Question 1

A ten-year lease obligation appears on the balance sheet of Generic Products Company.How would it most likely be classified on the balance sheet?

Accepted Answer

A) Current asset 
B) Long-term liability 
C) Long-term asset 
D) Contra-liability 
A) Current asset 
B) Long-term liability 
C) Long-term asset 
D) Contra-liability

Question 2

[APPENDIX] For 2015, Wasabi Company has accounting revenues of $6,000.However, because of temporary differences between tax and accounting, $1,000 of this is not subject to tax.If expenses are $3,000 for both tax and accounting, and the tax rate is 40%, what is the amount of tax payable to the IRS?

Accepted Answer

A) $ 400 
B) $ 800 
C) $1,200 
D) $1,600 
A) $ 400 
B) $ 800 
C) $1,200 
D) $1,600

Question 3

Long­term liabilities are a component of the "capital structure" of a company.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following trends can be unfavorable from the viewpoint of a bondholder?

Accepted Answer

A) The issuing company's debt ratio is steadily declining. 
B) The issuing company's interest coverage ratio is steadily rising. 
C) Market interest rates are steadily rising. 
D) The issuing company's net cash flow from operating activities is steadily increasing. 
A) The issuing company's debt ratio is steadily declining. 
B) The issuing company's interest coverage ratio is steadily rising. 
C) Market interest rates are steadily rising. 
D) The issuing company's net cash flow from operating activities is steadily increasing.

Question 5

[APPENDIX] A permanent difference with respect to taxes is a difference that affects the tax records but not the accounting records, or vice versa.

Accepted Answer

A) True 
 B)False

Question 6

On January 2, 2015, Garage Master Construction, Inc.issued $500,000, 10-year bonds for $574,540.The bonds pay interest on June 30 and December 31.The face rate is 8% and the market rate is 6%.The interest expense on the bonds at June 30, 2015 is

Accepted Answer

A) $ 2,764. 
B) $17,236. 
C) $20,000. 
D) $22,764. 
A) $ 2,764. 
B) $17,236. 
C) $20,000. 
D) $22,764.

Question 7

The interest rate used to calculate interest expense in the effective interest method of amortization is equal to the market rate of interest at the time the bonds are issued.

Accepted Answer

A) True 
 B)False

Question 8

Discount on Bonds Payable is classified as a current liability.

Accepted Answer

A) True 
 B)False

Question 9

[APPENDIX] The deferred income taxes for a corporation represent

Accepted Answer

A) the dollar amount of deductions that a corporation may claim for the year. 
B) an additional assessment made by the IRS for underpaid taxes. 
C) the estimated amount of next year's taxes. 
D) the dollar amount that arises due to the difference between accounting for financial statements and accounting for tax purposes. 
A) the dollar amount of deductions that a corporation may claim for the year. 
B) an additional assessment made by the IRS for underpaid taxes. 
C) the estimated amount of next year's taxes. 
D) the dollar amount that arises due to the difference between accounting for financial statements and accounting for tax purposes.

Question 10

is the process of transferring an amount from the bond discount or premium to interest expense each time period to adjust interest expense.

Accepted Answer

The answer of is the process of transferring an amount...

Question 11

A convertible bond is one where

Accepted Answer

A) the issuer can convert from a fixed interest rate to a floating one. 
B) the issuer can convert it from long-term to short-term. 
C) the issuer can retire the bond before its specified due date. 
D) the holder can convert the bond into common stock at a future time. 
A) the issuer can convert from a fixed interest rate to a floating one. 
B) the issuer can convert it from long-term to short-term. 
C) the issuer can retire the bond before its specified due date. 
D) the holder can convert the bond into common stock at a future time.

Question 12

If bonds were initially issued at a discount, the interest expense on the bonds calculated using the effective interest method will

Accepted Answer

A) decrease as the bonds approach their maturity date. 
B) increase as the bonds approach their maturity date. 
C) remain constant throughout the bonds' life. 
D) fluctuate throughout the bonds' life. 
A) decrease as the bonds approach their maturity date. 
B) increase as the bonds approach their maturity date. 
C) remain constant throughout the bonds' life. 
D) fluctuate throughout the bonds' life.

Question 13

Convertible bonds are attractive to investors because

Accepted Answer

A) they usually carry a higher rate of interest than non-convertible bonds. 
B) they carry a convertible interest rate that can be increased when the prime rate of interest increases. 
C) they can be converted into stock at the issuer's option. 
D) the issuing company cannot retire the bonds before maturity. 
A) they usually carry a higher rate of interest than non-convertible bonds. 
B) they carry a convertible interest rate that can be increased when the prime rate of interest increases. 
C) they can be converted into stock at the issuer's option. 
D) the issuing company cannot retire the bonds before maturity.

Question 14

[APPENDIX] The Deferred Tax account should reflect permanent differences but not items that are temporary differences between book accounting and tax reporting.

Accepted Answer

A) True 
 B)False

Question 15

Flagg Company issued $500,000 of bonds for $498,351, Interest is paid semiannually.The bond markets and the financial press are likely to state the bond issue price as

Accepted Answer

A) 498.35. 
B) 100.00. 
C) 99.67. 
D) 49.84. 
A) 498.35. 
B) 100.00. 
C) 99.67. 
D) 49.84.

Question 16

bonds may be retired by the issuing company before their specified due date.

Accepted Answer

The answer of bonds may be retired by the issuing...

Question 17

On January 2, 2015, Hi-Tech Master Construction, Inc.issued $500,000, 10-year bonds for $574,540.The bonds pay interest on June 30 and December 31.The face rate is 8% and the market rate is 6%.The annual cash payment paid in semiannual payments) on the bonds is

Accepted Answer

A) $40,000. 
B) $30,000. 
C) $20,000. 
D) $15,000. 
A) $40,000. 
B) $30,000. 
C) $20,000. 
D) $15,000.

Question 18

When bonds are sold for less than the face amount, this means that the

Accepted Answer

A) maturity value will be less than the face amount. 
B) maturity value will be greater than the face amount. 
C) bonds are sold at a premium. 
D) face rate of interest is less than the market rate of interest. 
A) maturity value will be less than the face amount. 
B) maturity value will be greater than the face amount. 
C) bonds are sold at a premium. 
D) face rate of interest is less than the market rate of interest.

Question 19

Which of the following statements regarding amortization is true?

Accepted Answer

A) Amortization of the premium causes the premium on bonds payable account to increase. 
B) Amortization of the premium causes the amount of interest expense to increase. 
C) Cash interest payments on bonds equals interest expense on the income statement when there is amortization of bond premium. 
D) Amortization of premium continues over the life of the bond until the balance in the account is reduced to zero. 
A) Amortization of the premium causes the premium on bonds payable account to increase. 
B) Amortization of the premium causes the amount of interest expense to increase. 
C) Cash interest payments on bonds equals interest expense on the income statement when there is amortization of bond premium. 
D) Amortization of premium continues over the life of the bond until the balance in the account is reduced to zero.

Question 20

On January 2, 2015, Concrete Master Construction, Inc.issued $500,000, 10-year bonds for $574,540.The bonds pay interest on June 30 and December 31.The face rate is 8% and the market rate is 6%.What is the carrying value of the bonds after the first interest payment is made on June 30, 2015?

Accepted Answer

A) $574,540 
B) $571,776 
C) $568,920 
D) $500,000 
A) $574,540 
B) $571,776 
C) $568,920 
D) $500,000

A ten-year lease obligation appears on the balance sheet of Generic Products Company.How would it most likely be classified on the balance sheet?

[APPENDIX] For 2015, Wasabi Company has accounting revenues of $6,000.However, because of temporary differences between tax and accounting, $1,000 of this is not subject to tax.If expenses are $3,000 for both tax and accounting, and the tax rate is 40%, what is the amount of tax payable to the IRS?

Longterm liabilities are a component of the "capital structure" of a company.

Which of the following trends can be unfavorable from the viewpoint of a bondholder?

[APPENDIX] A permanent difference with respect to taxes is a difference that affects the tax records but not the accounting records, or vice versa.

On January 2, 2015, Garage Master Construction, Inc.issued $500,000, 10-year bonds for $574,540.The bonds pay interest on June 30 and December 31.The face rate is 8% and the market rate is 6%.The interest expense on the bonds at June 30, 2015 is

The interest rate used to calculate interest expense in the effective interest method of amortization is equal to the market rate of interest at the time the bonds are issued.

Discount on Bonds Payable is classified as a current liability.

[APPENDIX] The deferred income taxes for a corporation represent

is the process of transferring an amount from the bond discount or premium to interest expense each time period to adjust interest expense.

A convertible bond is one where

If bonds were initially issued at a discount, the interest expense on the bonds calculated using the effective interest method will

Convertible bonds are attractive to investors because

[APPENDIX] The Deferred Tax account should reflect permanent differences but not items that are temporary differences between book accounting and tax reporting.

Flagg Company issued $500,000 of bonds for $498,351, Interest is paid semiannually.The bond markets and the financial press are likely to state the bond issue price as

bonds may be retired by the issuing company before their specified due date.

On January 2, 2015, Hi-Tech Master Construction, Inc.issued $500,000, 10-year bonds for $574,540.The bonds pay interest on June 30 and December 31.The face rate is 8% and the market rate is 6%.The annual cash payment paid in semiannual payments) on the bonds is

When bonds are sold for less than the face amount, this means that the

Which of the following statements regarding amortization is true?

On January 2, 2015, Concrete Master Construction, Inc.issued $500,000, 10-year bonds for $574,540.The bonds pay interest on June 30 and December 31.The face rate is 8% and the market rate is 6%.What is the carrying value of the bonds after the first interest payment is made on June 30, 2015?

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Inventories and Cost of Goods Sold

Cash and Internal Control

Receivables and Investments

Operating Assets: Property, Plant, and Equipment, and Intangibles

Current Liabilities, Contingencies, and the Time Value of Money

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

International Financial Reporting Standards

Filters

Exam 10: Long-Term Liabilities

A ten-year lease obligation appears on the balance sheet of Generic Products Company.How would it most likely be classified on the balance sheet?

[APPENDIX] For 2015, Wasabi Company has accounting revenues of $6,000.However, because of temporary differences between tax and accounting, $1,000 of this is not subject to tax.If expenses are $3,000 for both tax and accounting, and the tax rate is 40%, what is the amount of tax payable to the IRS?

Long­term liabilities are a component of the "capital structure" of a company.

Which of the following trends can be unfavorable from the viewpoint of a bondholder?

[APPENDIX] A permanent difference with respect to taxes is a difference that affects the tax records but not the accounting records, or vice versa.

On January 2, 2015, Garage Master Construction, Inc.issued $500,000, 10-year bonds for $574,540.The bonds pay interest on June 30 and December 31.The face rate is 8% and the market rate is 6%.The interest expense on the bonds at June 30, 2015 is

The interest rate used to calculate interest expense in the effective interest method of amortization is equal to the market rate of interest at the time the bonds are issued.

Discount on Bonds Payable is classified as a current liability.

[APPENDIX] The deferred income taxes for a corporation represent

is the process of transferring an amount from the bond discount or premium to interest expense each time period to adjust interest expense.

A convertible bond is one where

If bonds were initially issued at a discount, the interest expense on the bonds calculated using the effective interest method will

Convertible bonds are attractive to investors because

[APPENDIX] The Deferred Tax account should reflect permanent differences but not items that are temporary differences between book accounting and tax reporting.

Flagg Company issued $500,000 of bonds for $498,351, Interest is paid semiannually.The bond markets and the financial press are likely to state the bond issue price as

bonds may be retired by the issuing company before their specified due date.

On January 2, 2015, Hi-Tech Master Construction, Inc.issued $500,000, 10-year bonds for $574,540.The bonds pay interest on June 30 and December 31.The face rate is 8% and the market rate is 6%.The annual cash payment paid in semiannual payments) on the bonds is

When bonds are sold for less than the face amount, this means that the

Which of the following statements regarding amortization is true?

On January 2, 2015, Concrete Master Construction, Inc.issued $500,000, 10-year bonds for $574,540.The bonds pay interest on June 30 and December 31.The face rate is 8% and the market rate is 6%.What is the carrying value of the bonds after the first interest payment is made on June 30, 2015?

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Inventories and Cost of Goods Sold

Cash and Internal Control

Receivables and Investments

Operating Assets: Property, Plant, and Equipment, and Intangibles

Current Liabilities, Contingencies, and the Time Value of Money

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

International Financial Reporting Standards

Filters

Longterm liabilities are a component of the "capital structure" of a company.