Question 1

In an operating lease, the lessee is not required to record the right to use the property as an asset or to record the obligation for payments as a liability.

Accepted Answer

A) True 
 B)False

Question 2

The attitude of the Financial Accounting Standards Board toward deferred tax liabilities is that they are

Accepted Answer

A)  an amount that results in a future obligation and meets the definition of a liability. 
B)  a bookkeeping item that is used merely to maintain equality of the accounting equation. 
C)  not true liabilities because the balance increases every year. 
D)  not payable in the immediate future so it not necessary to record them. 
A)  an amount that results in a future obligation and meets the definition of a liability. 
B)  a bookkeeping item that is used merely to maintain equality of the accounting equation. 
C)  not true liabilities because the balance increases every year. 
D)  not payable in the immediate future so it not necessary to record them.

Question 3

Amortization of bond premium results in an

Accepted Answer

A)  decrease of the carrying value of bonds. 
B)  no change in stockholders' equity. 
C)  increase in interest expense. 
D)  decrease in the cash account. 
A)  decrease of the carrying value of bonds. 
B)  no change in stockholders' equity. 
C)  increase in interest expense. 
D)  decrease in the cash account.

Question 4

An alternate term for a timing difference is a .

Accepted Answer

temporary difference
Backkus M

Question 5

The asset leased under an operating lease requires the lessee to record depreciation expense.

Accepted Answer

A) True 
 B)False

Question 6

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 7

Which of the following lease conditions would result in a capital lease to the lessee?

Accepted Answer

A)  The lessee will return the property to the lessor at the end of the lease term. 
B)  The lessee can purchase the property for $1 at the end of the lease term. 
C)  The fair market value of the property at the inception of the lease is $18,000; the present value of the minimum lease payments is $15,977. 
D)  The lease term is 70% of the property's economic life. 
A)  The lessee will return the property to the lessor at the end of the lease term. 
B)  The lessee can purchase the property for $1 at the end of the lease term. 
C)  The fair market value of the property at the inception of the lease is $18,000; the present value of the minimum lease payments is $15,977. 
D)  The lease term is 70% of the property's economic life.

Question 8

Match the following bond and long-term liability related terms to the appropriate definition.
-The interest rate that bondholders could obtain by investing in other bonds that are similar to the issuing firm's bonds.

Accepted Answer

A) Long-term liability 
B) Face value 
C) Debenture bonds 
D) Serial bonds 
E) Callable bonds
F)Face rate of interest
G)Market rate of interest
H)Bond issue price
I)Premium
J)Discount
K)Effective interest method of amortization
L)Carrying value
M)Gain or loss on redemption 
A) Long-term liability 
B) Face value 
C) Debenture bonds 
D) Serial bonds 
E) Callable bonds
F)Face rate of interest
G)Market rate of interest
H)Bond issue price
I)Premium
J)Discount
K)Effective interest method of amortization
L)Carrying value
M)Gain or loss on redemption

Question 9

IFRS typically uses a more "rule­based" approach than U.S. GAAP.

Accepted Answer

A) True 
 B)False

Question 10

Bonds payable are dated January 1, 2016, and are issued on that date. The face value of the bonds is $200,000, and the face rate of interest is 8%. The bonds pay interest semiannually. The bonds will mature in five years. The market rate of interest at the time of issuance was 6%.
REQUIRED
1. What is the bond issuance price?
2. Using the effective interest amortization method, what amount should be amortized for the first six-month period? What amount of interest expense should be reported for the first six-month period?
3. Using the effective interest amortization method, what amount should be amortized for the period from July 1 to December 31, 2016? What amount of interest expense should be reported for the period from July 1 to December 31, 2016?

Accepted Answer

@#IMG-DLM& @#IMG-DLM& 1.
 @#IMG-DLM& 
2. Amount amortized is

Question 11

On the issuance date, the Bonds Payable account had a balance of $50,000,000 and Premium on Bonds Payable had a balance of $1,000,000. What was the issue price of the bonds?

Accepted Answer

A)  $50,000,000 
B)  $49,000,000 
C)  $51,000,000 
D)  Unable to determine from the information given. 
A)  $50,000,000 
B)  $49,000,000 
C)  $51,000,000 
D)  Unable to determine from the information given.

Question 12

Use the information provided in the time value of money tables Tables 9-1 through 9-4 in the text to answer the question that follows. Global Company issued $1,000,000, 8%, 7 year bonds, interest payable semiannually. The market rate of interest was 6%. The issuance price of the bonds is

Accepted Answer

A)  $1,111,560 
B)  $1,000,000 
C)  $1,151,480 
D)  $1,112,840 
A)  $1,111,560 
B)  $1,000,000 
C)  $1,151,480 
D)  $1,112,840

Question 13

Surplus Mining Company has leased a machine from Craft Machinery Company. The annual payments are $6,000 and the life of the lease is 8 years. It is estimated that the useful life of the machine is 9 years. How would Surplus Mining record the acquisition of the machine?

Accepted Answer

A)  The machine would be recorded as an asset with a cost of $48,000. 
B)  The company would not record the machine as an asset but would record rent expense of $6,000 per year. 
C)  The machine would be recorded as an asset, at the present value of the annual cash payments, $6,000 for 8 years. 
D)  The machine would be recorded as an asset, at the present value of the annual cash payments, $6,000 for 9 years. 
A)  The machine would be recorded as an asset with a cost of $48,000. 
B)  The company would not record the machine as an asset but would record rent expense of $6,000 per year. 
C)  The machine would be recorded as an asset, at the present value of the annual cash payments, $6,000 for 8 years. 
D)  The machine would be recorded as an asset, at the present value of the annual cash payments, $6,000 for 9 years.

Question 14

One way analysts measure the ability of a company to meet its obligations is to calculate the times interest earned ratio for any outstanding debt the company may have. For TempoSolutions Corporation calculate the times interest earned ratio?

Accepted Answer

A)  Income before interest and taxes divided by the interest expense. 
B)  Income before interest and taxes divided by carrying value of the bonds outstanding. 
C)  Income before interest and taxes divided by the face rate on bonds. 
D)  Face amount of bonds divided by income before interest and taxes. 
A)  Income before interest and taxes divided by the interest expense. 
B)  Income before interest and taxes divided by carrying value of the bonds outstanding. 
C)  Income before interest and taxes divided by the face rate on bonds. 
D)  Face amount of bonds divided by income before interest and taxes.

Question 15

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 16

Match the following bond and long-term liability related terms to the appropriate definition.
-The total of the present value of the cash flows produced by a bond. It is calculated as the present value of the annuity of interest payments plus the present value of the principal.

Accepted Answer

A) Long-term liability 
B) Face value 
C) Debenture bonds 
D) Serial bonds 
E) Callable bonds
F)Face rate of interest
G)Market rate of interest
H)Bond issue price
I)Premium
J)Discount
K)Effective interest method of amortization
L)Carrying value
M)Gain or loss on redemption 
A) Long-term liability 
B) Face value 
C) Debenture bonds 
D) Serial bonds 
E) Callable bonds
F)Face rate of interest
G)Market rate of interest
H)Bond issue price
I)Premium
J)Discount
K)Effective interest method of amortization
L)Carrying value
M)Gain or loss on redemption

Question 17

Wet Paint Company signed a ten-year lease agreement on January 1, 2015. The lease requires payments of
$65,000 per year every December 31. Wet Paint estimates that the leased property has a life of 11 years. The interest rate that applies to the lease is 12%.
REQUIRED:
1. Should Wet Paint Company treat the lease as an operating lease or a capital lease?
2. If a balance sheet is presented on January 1, 2015, what amounts related to the lease will appear on the balance sheet?
3. Assume that the leased asset is depreciated using the straight-line method and the lease is amortized using the effective interest method. Identify the accounting equation effects for Wet Paint's transactions on December 31, 2015?

Accepted Answer

1. This lease is a capital lease because

Question 18

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 19

The excess of the face value of bonds over the issue price is known as a premium.

Accepted Answer

A) True 
 B)False

Question 20

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.

In an operating lease, the lessee is not required to record the right to use the property as an asset or to record the obligation for payments as a liability.

The attitude of the Financial Accounting Standards Board toward deferred tax liabilities is that they are

Amortization of bond premium results in an

An alternate term for a timing difference is a .

The asset leased under an operating lease requires the lessee to record depreciation expense.

Convertible bonds are attractive to investors because

Which of the following lease conditions would result in a capital lease to the lessee?

Match the following bond and long-term liability related terms to the appropriate definition. -The interest rate that bondholders could obtain by investing in other bonds that are similar to the issuing firm's bonds.

IFRS typically uses a more "rulebased" approach than U.S. GAAP.

On the issuance date, the Bonds Payable account had a balance of $50,000,000 and Premium on Bonds Payable had a balance of $1,000,000. What was the issue price of the bonds?

Use the information provided in the time value of money tables Tables 9-1 through 9-4 in the text to answer the question that follows. Global Company issued $1,000,000, 8%, 7 year bonds, interest payable semiannually. The market rate of interest was 6%. The issuance price of the bonds is

Surplus Mining Company has leased a machine from Craft Machinery Company. The annual payments are $6,000 and the life of the lease is 8 years. It is estimated that the useful life of the machine is 9 years. How would Surplus Mining record the acquisition of the machine?

One way analysts measure the ability of a company to meet its obligations is to calculate the times interest earned ratio for any outstanding debt the company may have. For TempoSolutions Corporation calculate the times interest earned ratio?

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

Match the following bond and long-term liability related terms to the appropriate definition. -The total of the present value of the cash flows produced by a bond. It is calculated as the present value of the annuity of interest payments plus the present value of the principal.

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

The excess of the face value of bonds over the issue price is known as a premium.

A convertible bond is one where

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

In an operating lease, the lessee is not required to record the right to use the property as an asset or to record the obligation for payments as a liability.

The attitude of the Financial Accounting Standards Board toward deferred tax liabilities is that they are

Amortization of bond premium results in an

An alternate term for a timing difference is a .

The asset leased under an operating lease requires the lessee to record depreciation expense.

Convertible bonds are attractive to investors because

Which of the following lease conditions would result in a capital lease to the lessee?

Match the following bond and long-term liability related terms to the appropriate definition. -The interest rate that bondholders could obtain by investing in other bonds that are similar to the issuing firm's bonds.

IFRS typically uses a more "rule­based" approach than U.S. GAAP.

On the issuance date, the Bonds Payable account had a balance of $50,000,000 and Premium on Bonds Payable had a balance of $1,000,000. What was the issue price of the bonds?

Use the information provided in the time value of money tables Tables 9-1 through 9-4 in the text to answer the question that follows. Global Company issued $1,000,000, 8%, 7 year bonds, interest payable semiannually. The market rate of interest was 6%. The issuance price of the bonds is

Surplus Mining Company has leased a machine from Craft Machinery Company. The annual payments are $6,000 and the life of the lease is 8 years. It is estimated that the useful life of the machine is 9 years. How would Surplus Mining record the acquisition of the machine?

One way analysts measure the ability of a company to meet its obligations is to calculate the times interest earned ratio for any outstanding debt the company may have. For TempoSolutions Corporation calculate the times interest earned ratio?

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

Match the following bond and long-term liability related terms to the appropriate definition. -The total of the present value of the cash flows produced by a bond. It is calculated as the present value of the annuity of interest payments plus the present value of the principal.

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

The excess of the face value of bonds over the issue price is known as a premium.

A convertible bond is one where

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

IFRS typically uses a more "rulebased" approach than U.S. GAAP.