Exam 10: Long-Term Liabilities

Review the information for Padagonian Company. REQUIRED: 1 Where will the Deferred Income Taxes account most likely appear on a classified balance sheet? 2 What percent is deferred income taxes of long-term liabilities for the two years? 2016 __________ 2015 ___________ 3 What percent is deferred income taxes of total liabilities for the two years? 2016 __________ 2015 ___________

When determining the amount of interest to be paid on a bond, which of the following information is not necessary?

Review the consolidated balance sheets of Backkus Metal Company. REQUIRED: 1 What are the total long-term liabilities for the two years presented? 2 What is the percent increase/decrease of long-term liabilities from 2014 to 2015? Which liability appears to have caused the greatest change?

Carrying value is computed annually when a bond is issued for other than its face value. For a bond issued at a discount, how will this component change as the bond approaches maturity?

On January 1, 2015, Clark, Inc. issued $400,000, 10-year, 10% bonds for $354,200. The bonds pay interest on June 30 and December 31. The market rate is 12%. What is the carrying value of the bonds at the end of the ten years?

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 effective interest method amortizes premium or discount in a manner that produces an rate of interest from period to period.

Under the effective interest method of amortization, the interest expense for each period is the carrying value times the ______________________.

Endeavor Company issued 20-year bonds with a coupon rate of 6% when the market rate of interest was 9%. This means that the bonds were issued

Which of the following statements regarding serial bonds is true?

The denomination or principal amount of the bond is usually referred to as the .

Wave Corporation is determining its income tax liability. It has one machine that cost $30,000 with a 4-year life and no salvage value. Wave is using an accelerated depreciation method for tax purposes. For accounting purposes, Wave has decided to use the straight-line method. Which of the following statements is true?

Bonds in the amount of $100,000 and a life of 10 years were issued by the Focus Company. If the face rate is 6% and interest is paid semiannually, what would be the total amount of interest paid over the life of the bonds?

Temporary differences occur when an item affects both book and tax calculations but not in the same time period.

Churchill Company planned to raise $100,000 by issuing bonds. The bond certificates were printed bearing an interest rate of 8%, which was equal to the market rate of interest. However, before the bonds could be issued, economic conditions forced the market rate up to 9%. If the life of the bonds is 6 years and interest is paid annually on December 31, how much will Churchill receive from the sale of the bonds?

On January 2, 2015, Roof 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%. At the maturity date, besides an interest payment, Roof Master would repay the bondholders

Deferred income taxes arise because

The Discount on Bonds Payable account is shown on the balance sheet as

Carrying value is computed annually when a bond is issued for other than its face value. For a bond issued at a premium, how will this component change as the bond approaches maturity?

On January 1, 2014, Hart Company purchased an asset for $137,500. For financial accounting purposes, the asset will be depreciated on a straight-line basis over five years with no residual value at the end of that time. For tax purposes, the asset will be depreciated as follows: 2014, $45,000; 2015, $35,000; 2016, $25,000; 2017, $20,000; and 2018, $12,500. Assume that the company is subject to a 35% tax rate. REQUIRED: 1. What is the amount of deferred tax at December 31, 2014? 2. Does the deferred tax represent an asset or a liability? 3. What is the amount of deferred tax at December 31, 2018?