Question 1

Bonds are generally issued in denominations of $1,000.

Accepted Answer

A) True 
 B)False

Question 2

Caron Industries received authorization on December 31, 2014, to issue $7,000,000 face value of 6%, 10-year bonds. The interest payment dates are June 30 and December 31. All the bonds were issued at par, plus accrued interest, April 1, 2015. The bonds are callable by Caron at any time at 102.
REQUIRED:
Identify the accounting equation effects for recording the first semiannual interest payment on the bonds at June 30, 2015.

Accepted Answer

June 30,
2015
To rec

Question 3

Stock investors view equity as a claim against the company that must be satisfied before they get a return on their money.

Accepted Answer

A) True 
 B)False

Question 4

Review the consolidated balance sheets of Backkus Metal Company.
REQUIRED:
Which one of the liabilities shown in the balance sheets is used in the calculation of the debt-to-equity ratio?
If we can assume that the stockholders' equity total remained relatively constant for the two years, how would the ratio change increase/decrease from 2014 to 2015? What would this say about the company's financial position?

Accepted Answer

All liabilities are used in the calculat

Question 5

Under the effective interest method, the cash paid on each interest payment date will

Accepted Answer

A)  decrease if bonds are issued at a premium. 
B)  increase if bonds are issued at a premium. 
C)  remain constant regardless of the issuance price. 
D)  increase if bonds are issued at a discount. 
A)  decrease if bonds are issued at a premium. 
B)  increase if bonds are issued at a premium. 
C)  remain constant regardless of the issuance price. 
D)  increase if bonds are issued at a discount.

Question 6

A bond with a face value of $10,000 is issued at a discount of $800 on January 1, 2014. The face rate of interest on the bond is 7%.
REQUIRED:
1. Was the market rate at the time of issuance greater than 7% or less than 7%?
2. If a balance sheet is presented on January 1, 2014, how will the bonds appear on the balance sheet?
3. If a balance sheet is presented on December 31, 2014, will the amount for the bonds be higher or lower than on January 1, 2014?

Accepted Answer

1..If the bond was issued at a

Question 7

A bond issue price is the present value of the cash flows that the bond will produce.

Accepted Answer

A) True 
 B)False

Question 8

The debt-to-equity ratio is defined as total long-term liabilities divided by total stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 9

The issue price of a bond is always present valued using the market rate of interest.

Accepted Answer

A) True 
 B)False

Question 10

On January 1, 2015, the long-term liability section of Quick Silver Co. balance sheet showed a balance of $800,000 in the bonds payable account. On December 31, 2015, the balance in that same account was $765,000. This change would appear on the statement of cash flows as

Accepted Answer

A)  an outflow of cash of $35,000 in the financing activities category. 
B)  an inflow of cash of $35,000 in the financing activities category. 
C)  an outflow of cash of $35,000 in the investing activities category. 
D)  an inflow of cash of $35,000 in the investing activities category. 
A)  an outflow of cash of $35,000 in the financing activities category. 
B)  an inflow of cash of $35,000 in the financing activities category. 
C)  an outflow of cash of $35,000 in the investing activities category. 
D)  an inflow of cash of $35,000 in the investing activities category.

Question 11

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 12

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 13

An investor views a high debt­to­equity ratio and a low times interest earned as a favorable sign of a company's
abilities to meet its long-term obligations.

Accepted Answer

A) True 
 B)False

Question 14

Discount on Bonds Payable is a balance sheet item for Covington Products Company. How would it most likely be classified on the balance sheet?

Accepted Answer

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

Question 15

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 16

All of the following are considered to be long-term liabilities for Parsons Company except:

Accepted Answer

A)  Bonds issued this year due in 10 years. 
B)  The third year payments for a three-year lease signed this year. 
C)  The current year portion of Deferred taxes. 
D)  The principal of a note payable signed this year, but due in five years. 
A)  Bonds issued this year due in 10 years. 
B)  The third year payments for a three-year lease signed this year. 
C)  The current year portion of Deferred taxes. 
D)  The principal of a note payable signed this year, but due in five years.

Question 17

Match the following bond and long-term liability related terms to the appropriate definition.
-The principal amount of the bond as stated on the bond certificate.

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 18

Marshland Company uses the straight-line depreciation for financial reporting purposes and an accelerated depreciation method for tax purposes. As a result, Marshland will record:

Accepted Answer

A)  a deferred tax asset. 
B)  a deferred tax liability. 
C)  a permanent difference. 
D)  tax-exempt depreciation. 
A)  a deferred tax asset. 
B)  a deferred tax liability. 
C)  a permanent difference. 
D)  tax-exempt depreciation.

Question 19

Review the information for Grenada Corporation.
REQUIRED:
Determine the effect on the accounting equation when recording each type of lease described in the previous question.

Accepted Answer

The entry for an operating lease merely

Question 20

The face rate is also called the nominal or stated rate.

Accepted Answer

A) True 
 B)False

Bonds are generally issued in denominations of $1,000.

Stock investors view equity as a claim against the company that must be satisfied before they get a return on their money.

Under the effective interest method, the cash paid on each interest payment date will

A bond issue price is the present value of the cash flows that the bond will produce.

The debt-to-equity ratio is defined as total long-term liabilities divided by total stockholders' equity.

The issue price of a bond is always present valued using the market rate of interest.

On January 1, 2015, the long-term liability section of Quick Silver Co. balance sheet showed a balance of $800,000 in the bonds payable account. On December 31, 2015, the balance in that same account was $765,000. This change would appear on the statement of cash flows as

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

Which of the following statements regarding amortization is true?

An investor views a high debttoequity ratio and a low times interest earned as a favorable sign of a company's abilities to meet its long-term obligations.

Discount on Bonds Payable is a balance sheet item for Covington Products Company. How would it most likely be classified on the balance sheet?

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

All of the following are considered to be long-term liabilities for Parsons Company except:

Match the following bond and long-term liability related terms to the appropriate definition. -The principal amount of the bond as stated on the bond certificate.

Marshland Company uses the straight-line depreciation for financial reporting purposes and an accelerated depreciation method for tax purposes. As a result, Marshland will record:

Review the information for Grenada Corporation. REQUIRED: Determine the effect on the accounting equation when recording each type of lease described in the previous question.

The face rate is also called the nominal or stated rate.

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

Bonds are generally issued in denominations of $1,000.

Stock investors view equity as a claim against the company that must be satisfied before they get a return on their money.

Under the effective interest method, the cash paid on each interest payment date will

A bond issue price is the present value of the cash flows that the bond will produce.

The debt-to-equity ratio is defined as total long-term liabilities divided by total stockholders' equity.

The issue price of a bond is always present valued using the market rate of interest.

On January 1, 2015, the long-term liability section of Quick Silver Co. balance sheet showed a balance of $800,000 in the bonds payable account. On December 31, 2015, the balance in that same account was $765,000. This change would appear on the statement of cash flows as

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

Which of the following statements regarding amortization is true?

An investor views a high debt­to­equity ratio and a low times interest earned as a favorable sign of a company's abilities to meet its long-term obligations.

Discount on Bonds Payable is a balance sheet item for Covington Products Company. How would it most likely be classified on the balance sheet?

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

All of the following are considered to be long-term liabilities for Parsons Company except:

Match the following bond and long-term liability related terms to the appropriate definition. -The principal amount of the bond as stated on the bond certificate.

Marshland Company uses the straight-line depreciation for financial reporting purposes and an accelerated depreciation method for tax purposes. As a result, Marshland will record:

Review the information for Grenada Corporation. REQUIRED: Determine the effect on the accounting equation when recording each type of lease described in the previous question.

The face rate is also called the nominal or stated rate.

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

An investor views a high debttoequity ratio and a low times interest earned as a favorable sign of a company's abilities to meet its long-term obligations.