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)  Both as a current asset and a long-term asset 
B)  Both as a long-term liability and a current liability 
C)  A stockholders' equity 
D)  Contra-liability 
A)  Both as a current asset and a long-term asset 
B)  Both as a long-term liability and a current liability 
C)  A stockholders' equity 
D)  Contra-liability

Question 2

The change in the Deferred Taxes account is reflected in the Operating Activities category of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 3

Serial bonds are unique because the interest is paid as a series of daily payments.

Accepted Answer

A) True 
 B)False

Question 4

All liabilities that are not classified as current liabilities are classified as long-term.

Accepted Answer

A) True 
 B)False

Question 5

Deferred income taxes is a balance sheet item for Iowa Products Company. How would it most likely be classified on the balance sheet?

Accepted Answer

A)  Owners' equity 
B)  Long-term liability 
C)  Expense 
D)  Contra liability 
A)  Owners' equity 
B)  Long-term liability 
C)  Expense 
D)  Contra liability

Question 6

Tampa Corporation's balance sheet showed the following amounts for their liabilities and stockholders' equity accounts: Current Liabilities, $20,000; Bonds Payable, $60,000; Lease Obligations, $12,000; and Deferred Income Taxes, $2,000. Total stockholders' equity was $42,000. The debt-to-equity ratio is

Accepted Answer

A)  0.45 
B)  0.58 
C)  1.76 
D)  2.24 
A)  0.45 
B)  0.58 
C)  1.76 
D)  2.24

Question 7

Which of the following terms does not describe an interest rate used to calculate the interest expense on the income statement?

Accepted Answer

A)  Nominal rate 
B)  Market rate 
C)  Effective rate 
D)  Yield rate 
A)  Nominal rate 
B)  Market rate 
C)  Effective rate 
D)  Yield rate

Question 8

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 9

Crystal, Inc. issued $41,000,000 of bonds. Assuming the most common denomination of bonds, the number of bonds sold was

Accepted Answer

A)  41,000. 
B)  410,000. 
C)  4,100,000. 
D)  41,000,000. 
A)  41,000. 
B)  410,000. 
C)  4,100,000. 
D)  41,000,000.

Question 10

Weather Corp. issued 10-year, 8%, $100,000 bonds paying interest on an annual basis, at a $5,200 premium. Which one of the following statements is true?

Accepted Answer

A)  Weather's annual interest expense on the bonds will be greater than the amount of interest payments to bondholders each year. 
B)  Weather's annual interest expense on the bonds will be less than the amount of interest payments to bondholders each year. 
C)  Weather will receive $94,800 as the issue price. 
D)  The cash paid to bondholders will be $520 each interest period. 
A)  Weather's annual interest expense on the bonds will be greater than the amount of interest payments to bondholders each year. 
B)  Weather's annual interest expense on the bonds will be less than the amount of interest payments to bondholders each year. 
C)  Weather will receive $94,800 as the issue price. 
D)  The cash paid to bondholders will be $520 each interest period.

Question 11

The sum of the carrying value and the redemption price at the time bonds are redeemed results in the gain or loss on redemption.

Accepted Answer

A) True 
 B)False

Question 12

Most long­term liabilities are related to a firm's investing activities.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A)  a contra asset. 
B)  a reduction of an expense. 
C)  an addition to a long-term liability. 
D)  a subtraction from a long-term liability. 
A)  a contra asset. 
B)  a reduction of an expense. 
C)  an addition to a long-term liability. 
D)  a subtraction from a long-term liability.

Question 14

Deferred tax is an amount that reconciles the differences between the income for financial purposes with the income reported for tax purposes. In most cases, it is a long-term liability.

Accepted Answer

A) True 
 B)False

Question 15

In an operating lease, the lessee has acquired sufficient rights of ownership and control of the property to be considered its owner.

Accepted Answer

A) True 
 B)False

Question 16

Cash interest payment 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?

Accepted Answer

A)  Decrease 
B)  Increase 
C)  Remain constant 
D)  Not enough information given to decide. 
A)  Decrease 
B)  Increase 
C)  Remain constant 
D)  Not enough information given to decide.

Question 17

Bonds are typically issued in denominations of $10,000.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements regarding leases is false?

Accepted Answer

A)  Lease agreements are a popular form of financing the purchase of assets because leases do not require a large initial outlay of cash. 
B)  Accounting recognizes two types of leases--operating and capital leases. 
C)  If a lessor classifies a lease as a capital lease, then the lessee records a lease liability on its balance sheet. 
D)  If a lease is classified as an operating lease, the lessee records a lease liability on its balance sheet. 
A)  Lease agreements are a popular form of financing the purchase of assets because leases do not require a large initial outlay of cash. 
B)  Accounting recognizes two types of leases--operating and capital leases. 
C)  If a lessor classifies a lease as a capital lease, then the lessee records a lease liability on its balance sheet. 
D)  If a lease is classified as an operating lease, the lessee records a lease liability on its balance sheet.

Question 19

Match the following bond and long-term liability related terms to the appropriate definition.
-The difference between the carrying value and the redemption price at the time bonds are redeemed. This amount is presented as an income statement account.

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 20

Which of the following statements regarding bonds payable is true?

Accepted Answer

A)  Generally, bonds are issued in denominations of $100. 
B)  When an issuing company's bonds are traded in the "secondary" market, the company will receive part of the proceeds when the bonds are sold from the first purchaser to the second purchaser. 
C)  A debenture bond is backed by specific assets of the issuing company. 
D)  Most bonds are term bonds, meaning that the entire principal amount will mature on a single date. 
A)  Generally, bonds are issued in denominations of $100. 
B)  When an issuing company's bonds are traded in the "secondary" market, the company will receive part of the proceeds when the bonds are sold from the first purchaser to the second purchaser. 
C)  A debenture bond is backed by specific assets of the issuing company. 
D)  Most bonds are term bonds, meaning that the entire principal amount will mature on a single date.

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?

The change in the Deferred Taxes account is reflected in the Operating Activities category of the statement of cash flows.

Serial bonds are unique because the interest is paid as a series of daily payments.

All liabilities that are not classified as current liabilities are classified as long-term.

Deferred income taxes is a balance sheet item for Iowa Products Company. How would it most likely be classified on the balance sheet?

Which of the following terms does not describe an interest rate used to calculate the interest expense on the income statement?

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

Crystal, Inc. issued $41,000,000 of bonds. Assuming the most common denomination of bonds, the number of bonds sold was

Weather Corp. issued 10-year, 8%, $100,000 bonds paying interest on an annual basis, at a $5,200 premium. Which one of the following statements is true?

The sum of the carrying value and the redemption price at the time bonds are redeemed results in the gain or loss on redemption.

Most longterm liabilities are related to a firm's investing activities.

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

Deferred tax is an amount that reconciles the differences between the income for financial purposes with the income reported for tax purposes. In most cases, it is a long-term liability.

In an operating lease, the lessee has acquired sufficient rights of ownership and control of the property to be considered its owner.

Cash interest payment 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?

Bonds are typically issued in denominations of $10,000.

Which of the following statements regarding leases is false?

Match the following bond and long-term liability related terms to the appropriate definition. -The difference between the carrying value and the redemption price at the time bonds are redeemed. This amount is presented as an income statement account.

Which of the following statements regarding bonds payable is true?

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?

The change in the Deferred Taxes account is reflected in the Operating Activities category of the statement of cash flows.

Serial bonds are unique because the interest is paid as a series of daily payments.

All liabilities that are not classified as current liabilities are classified as long-term.

Deferred income taxes is a balance sheet item for Iowa Products Company. How would it most likely be classified on the balance sheet?

Which of the following terms does not describe an interest rate used to calculate the interest expense on the income statement?

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

Crystal, Inc. issued $41,000,000 of bonds. Assuming the most common denomination of bonds, the number of bonds sold was

Weather Corp. issued 10-year, 8%, $100,000 bonds paying interest on an annual basis, at a $5,200 premium. Which one of the following statements is true?

The sum of the carrying value and the redemption price at the time bonds are redeemed results in the gain or loss on redemption.

Most long­term liabilities are related to a firm's investing activities.

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

Deferred tax is an amount that reconciles the differences between the income for financial purposes with the income reported for tax purposes. In most cases, it is a long-term liability.

In an operating lease, the lessee has acquired sufficient rights of ownership and control of the property to be considered its owner.

Cash interest payment 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?

Bonds are typically issued in denominations of $10,000.

Which of the following statements regarding leases is false?

Match the following bond and long-term liability related terms to the appropriate definition. -The difference between the carrying value and the redemption price at the time bonds are redeemed. This amount is presented as an income statement account.

Which of the following statements regarding bonds payable is true?

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

Most longterm liabilities are related to a firm's investing activities.