Exam 10: Long-Term Liabilities

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

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

Amortization of bond premium results in a(n)

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

East Liberty Corp.received authorization on December 31, 2016, 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, 2017.The bonds are callable by East Liberty at any time at 102. Required: Prepare the journal entry to record the first semiannual interest payment on the bonds at June 30, 2017.

Which of the following statements about bond accounting under the effective interest method is correct?

Rent owed to the landlord is a balance sheet item for Generic Products Company.How would it most likely be classified on the balance sheet?

If bonds were initially issued at a premium, the carrying value of the bonds on the issuer's books will

The current balance sheet of Blawnox Inc.reports total assets of $20 million, total liabilities of $2 million, and owners' equity of $18 million.Blawnox Inc.is considering several financing possibilities in order to expand operations.What is the additional amount that Blawnox Inc.can borrow and not exceed a debt to equity ratio of 0.3?

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

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 Tempo Solutions Corporation, $10,000 of bonds paying 6.5% annually is outstanding.Income before interest and taxes is $7,000.How would Tempo Solutions Corporation calculate the times interest earned ratio?

[APPENDIX] 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.

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

Match the following bond and long-term liability related terms to the appropriate definition. -An obligation that will not be satisfied within one year.

Match the following bond and long-term liability related terms to the appropriate definition. -The interest rate stated on the bond certificate.It is also called the nominal or coupon rate.

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?

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

In general, the international accounting standards provide lease criteria that are similar to the U.S.standards.

On March 1, 2016, Farmer Co.issued at a price of 100 $20 million of 8%, 25-year bonds payable.Interest is payable semiannually each March 1 and September 1. Required: Present the adjusting entry necessary at December 31, 2016, regarding this bond issue.