Exam 10: Long-Term Liabilities

Match the following bond and long-term liability related terms to the appropriate definition. -Bonds that are backed by the general creditworthiness of the issuer and are not backed by specific collateral.

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 issuance of the bonds on April 1, 2017.

Callable bonds may be retired by the issuer before their specified due date.

Which of the following items should not appear in the long-term liability section of the balance sheet?

Line Corporation's balance sheet showed the following amounts for their liability and stockholders' equity accounts: Current Liabilities, $5,000; Bonds Payable, $1,500; Lease Obligations, $2,000; and Deferred Income Taxes, $300.Total stockholders' equity was $6,000.The debt-to-equity ratio is

On January 1, 2016, Sharpsburg, 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?

A convertible bond is one where

The accounting for leases is an excellent example of the differences in how U.S.and IFRS accounting standards are applied.

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

Match the following bond and long-term liability related terms to the appropriate definition. -The process of transferring a portion of premium or discount to interest expense.This method transfers an amount resulting in a constant effective interest rate.

Cash interest 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?

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

One example of a temporary difference between financial and tax reporting results from

If bonds were initially issued at a discount, the interest expense on the bonds calculated using the effective interest method will

Shuttle Master Airlines has leased an aircraft from Streamline Aircraft Company.The annual payments are $1,000,000 and the life of the lease is 18 years.It is estimated that the useful life of the aircraft is 20 years.How would Shuttle Master Airlines record the acquisition of the aircraft? The effective rate of interest is 9%.

Flagg Company issued $500,000 of bonds for $498,351, Interest is paid semiannually.The bond markets and the financial press are likely to state the bond issue price as

In an operating lease, the lessee acquires the right to use an asset for only a limited period of time.

Deferred income taxes arise because

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

When using the indirect method for preparing the statement of cash flows, all of the following will appear in the operating activities section except: