Question 1

Convertible bonds are attractive to investors because

Accepted Answer

A)  they usually carry a higher rate of interest than non-convertible bonds. 
B)  they carry a convertible interest rate that can be increased when the prime rate of interest increases. 
C)  they can be converted into stock at the issuer's option. 
D)  the issuing company cannot retire the bonds before maturity. 
A)  they usually carry a higher rate of interest than non-convertible bonds. 
B)  they carry a convertible interest rate that can be increased when the prime rate of interest increases. 
C)  they can be converted into stock at the issuer's option. 
D)  the issuing company cannot retire the bonds before maturity.

Question 2

The amortization of bond discount increases the effective interest expense incurred each period for the issuer while amortization of bond premium decreases it.

Accepted Answer

A) True 
 B)False

Question 3

A lease is accounted for as a capital lease if the lease term is 75% or more of the property's economic life.

Accepted Answer

A) True 
 B)False

Question 4

In 2016, Aspinwall Company issued $200,000 of bonds for $175,000.If the face rate of interest was 9% and the effective rate of interest was 7.99%, how would Aspinwall calculate the interest expense for the first year on the bonds using the effective interest method?

Accepted Answer

A)  $175,000 × 7.99% 
B)  $175,000 × 9% 
C)  $10,000 × 7.99% 
D)  $10,000 × 9% 
A)  $175,000 × 7.99% 
B)  $175,000 × 9% 
C)  $10,000 × 7.99% 
D)  $10,000 × 9%

Question 5

The result of using the effective interest method of amortization of discount on bonds is that the

Accepted Answer

A)  interest expense for each amortization period is constant. 
B)  effective interest rate for each amortization period is constant. 
C)  amount of interest expense decreases each period. 
D)  cash interest payment is greater than the interest expense. 
A)  interest expense for each amortization period is constant. 
B)  effective interest rate for each amortization period is constant. 
C)  amount of interest expense decreases each period. 
D)  cash interest payment is greater than the interest expense.

Question 6

The current portion of long-term debt is a balance sheet item for Flavorful Products Company.How would it most likely be classified on the balance sheet?
A) Current liability
B) Long-term liability
C) Current asset
D) Long-term liability

Accepted Answer

The answer of The current portion of long-term debt is...

Question 7

If an investor has the right to retire the bonds, they are referred to as callable.

Accepted Answer

A) True 
 B)False

Question 8

Neville Company issued $100,000 of 6%, 10 year bonds when the market rate of interest was 5%.The proceeds from this bond issue were $107,732.Using the effective interest method of amortization, which of the following statements is true? Assume interest is paid annually.

Accepted Answer

A)  Interest payments to bondholders each period will be $6,464. 
B)  Interest payments to bondholders each period will be $5,000. 
C)  Amortization of the premium for the first interest period will be $1,226. 
D)  Amortization of the premium for the first interest period will be $613. 
A)  Interest payments to bondholders each period will be $6,464. 
B)  Interest payments to bondholders each period will be $5,000. 
C)  Amortization of the premium for the first interest period will be $1,226. 
D)  Amortization of the premium for the first interest period will be $613.

Question 9

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 10

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?

Accepted Answer

A)  There will be a temporary difference between accounting income and income for tax purposes. 
B)  There will be a permanent difference between accounting income and income for tax purposes. 
C)  Wave's accounting income and income for tax purposes will be equal. 
D)  Accounting income will be lower than income for tax purposes, especially in the early years of the asset's life. 
A)  There will be a temporary difference between accounting income and income for tax purposes. 
B)  There will be a permanent difference between accounting income and income for tax purposes. 
C)  Wave's accounting income and income for tax purposes will be equal. 
D)  Accounting income will be lower than income for tax purposes, especially in the early years of the asset's life.

Question 11

On January 1, 2016, the long-term liability section of Eden Company's balance sheet showed a balance of $35,000 in the bonds payable account.On December 31, 2016, the balance in that same account was $20,000.This change would appear on the statement of cash flows as

Accepted Answer

A)  an outflow of cash of $15,000 in the financing activities category. 
B)  an inflow of cash of $15,000 in the financing activities category. 
C)  an outflow of cash of $15,000 in the investing activities category. 
D)  an inflow of cash of $15,000 in the investing activities category. 
A)  an outflow of cash of $15,000 in the financing activities category. 
B)  an inflow of cash of $15,000 in the financing activities category. 
C)  an outflow of cash of $15,000 in the investing activities category. 
D)  an inflow of cash of $15,000 in the investing activities category.

Question 12

When a lease is classified as an operating lease, the lease liability should be presented on the balance sheet of the lessee.

Accepted Answer

A) True 
 B)False

Question 13

Amortization of bond discount results in a(n)

Accepted Answer

A)  decrease of the bonds payable account. 
B)  decrease of stockholders' equity. 
C)  increase of stockholders' equity. 
D)  decrease in the cash account. 
A)  decrease of the bonds payable account. 
B)  decrease of stockholders' equity. 
C)  increase of stockholders' equity. 
D)  decrease in the cash account.

Question 14

Stockton Corporation has made an accounting entry to record deferred taxes as a liability resulting from temporary differences between accounting income and taxable income.Which of the following statements is true?

Accepted Answer

A)  Deferred tax will be decreased. 
B)  Stockholders' equity will be increased. 
C)  Stockholders' equity will be decreased. 
D)  Assets will be decreased. 
A)  Deferred tax will be decreased. 
B)  Stockholders' equity will be increased. 
C)  Stockholders' equity will be decreased. 
D)  Assets will be decreased.

Question 15

Discount on Bonds Payable is classified as a current liability.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following terms does not describe the interest rate printed on the bond certificate?

Accepted Answer

A)  Coupon rate 
B)  Effective rate 
C)  Face rate 
D)  Stated rate 
A)  Coupon rate 
B)  Effective rate 
C)  Face rate 
D)  Stated rate

Question 17

When a bond is issued at a discount, the interest expense each year is less than the cash payment for interest.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Discount on Bonds Payable is shown on the balance sheet as a(n) ____________________________.

Accepted Answer

The answer of Discount on Bonds Payable is shown on...

Question 20

The deferred income taxes for a corporation represent

Accepted Answer

A)  the dollar amount of deductions that a corporation may claim for the year. 
B)  an additional assessment made by the IRS for underpaid taxes. 
C)  the estimated amount of next year's taxes. 
D)  the dollar amount that arises due to the difference between accounting for financial statements and accounting for tax purposes. 
A)  the dollar amount of deductions that a corporation may claim for the year. 
B)  an additional assessment made by the IRS for underpaid taxes. 
C)  the estimated amount of next year's taxes. 
D)  the dollar amount that arises due to the difference between accounting for financial statements and accounting for tax purposes.

Convertible bonds are attractive to investors because

The amortization of bond discount increases the effective interest expense incurred each period for the issuer while amortization of bond premium decreases it.

A lease is accounted for as a capital lease if the lease term is 75% or more of the property's economic life.

In 2016, Aspinwall Company issued $200,000 of bonds for $175,000.If the face rate of interest was 9% and the effective rate of interest was 7.99%, how would Aspinwall calculate the interest expense for the first year on the bonds using the effective interest method?

The result of using the effective interest method of amortization of discount on bonds is that the

The current portion of long-term debt is a balance sheet item for Flavorful Products Company.How would it most likely be classified on the balance sheet? A) Current liability B) Long-term liability C) Current asset D) Long-term liability

If an investor has the right to retire the bonds, they are referred to as callable.

Neville Company issued $100,000 of 6%, 10 year bonds when the market rate of interest was 5%.The proceeds from this bond issue were $107,732.Using the effective interest method of amortization, which of the following statements is true? Assume interest is paid annually.

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

On January 1, 2016, the long-term liability section of Eden Company's balance sheet showed a balance of $35,000 in the bonds payable account.On December 31, 2016, the balance in that same account was $20,000.This change would appear on the statement of cash flows as

When a lease is classified as an operating lease, the lease liability should be presented on the balance sheet of the lessee.

Amortization of bond discount results in a(n)

Stockton Corporation has made an accounting entry to record deferred taxes as a liability resulting from temporary differences between accounting income and taxable income.Which of the following statements is true?

Discount on Bonds Payable is classified as a current liability.

Which of the following terms does not describe the interest rate printed on the bond certificate?

When a bond is issued at a discount, the interest expense each year is less than the cash payment for interest.

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

Discount on Bonds Payable is shown on the balance sheet as a(n) ____________________________.

The deferred income taxes for a corporation represent

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 True Value of Money

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Exploring Accounting Standards and Differences around the World

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Exam 10: Long-Term Liabilities

Convertible bonds are attractive to investors because

The amortization of bond discount increases the effective interest expense incurred each period for the issuer while amortization of bond premium decreases it.

A lease is accounted for as a capital lease if the lease term is 75% or more of the property's economic life.

In 2016, Aspinwall Company issued $200,000 of bonds for $175,000.If the face rate of interest was 9% and the effective rate of interest was 7.99%, how would Aspinwall calculate the interest expense for the first year on the bonds using the effective interest method?

The result of using the effective interest method of amortization of discount on bonds is that the

The current portion of long-term debt is a balance sheet item for Flavorful Products Company.How would it most likely be classified on the balance sheet? A) Current liability B) Long-term liability C) Current asset D) Long-term liability

If an investor has the right to retire the bonds, they are referred to as callable.

Neville Company issued $100,000 of 6%, 10 year bonds when the market rate of interest was 5%.The proceeds from this bond issue were $107,732.Using the effective interest method of amortization, which of the following statements is true? Assume interest is paid annually.

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

On January 1, 2016, the long-term liability section of Eden Company's balance sheet showed a balance of $35,000 in the bonds payable account.On December 31, 2016, the balance in that same account was $20,000.This change would appear on the statement of cash flows as

When a lease is classified as an operating lease, the lease liability should be presented on the balance sheet of the lessee.

Amortization of bond discount results in a(n)

Stockton Corporation has made an accounting entry to record deferred taxes as a liability resulting from temporary differences between accounting income and taxable income.Which of the following statements is true?

Discount on Bonds Payable is classified as a current liability.

Which of the following terms does not describe the interest rate printed on the bond certificate?

When a bond is issued at a discount, the interest expense each year is less than the cash payment for interest.

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

Discount on Bonds Payable is shown on the balance sheet as a(n) ____________________________.

The deferred income taxes for a corporation represent

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 True Value of Money

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Exploring Accounting Standards and Differences around the World

Filters