Exam 10: Long-Term Liabilities

Sewickley Company Use the liabilities section of Sewickley Company's balance sheet to answer the questions that follow. Sewickley Company Consolidated Balance Sheets (in millions) December 31, 2017 2016 Current liabilities Short-term borrowings \ 354 \ 202 Accounts payable and other current liabilities 4,461 4,529 Income taxes payable 183 64 Total current liabilities \ 4,998 \ 4,795 Long-term debt \ 2,651 \ 3,009 Other long-term liabilities 3,876 3,960 Deferred income taxes (assume all are long-term) 1,496 1,367 ​ ​ -Review the consolidated balance sheets of Sewickley Company. Required: (1) What are the total long-term liabilities for the two years presented? ​ (2) What is the percent increase/decrease of long-term liabilities from 2016 to 2017? Which liability appears to have caused the greatest change?

When a company has a credit balance in its Deferred Tax account, this amount would appear as a(n)

Happy Corporation leased a building from Sensor Company.The 10-year lease is recorded as a capital lease.The annual payments are $10,000 and the recorded cost of the asset is $67,100.The straight-line method is used to calculate depreciation.Which of the following statements is true?

Use the information provided in the time value of money tables (Tables 9-1 through 9-4) in the text to answer the question that follows. Global Company issued $1,000,000, 8%, 7 year bonds, interest payable semiannually.The market rate of interest was 6%.The issuance price of the bonds is

A gain on bond redemption

On January 2, 2016, Lawn 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%.What is the carrying value of the bonds at the end of ten years before the final maturity payment is made?

When determining the amount of interest to be paid on a bond, which of the following information is not necessary?

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

An example of a cash flow related to a liability that would not appear in the financing activities category of the statement of cash flows is

Most investors would prefer to see equity rather than debt on the balance sheet.

Sewickley Company Use the liabilities section of Sewickley Company's balance sheet to answer the questions that follow. Sewickley Company Consolidated Balance Sheets (in millions) December 31, 2017 2016 Current liabilities Short-term borrowings \ 354 \ 202 Accounts payable and other current liabilities 4,461 4,529 Income taxes payable 183 64 Total current liabilities \ 4,998 \ 4,795 Long-term debt \ 2,651 \ 3,009 Other long-term liabilities 3,876 3,960 Deferred income taxes (assume all are long-term) 1,496 1,367 ​ ​ -Review the consolidated balance sheets of Sewickley 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 2016 to 2017? What would this say about the company's financial position?

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?

Interest expense 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?

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.

Match the following bond and long-term liability related terms to the appropriate definition. -The face value of a bond plus the amount of unamortized premium or minus the amount of unamortized discount.

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

Most long-term liabilities are related to a firm's investing activities.

Match the following bond and long-term liability related terms to the appropriate definition. -Bonds that may be redeemed or retired before their specified due date.

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

On January 2, 2016, Roof 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%.At the maturity date, besides an interest payment, Roof Master would repay the bondholders