Question 1

Long-term liabilities are a component of the "capital structure" of a company.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following lease conditions would result in a capital lease to the lessee?

Accepted Answer

A)  The lessee will return the property to the lessor at the end of the lease term. 
B)  The lessee can purchase the property for $1 at the end of the lease term. 
C)  The fair market value of the property at the inception of the lease is $18,000; the present value of the minimum lease payments is $15,977. 
D)  The lease term is 70% of the property's economic life. 
A)  The lessee will return the property to the lessor at the end of the lease term. 
B)  The lessee can purchase the property for $1 at the end of the lease term. 
C)  The fair market value of the property at the inception of the lease is $18,000; the present value of the minimum lease payments is $15,977. 
D)  The lease term is 70% of the property's economic life.

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

When a bond issue is retired early, the amount of unamortized discount or premium is not considered in the calculation of a gain or loss.

Accepted Answer

A) True 
 B)False

Question 5

The bond issue price is determined by calculating the

Accepted Answer

A)  present value of the stream of interest payments and the future value of the maturity amount. 
B)  future value of the stream of interest payments and the future value of the maturity amount. 
C)  future value of the stream of interest payments and the present value of the maturity amount. 
D)  present value of the stream of interest payments and the present value of the maturity amount. 
A)  present value of the stream of interest payments and the future value of the maturity amount. 
B)  future value of the stream of interest payments and the future value of the maturity amount. 
C)  future value of the stream of interest payments and the present value of the maturity amount. 
D)  present value of the stream of interest payments and the present value of the maturity amount.

Question 6

Churchill Company planned to raise $100,000 by issuing bonds.The bond certificates were printed bearing an interest rate of 8%, which was equal to the market rate of interest.However, before the bonds could be issued, economic conditions forced the market rate up to 9%.If the life of the bonds is 6 years and interest is paid annually on December 31, how much will Churchill receive from the sale of the bonds?

Accepted Answer

A)  Exactly $100,000 because Churchill Company would still pay interest at the face rate of 8%. 
B)  Less than $100,000 because the market rate of interest at 9% was more than the face rate. 
C)  Greater than $100,000 because the face rate of interest at 8% was less than the market rate. 
D)  The bonds would not be sold at all; Churchill Company would have the certificates reprinted bearing the market rate of 9%. 
A)  Exactly $100,000 because Churchill Company would still pay interest at the face rate of 8%. 
B)  Less than $100,000 because the market rate of interest at 9% was more than the face rate. 
C)  Greater than $100,000 because the face rate of interest at 8% was less than the market rate. 
D)  The bonds would not be sold at all; Churchill Company would have the certificates reprinted bearing the market rate of 9%.

Question 7

All liabilities that are not classified as current liabilities are classified as ___________________.

Accepted Answer

The answer of All liabilities that are not classified as...

Question 8

A decrease in deferred taxes (liability) would appear on the statement of cash flows, prepared using the indirect method as a(n)

Accepted Answer

A)  addition to net income in the operating activities category. 
B)  deduction to net income in the operating activities category. 
C)  inflow of cash in the financing activities category. 
D)  outflow of cash in the financing activities category. 
A)  addition to net income in the operating activities category. 
B)  deduction to net income in the operating activities category. 
C)  inflow of cash in the financing activities category. 
D)  outflow of cash in the financing activities category.

Question 9

Match the following bond and long-term liability related terms to the appropriate definition.
-The interest rate that bondholders could obtain by investing in other bonds that are similar to the issuing firm's bonds.

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 10

Bonds are sold at a premium if the

Accepted Answer

A)  issuing company has a better reputation than other companies in the same business. 
B)  market rate of interest was less than the face rate at the time of issue. 
C)  market rate of interest was more than the face rate at the time of issue. 
D)  company will have to pay a premium to retire the bonds. 
A)  issuing company has a better reputation than other companies in the same business. 
B)  market rate of interest was less than the face rate at the time of issue. 
C)  market rate of interest was more than the face rate at the time of issue. 
D)  company will have to pay a premium to retire the bonds.

Question 11

A(n) ______________________ lease is recorded on the lessee's balance sheet as an asset and related liability.

Accepted Answer

The answer of A(n) ______________________ lease is recorded on the...

Question 12

Connor Martin Corporation's balance sheet showed the following amounts: Current Liabilities, $10,000; Bonds Payable, $3,000; Lease Obligations, $4,000; and Notes Payable, $600.Total stockholders' equity was $12,000.The debt-to-equity ratio is:

Accepted Answer

A)  0.83. 
B)  1.47. 
C)  1.42. 
D)  0.63. 
A)  0.83. 
B)  1.47. 
C)  1.42. 
D)  0.63.

Question 13

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

Accepted Answer

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

Question 14

When bonds are issued by a company, the accounting entry shows an

Accepted Answer

A)  increase in liabilities and a decrease in stockholders' equity. 
B)  increase in liabilities and an increase in stockholders' equity. 
C)  increase in assets and an increase in liabilities. 
D)  increase in assets and an increase in stockholders' equity. 
A)  increase in liabilities and a decrease in stockholders' equity. 
B)  increase in liabilities and an increase in stockholders' equity. 
C)  increase in assets and an increase in liabilities. 
D)  increase in assets and an increase in stockholders' equity.

Question 15

Which of the following statements is true with regard to early retirement of bonds?

Accepted Answer

A)  If the carrying value of the bonds is higher than the redemption price, the issuing firm must record a loss. 
B)  Firms always find it advantageous to retire bonds issued at lower rates with bonds issued at higher rates. 
C)  It is always advantageous to carry out early retirement for bonds issued at a premium but not for bonds issued at a discount. 
D)  Any gain or loss resulting from early retirement of bonds would appear on the income statement of the issuing company. 
A)  If the carrying value of the bonds is higher than the redemption price, the issuing firm must record a loss. 
B)  Firms always find it advantageous to retire bonds issued at lower rates with bonds issued at higher rates. 
C)  It is always advantageous to carry out early retirement for bonds issued at a premium but not for bonds issued at a discount. 
D)  Any gain or loss resulting from early retirement of bonds would appear on the income statement of the issuing company.

Question 16

The issue price of a bond is always present valued using the market rate of interest.

Accepted Answer

A) True 
 B)False

Question 17

An alternate term for a timing difference is a _________________________.

Accepted Answer

temporary

Question 18

Convertible bonds normally sell at a higher price than non-convertible bonds.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Bonds are a popular source of financing because

Accepted Answer

A)  bond interest expense is deductible for tax purposes, while dividends paid on stock are not. 
B)  financial analysts tend to downgrade a company that has raised large amounts of cash by frequent issues of stock. 
C)  a company having cash flow problems can postpone payment of interest to bondholders. 
D)  the bondholders can always convert their bonds into stock if they choose. 
A)  bond interest expense is deductible for tax purposes, while dividends paid on stock are not. 
B)  financial analysts tend to downgrade a company that has raised large amounts of cash by frequent issues of stock. 
C)  a company having cash flow problems can postpone payment of interest to bondholders. 
D)  the bondholders can always convert their bonds into stock if they choose.

Long-term liabilities are a component of the "capital structure" of a company.

Which of the following lease conditions would result in a capital lease to the lessee?

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

When a bond issue is retired early, the amount of unamortized discount or premium is not considered in the calculation of a gain or loss.

The bond issue price is determined by calculating the

All liabilities that are not classified as current liabilities are classified as ___________________.

A decrease in deferred taxes (liability) would appear on the statement of cash flows, prepared using the indirect method as a(n)

Match the following bond and long-term liability related terms to the appropriate definition. -The interest rate that bondholders could obtain by investing in other bonds that are similar to the issuing firm's bonds.

Bonds are sold at a premium if the

A(n) ______________________ lease is recorded on the lessee's balance sheet as an asset and related liability.

Connor Martin Corporation's balance sheet showed the following amounts: Current Liabilities, $10,000; Bonds Payable, $3,000; Lease Obligations, $4,000; and Notes Payable, $600.Total stockholders' equity was $12,000.The debt-to-equity ratio is:

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

When bonds are issued by a company, the accounting entry shows an

Which of the following statements is true with regard to early retirement of bonds?

The issue price of a bond is always present valued using the market rate of interest.

An alternate term for a timing difference is a _________________________.

Convertible bonds normally sell at a higher price than non-convertible bonds.

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

Bonds are a popular source of financing because

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

Long-term liabilities are a component of the "capital structure" of a company.

Which of the following lease conditions would result in a capital lease to the lessee?

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

When a bond issue is retired early, the amount of unamortized discount or premium is not considered in the calculation of a gain or loss.

The bond issue price is determined by calculating the

All liabilities that are not classified as current liabilities are classified as ___________________.

A decrease in deferred taxes (liability) would appear on the statement of cash flows, prepared using the indirect method as a(n)

Match the following bond and long-term liability related terms to the appropriate definition. -The interest rate that bondholders could obtain by investing in other bonds that are similar to the issuing firm's bonds.

Bonds are sold at a premium if the

A(n) ______________________ lease is recorded on the lessee's balance sheet as an asset and related liability.

Connor Martin Corporation's balance sheet showed the following amounts: Current Liabilities, $10,000; Bonds Payable, $3,000; Lease Obligations, $4,000; and Notes Payable, $600.Total stockholders' equity was $12,000.The debt-to-equity ratio is:

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

When bonds are issued by a company, the accounting entry shows an

Which of the following statements is true with regard to early retirement of bonds?

The issue price of a bond is always present valued using the market rate of interest.

An alternate term for a timing difference is a _________________________.

Convertible bonds normally sell at a higher price than non-convertible bonds.

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

Bonds are a popular source of financing because

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