Exam 10: Long-Term Liabilities

Amortized premium 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?

If bonds are issued at 101.25, this means that

[APPENDIX] A permanent difference with respect to taxes is a difference that affects the tax records but not the accounting records, or vice versa.

[APPENDIX] The Deferred Tax account should reflect permanent differences but not items that are temporary differences between book accounting and tax reporting.

The terms of a lease can only be structured in one way to meet the lessor and lessee and satisfy accounting standards.

With the effective interest method of amortization, the amortization of bond premium results in a(n)

The change in the Deferred Taxes account is reflected in the Operating Activities category of the statement of cash flows.

When bonds are sold for less than the face amount, this means that the

If Tanner Company becomes less creditworthy, the market price of its bonds will decline.

The most obvious risk to bond investors is that a company will fail and be unable to pay its debts.

A company issued 10-year bonds with a par value of $20,000,000 and an 8% annual face on January 2, 2016.The issue price of the bond issue was $19,866,397 which reflected an 8.1% effective interest rate. Required: a) Determine the effect on the accounting equation upon recording the issuance of the bonds. b) Determine the effect on the accounting equation upon recording the recognition of interest expense at December 31, 2016. Any premium or discount should be amortized using the effective interest rate method. c) Determine the effect on the accounting equation upon recording the interest paid to the bondholders on January 2, 2017. d) Determine the effect on the accounting equation upon recognizing the interest expense at December 31, 2017. Any premium or discount should be amortized using the effective interest rate method.

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%.The cash payment on June 30, 2016, is

On January 2, 2016, Hi-Tech 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%.The annual cash payment (paid in semiannual payments) on the bonds is

Surplus Mining Company has leased a machine from Craft Machinery Company.The annual payments are $6,000 and the life of the lease is 8 years.It is estimated that the useful life of the machine is 9 years.How would Surplus Mining record the acquisition of the machine?

The bond issue price equals the _________________________ of the cash flows that the bond will produce.

Carrying value 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?

Bonds in the amount of $100,000 and a life of 10 years were issued by the Focus Company.If the face rate is 6% and interest is paid semiannually, what would be the total amount of interest paid over the life of the bonds?

For 2016, Wasabi Company has accounting revenues of $6,000.However, because of temporary differences between tax and accounting, $1,000 of this is not subject to tax.If expenses are $3,000 for both tax and accounting, and the tax rate is 40%, what is the amount of tax payable to the IRS?

Match the following bond and long-term liability related terms to the appropriate definition. -The principal amount of the bond as stated on the bond certificate.

Which of the following statements is correct?