Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Padagonian Company

Use the Deferred Income Taxes account that appears in the financial statements of Padagonian Company to answer the related questions.
$\begin{array} { l r r } 
&  { \text { December 31, } } \
\text { (In millions) } & \underline{ \mathbf { 2 0 1 8 } } & \underline{\mathbf { 2 0 1 7 } }\
\text { Deferred income taxes } & { \$442 }& \$ 358 \
\text { Total assets } & 22,417 & 20,834 \
\text { Total current liabilities } & 8,429 & 9,321 \
\text { Total stockholders' equity } & 11,366 & 9,316
\end{array}$
- Review the information for Padagonian Company.
Required
(1)In your opinion,are deferred income taxes an appreciable portion of both long-term liabilities and total liabilities? Why?
(2)What difference between accounting income and taxable income produces the Deferred Income Taxes account?
(3)Will Padagonian eventually pay the deferred tax liability? When?

Accepted Answer

(1)Deferred income taxes do not appear t

Question 3

Antietam Corporation

Use the note on disclosure of leases for Antietam Corporation to answer the questions that follow.

The Corporation leases office, warehouse and showroom space, retail stores and office equipment under operating leases, which expire no later than 2031. The Corporation normalizes fixed escalations in rental expense under its operating leases. Minimum annual rentals under noncancelable operating leases, excluding operating cost escalations and contingent rental amounts based upon retail sales, are payable as follows:$\begin{array}{l}
\text { Fiscal year ending March 31, }\
\begin{array} { l r } 
2017 & \$ 10,051,000 \
2018 & 11,121,000 \
2019 & 10,161,000 \
2020 & 9,063,000 \
2021 & 8,814,000 \
\text { Thereafter } & 46,681,000
\end{array}
\end{array}$Rent expense was $12,551,000, $8,911,000, and $5,768,000 for the years ended March 31, 2016, 2015, and 2014, respectively.

-Review the information for Antietam Corporation.
Required
The note disclosure mentions contingent rent payments.What do you think this means with regard to Antietam Corporation?

Accepted Answer

The implication is that under certain ci

Question 4

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

Accepted Answer

A) bonds issued this year (due in ten years). 
B) the payment due in three years for a three-year lease signed this year. 
C) the current year portion of deferred taxes. 
D) the principal of a note payable signed this year but due in five years. 
A) bonds issued this year (due in ten years). 
B) the payment due in three years for a three-year lease signed this year. 
C) the current year portion of deferred taxes. 
D) the principal of a note payable signed this year but due in five years.

Question 5

Which of the following statements regarding leases is false?

Accepted Answer

A) Lease agreements are a popular form of financing the purchase of assets because leases do not require a large initial outlay of cash. 
B) Accounting recognizes two types of leases-operating leases and capital leases. 
C) If a lessor classifies a lease as a capital lease,then the lessee records a lease liability on its balance sheet. 
D) If a lease is classified as an operating lease,the lessee records a lease liability on its balance sheet. 
A) Lease agreements are a popular form of financing the purchase of assets because leases do not require a large initial outlay of cash. 
B) Accounting recognizes two types of leases-operating leases and capital leases. 
C) If a lessor classifies a lease as a capital lease,then the lessee records a lease liability on its balance sheet. 
D) If a lease is classified as an operating lease,the lessee records a lease liability on its balance sheet.

Question 6

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 7

On January 2,2017,Wynn Corporation sold $750,000 of bonds for $745,000.The bonds will mature in ten years and pay interest annually on December 31.Wynn properly recorded the payment of interest and amortization of the discount using the effective interest method.Which of the following statements is true about the carrying value of the bonds and/or the unamortized discount at the end of 2017?

Accepted Answer

A) The carrying value will be less than $745,000. 
B) The carrying value will be $745,000. 
C) The carrying value will be greater than $745,000. 
D) The unamortized premium will be less than $5,000. 
A) The carrying value will be less than $745,000. 
B) The carrying value will be $745,000. 
C) The carrying value will be greater than $745,000. 
D) The unamortized premium will be less than $5,000.

Question 8

Deferred income taxes arise because

Accepted Answer

A) corporations often make errors in their tax estimations. 
B) companies can use accounting methods that minimize net income for tax purposes and other methods that maximize net income for reporting to shareholders. 
C) the IRS owes a company a refund from last year. 
D) large corporations generally have operations in foreign countries whose tax law is quite different from U.S.tax law. 
A) corporations often make errors in their tax estimations. 
B) companies can use accounting methods that minimize net income for tax purposes and other methods that maximize net income for reporting to shareholders. 
C) the IRS owes a company a refund from last year. 
D) large corporations generally have operations in foreign countries whose tax law is quite different from U.S.tax law.

Question 9

Discount on Bonds Payable is classified as a current liability.

Accepted Answer

A) True 
 B)False

Question 10

If the lease term is 75% or more of the property's economic life,the lease agreement should be accounted for as an operating lease.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) decrease as the bonds approach their maturity date. 
B) increase as the bonds approach their maturity date. 
C) remain constant throughout the bonds' life. 
D) fluctuate throughout the bonds' life. 
A) decrease as the bonds approach their maturity date. 
B) increase as the bonds approach their maturity date. 
C) remain constant throughout the bonds' life. 
D) fluctuate throughout the bonds' life.

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

__________ is the process of transferring an amount from the bond discount or premium to interest expense each time period to adjust interest expense.

Accepted Answer

The answer of __________ is the process of transferring an...

Question 14

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 15

On January 1,2017,Sharpsburg,Inc.issued $400,000,ten-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 after the first interest payment is made on June 30,2017?

Accepted Answer

A) $352,960 
B) $354,200 
C) $355,452 
D) $400,000 
A) $352,960 
B) $354,200 
C) $355,452 
D) $400,000

Question 16

In general,the international accounting standards provide lease criteria that are similar to the U.S.standards.

Accepted Answer

A) True 
 B)False

Question 17

Bonds were issued at a(n)__________ when the issue price exceeds the face value.

Accepted Answer

The answer of Bonds were issued at a(n)__________ when the...

Question 18

A ten-year lease obligation appears on the balance sheet of Generic Products Company.How would it most likely be classified on the balance sheet?

Accepted Answer

A) Long-term liability 
B) Current asset 
C) Long-term asset 
D) Contra-liability 
A) Long-term liability 
B) Current asset 
C) Long-term asset 
D) Contra-liability

Question 19

Sewickley Company
Use the Liabilities section of Sewickley Company's balance sheet to answer the questions that follow.
 $\begin{array}{c}
\text {Sewickley Company}\
\text {Consolidated Balance Sheets}\
 \text {(in millions)}\\begin{array}{lrr}
&\quad\quad\text { December 31,} \
&2018 & 2017 \
\text { Current liabilities }\
\text { Short-term borrowings } & \$ 354 & \$ 202 \
\text { Accounts payable and other current liabilities } & 4,461 & 4,529 \
\text { Income taxes payable } & \underline{183} & \underline{64} \
\text { Total current liabilities } & \$ 4,998 & \$ 4,795\\
\text { Long-term debt } & \$ 2,651 & \$ 3,009 \
\text { Other long-term li abilities } & 3,876 & 3,960 \
\text { Deferred income taxes (assume all are long-term) } & 1,496 & 1,367
\end{array}\end{array}$  
-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 2017 to 2018? Which liability appears to have caused the greatest change?

Accepted Answer

(1)2018-$8,023 (in millions)
$2,651 (Lon

Question 20

The issue price of a bond is always calculated at present value using the market rate of interest.

Accepted Answer

A) True 
 B)False

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

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

Which of the following statements regarding leases is false?

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

Deferred income taxes arise because

Discount on Bonds Payable is classified as a current liability.

If the lease term is 75% or more of the property's economic life,the lease agreement should be accounted for as an operating lease.

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

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

__________ is the process of transferring an amount from the bond discount or premium to interest expense each time period to adjust interest expense.

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

On January 1,2017,Sharpsburg,Inc.issued $400,000,ten-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 after the first interest payment is made on June 30,2017?

In general,the international accounting standards provide lease criteria that are similar to the U.S.standards.

Bonds were issued at a(n)__________ when the issue price exceeds the face value.

A ten-year lease obligation appears on the balance sheet of Generic Products Company.How would it most likely be classified on the balance sheet?

The issue price of a bond is always calculated at present value using the market rate of interest.

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 Time Value of Money

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

International Financial Reporting Standards

Filters

Exam 10: Long-Term Liabilities

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

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

Which of the following statements regarding leases is false?

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

Deferred income taxes arise because

Discount on Bonds Payable is classified as a current liability.

If the lease term is 75% or more of the property's economic life,the lease agreement should be accounted for as an operating lease.

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

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

__________ is the process of transferring an amount from the bond discount or premium to interest expense each time period to adjust interest expense.

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

On January 1,2017,Sharpsburg,Inc.issued $400,000,ten-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 after the first interest payment is made on June 30,2017?

In general,the international accounting standards provide lease criteria that are similar to the U.S.standards.

Bonds were issued at a(n)__________ when the issue price exceeds the face value.

A ten-year lease obligation appears on the balance sheet of Generic Products Company.How would it most likely be classified on the balance sheet?

The issue price of a bond is always calculated at present value using the market rate of interest.

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 Time Value of Money

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

International Financial Reporting Standards

Filters