Exam 10: Long-Term Liabilities

The carrying value is computed annually when a bond is issued for other than its face value.For a bond issued at a discount,how will this component change as the bond approaches maturity?

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

Which of the following statements is correct?

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, 2018 2017 Current liabilities Short-term borrowings \ 354 \ 202 Accounts payable and other current liabilities 4,461 4,529 Income taxes payable Total current liabilities \ 4,998 \ 4,795 Long-term debt \ 2,651 \ 3,009 Other long-term li abilities 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)Which long-term liability would also be listed in the Short-Term Liability section? Why? (2)What percent of the total liabilities for 2018 and 2017 are long-term liabilities? What implication does this have?

Stock investors view equity as a claim against the company that must be satisfied before they get a return on their money.

Frank Crawford Corporation's balance sheet showed the following amounts: Current Liabilities,$15,000;Bonds Payable,$8,000;Lease Obligations,$9,000;and Notes Payable,$5,600.Total stockholders' equity was $17,000.The debt-to-equity ratio is

Line Corporation's balance sheet showed the following amounts for their liability and stockholders' equity accounts: Current Liabilities,$5,000;Bonds Payable,$1,500;Lease Obligations,$2,000;and Deferred Income Taxes,$300.Total stockholders' equity was $6,000.The debt-to-equity ratio is

Stanton Heights Corporation issued $95,000 face value bonds at a discount of $5,000. The bonds contain a call price of 102. Stanton Heights decides to redeem the bonds early when the unamortized discount is $2,750. Required 1. Calculate Stanton Heights Corporation’s gain or loss on the early redemption of the bonds. 2. Describe how the gain or loss would be reported on the income statement and in the notes to the financial statements.

On January 1,2017,the Long-Term Liability section of Eden Company's balance sheet showed a balance of $35,000 in the Bonds Payable account.On December 31,2017,the balance in that same account was $20,000.This change would appear on the statement of cash flows as an

If bonds are issued at 101.25,this means that

An 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 under the effective interest method as the bond approaches maturity?

If bonds were initially issued at a premium,the carrying value of the bonds on the issuer's books will

Convertible bonds normally sell at a higher price than nonconvertible bonds.

On January 2,2017,Roof Master Construction,Inc.issued $500,000,ten-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

Premium on Bonds Payable is a balance sheet item for Ohio Products Company.How would it most likely be classified on the balance sheet?

An investor views a high debt-to-equity ratio and a low times interest earned ratio as favorable signs of a company's abilities to meet its long-term obligations.

In an operating lease,the lessee is not required to record the right to use the property as an asset or to record the obligation for payments as a liability.

The effective interest method amortizes premium or discount in a manner that produces a(n)__________ rate of interest from period to period.

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

Which of the following accounts would not appear on the balance sheet of a lessee company recording a capital lease after the first year of its ten-year life?