Exam 10: Long-Term Liabilities

A friend of yours has asked you whether off-balance-sheet financing means that the amounts are immaterial and therefore are not reported.In a short paragraph,tell him what off-balance-sheet financing is and why firms engage in off-balance-sheet transactions?

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Question 1

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Off-balance-sheet financing refers to transactions whereby a party obtains the use of an asset but is not required to record the related liability on the balance sheet.These transactions can be very material.Firms may favor off-balance-sheet arrangements because they believe there are benefits in not recording an obligation as a liability.Benefits may include the maintenance of borrowing capacity and flexibility in meeting debt/equity or similar requirements in existing loan contracts.An example of off-balance-sheet financing is 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.

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?

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Question 2

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Although operating leases are not recorded on the balance sheet by the lessee,they are disclosed in the ____________________________________.

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Question 3

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es to the financial statements financial statements

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

(Multiple Choice)

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Question 4

All of the following statements are true except:

(Multiple Choice)

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Question 5

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

(True/False)

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Question 6

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

(Multiple Choice)

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Question 7

Bonds are sold at a premium if the

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Question 8

When the market rate of interest is less than the face rate,then the bond issue will be sold at a discount.

(True/False)

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Question 9

[APPENDIX] For 2012,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?

(Multiple Choice)

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Question 10

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

(Multiple Choice)

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Question 11

The result of using the effective interest method of amortization of discount on bonds is that the

(Multiple Choice)

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Question 12

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

(Multiple Choice)

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Question 13

If bonds are issued at 101.25,this means that

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Question 14

The debt-to-equity ratio is defined as total long-term liabilities divided by total stockholders' equity.

(True/False)

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Question 15

[APPENDIX] On January 1,2010,Roxie Company purchased an asset for $137,500.For financial accounting purposes,the asset will be depreciated on a straight-line basis over five years with no residual value at the end of that time.For tax purposes,the asset will be depreciated as follows: 2010,$45,000;2011,$35,000;2012,$25,000;2013,$20,000;and 2014,$12,500.Assume that the company is subject to a 35% tax rate. REQUIRED: 1.What is the amount of deferred tax at December 31,2010? 2.Does the deferred tax represent an asset or a liability? 3.What is the amount of deferred tax at December 31,2014?

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Question 16

The _____________________ rate of interest is the rate that bondholders could obtain by investing in other bonds that are similar to the issuing firm's bonds.

(Short Answer)

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Question 17

In 2012,Park Company issued $200,000 of bonds for $189,640.If the face rate of interest was 8% and the effective rate of interest was 6.73%,how would Park calculate the interest expense for the first year on the bonds using the effective interest method?

(Multiple Choice)

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Question 18

The accounting for leases is an excellent example of the differences in how U.S.and IFRS accounting standards are applied.

(True/False)

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Question 19

The amortization of bond discount increases the effective interest expense incurred each period for the issuer while amortization of bond premium decreases it.

(True/False)

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Question 20

Showing 1 - 20 of 159

A friend of yours has asked you whether off-balance-sheet financing means that the amounts are immaterial and therefore are not reported.In a short paragraph,tell him what off-balance-sheet financing is and why firms engage in off-balance-sheet transactions?

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?

Although operating leases are not recorded on the balance sheet by the lessee,they are disclosed in the ____________________________________.

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

All of the following statements are true except:

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

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

Bonds are sold at a premium if the

When the market rate of interest is less than the face rate,then the bond issue will be sold at a discount.

[APPENDIX] For 2012,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?

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

The result of using the effective interest method of amortization of discount on bonds is that the

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

If bonds are issued at 101.25,this means that

The debt-to-equity ratio is defined as total long-term liabilities divided by total stockholders' equity.

The _____________________ rate of interest is the rate that bondholders could obtain by investing in other bonds that are similar to the issuing firm's bonds.

In 2012,Park Company issued $200,000 of bonds for $189,640.If the face rate of interest was 8% and the effective rate of interest was 6.73%,how would Park calculate the interest expense for the first year on the bonds using the effective interest method?

The accounting for leases is an excellent example of the differences in how U.S.and IFRS accounting standards are applied.

The amortization of bond discount increases the effective interest expense incurred each period for the issuer while amortization of bond premium decreases it.

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

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