Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Debenture bonds are backed by specific collateral of the issuing company.

Accepted Answer

A) True 
 B)False

Question 3

The face rate is also called the nominal or stated rate.

Accepted Answer

A) True 
 B)False

Question 4

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 5

The denomination or principal amount of the bond is usually referred to as the _________________________.

Accepted Answer

face value

Question 6

A decreasing long-term liability account is presented on the statement of cash flows as

Accepted Answer

A) a decrease in cash in the Financing Activities category. 
B) an decrease in cash in the Investing Activities category. 
C) an increase in cash in the Operating Activities category. 
D) an increase in cash in the Financing Activities category. 
A) a decrease in cash in the Financing Activities category. 
B) an decrease in cash in the Investing Activities category. 
C) an increase in cash in the Operating Activities category. 
D) an increase in cash in the Financing Activities category.

Question 7

If an investor has the right to retire the bonds,they are referred to as callable.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Flagg Company issued $500,000 of bonds for $498,351,Interest is paid semiannually.The bond markets and the financial press are likely to state the bond issue price as

Accepted Answer

A) 498.35. 
B) 100.00. 
C) 99.67. 
D) 49.84. 
A) 498.35. 
B) 100.00. 
C) 99.67. 
D) 49.84.

Question 10

Because of changing market conditions,Friendly Corporation made the decision to redeem $300,000 of its bonds prior to maturity.The bonds had been issued at a discount and the balance in the discount account at the time of redemption was $15,000.The corporation's bond certificates indicated that the bonds could be retired early at 103.Friendly's retirement of the bonds would result in a(n)

Accepted Answer

A) loss of $24,000. 
B) gain of $6,000. 
C) decrease in owners' equity of $9,000. 
D) increase in assets of $15,000. 
A) loss of $24,000. 
B) gain of $6,000. 
C) decrease in owners' equity of $9,000. 
D) increase in assets of $15,000.

Question 11

If the market rate of interest is greater then the face rate,then the bonds are issued at a(n)________________________.

Accepted Answer

The answer of If the market rate of interest is...

Question 12

Amortization of bond discount results in a(n)

Accepted Answer

A) decrease of the bonds payable account. 
B) decrease of stockholders' equity. 
C) increase of stockholders' equity. 
D) decrease in the cash account 
A) decrease of the bonds payable account. 
B) decrease of stockholders' equity. 
C) increase of stockholders' equity. 
D) decrease in the cash account

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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?

Accepted Answer

A) The machine would be recorded as an asset with a cost of $48,000. 
B) The company would not record the machine as an asset but would record rent expense of $6,000 per year. 
C) The machine would be recorded as an asset,at the present value of the annual cash payments,$6,000 for 8 years. 
D) The machine would be recorded as an asset,at the present value of the annual cash payments,$6,000 for 9 years. 
A) The machine would be recorded as an asset with a cost of $48,000. 
B) The company would not record the machine as an asset but would record rent expense of $6,000 per year. 
C) The machine would be recorded as an asset,at the present value of the annual cash payments,$6,000 for 8 years. 
D) The machine would be recorded as an asset,at the present value of the annual cash payments,$6,000 for 9 years.

Question 15

When will bonds sell at a discount?

Accepted Answer

A) The credit standing of the issuing company is not as good as other companies in a similar line of business. 
B) The face rate of interest is less than the market rate of interest at the time of issue. 
C) The face rate of interest is more than the market rate of interest at the time of issue. 
D) The issuing company will be able to retire the bonds at less than face at maturity. 
A) The credit standing of the issuing company is not as good as other companies in a similar line of business. 
B) The face rate of interest is less than the market rate of interest at the time of issue. 
C) The face rate of interest is more than the market rate of interest at the time of issue. 
D) The issuing company will be able to retire the bonds at less than face at maturity.

Question 16

When a lease is classified as an operating lease,the lease liability should be presented on the balance sheet of the lessee.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

On January 1,2012,the long-term liability section of Dennison Supply Co.balance sheet showed a balance of $800,000 in the bonds payable account.On December 31,2012,the balance in that same account was $765,000.This change would appear on the statement of cash flows as

Accepted Answer

A) an outflow of cash of $35,000 in the financing activities category. 
B) an inflow of cash of $35,000 in the financing activities category. 
C) an outflow of cash of $35,000 in the investing activities category. 
D) an inflow of cash of $35,000 in the investing activities category. 
A) an outflow of cash of $35,000 in the financing activities category. 
B) an inflow of cash of $35,000 in the financing activities category. 
C) an outflow of cash of $35,000 in the investing activities category. 
D) an inflow of cash of $35,000 in the investing activities category.

Question 19

[APPENDIX] 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 20

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

Accepted Answer

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

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

Debenture bonds are backed by specific collateral of the issuing company.

The face rate is also called the nominal or stated rate.

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

The denomination or principal amount of the bond is usually referred to as the _________________________.

A decreasing long-term liability account is presented on the statement of cash flows as

If an investor has the right to retire the bonds,they are referred to as callable.

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

Flagg Company issued $500,000 of bonds for $498,351,Interest is paid semiannually.The bond markets and the financial press are likely to state the bond issue price as

If the market rate of interest is greater then the face rate,then the bonds are issued at a(n)________________________.

Amortization of bond discount results in a(n)

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

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?

When will bonds sell at a discount?

When a lease is classified as an operating lease,the lease liability should be presented on the balance sheet of the lessee.

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

On January 1,2012,the long-term liability section of Dennison Supply Co.balance sheet showed a balance of $800,000 in the bonds payable account.On December 31,2012,the balance in that same account was $765,000.This change would appear on the statement of cash flows as

[APPENDIX] Deferred income taxes arise because

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

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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Exam 10: Long-Term Liabilities

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

Debenture bonds are backed by specific collateral of the issuing company.

The face rate is also called the nominal or stated rate.

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

The denomination or principal amount of the bond is usually referred to as the _________________________.

A decreasing long-term liability account is presented on the statement of cash flows as

If an investor has the right to retire the bonds,they are referred to as callable.

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

Flagg Company issued $500,000 of bonds for $498,351,Interest is paid semiannually.The bond markets and the financial press are likely to state the bond issue price as

If the market rate of interest is greater then the face rate,then the bonds are issued at a(n)________________________.

Amortization of bond discount results in a(n)

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

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?

When will bonds sell at a discount?

When a lease is classified as an operating lease,the lease liability should be presented on the balance sheet of the lessee.

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

On January 1,2012,the long-term liability section of Dennison Supply Co.balance sheet showed a balance of $800,000 in the bonds payable account.On December 31,2012,the balance in that same account was $765,000.This change would appear on the statement of cash flows as

[APPENDIX] Deferred income taxes arise because

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

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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