Question 1

On January 1, 2016, 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, 2016, the balance in that same account was $20,000.This change would appear on the statement of cash flows as

Accepted Answer

A)   an outflow of cash of $15,000 in the financing activities category.
B)   an inflow of cash of $15,000 in the financing activities category.
C)   an outflow of cash of $15,000 in the investing activities category.
D)   an inflow of cash of $15,000 in the investing activities category.E) A) and D)
F) A) and C)

Question 2

The current portion of long-term debt is a balance sheet item for Flavorful Products Company.How would it most likely be classified on the balance sheet?
A) Current liability
B) Long-term liability
C) Current asset
D) Long-term liability

Accepted Answer

The answer of The current portion of long-term debt is...

Question 3

Which of the following terms does not describe the interest rate printed on the bond certificate?

Accepted Answer

A)   Coupon rate
B)   Effective rate
C)   Face rate
D)   Stated rateE) None of the above
F) A) and B)

Question 4

Neville Company issued $100,000 of 6%, 10 year bonds when the market rate of interest was 5%.The proceeds from this bond issue were $107,732.Using the effective interest method of amortization, which of the following statements is true? Assume interest is paid annually.

Accepted Answer

A)   Interest payments to bondholders each period will be $6,464.
B)   Interest payments to bondholders each period will be $5,000.
C)   Amortization of the premium for the first interest period will be $1,226.
D)   Amortization of the premium for the first interest period will be $613.E) A) and B)
F) B) and D)

Question 5

Stockton Corporation has made an accounting entry to record deferred taxes as a liability resulting from temporary differences between accounting income and taxable income.Which of the following statements is true?

Accepted Answer

A)   Deferred tax will be decreased.
B)   Stockholders' equity will be increased.
C)   Stockholders' equity will be decreased.
D)   Assets will be decreased.E) A) and D)
F) B) and C)

Question 6

Convertible bonds are attractive to investors because

Accepted Answer

A)   they usually carry a higher rate of interest than non-convertible bonds.
B)   they carry a convertible interest rate that can be increased when the prime rate of interest increases.
C)   they can be converted into stock at the issuer's option.
D)   the issuing company cannot retire the bonds before maturity.E) B) and C)
F) A) and B)

Question 7

Discount on Bonds Payable is shown on the balance sheet as a(n) ____________________________.

Accepted Answer

The answer of Discount on Bonds Payable is shown on...

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

The sum of the carrying value and the redemption price at the time bonds are redeemed results in the gain or loss on redemption.

Accepted Answer

A) True 
 B)False

Question 10

Discount on Bonds Payable is classified as a current liability.

Accepted Answer

A) True 
 B)False

Question 11

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 12

A lease is accounted for as a capital lease if the lease term is 75% or more of the property's economic life.

Accepted Answer

A) True 
 B)False

Question 13

The deferred income taxes for a corporation represent

Accepted Answer

A)   the dollar amount of deductions that a corporation may claim for the year.
B)   an additional assessment made by the IRS for underpaid taxes.
C)   the estimated amount of next year's taxes.
D)   the dollar amount that arises due to the difference between accounting for financial statements and accounting for tax purposes.E) B) and C)
F) A) and B)

Question 14

When a bond is issued at a discount, the interest expense each year is less than the cash payment for interest.

Accepted Answer

A) True 
 B)False

Question 15

In 2016, Aspinwall Company issued $200,000 of bonds for $175,000.If the face rate of interest was 9% and the effective rate of interest was 7.99%, how would Aspinwall calculate the interest expense for the first year on the bonds using the effective interest method?

Accepted Answer

A)   $175,000 × 7.99%
B)   $175,000 × 9%
C)   $10,000 × 7.99%
D)   $10,000 × 9%E) None of the above
F) All of the above

Question 16

Wave Corporation is determining its income tax liability.It has one machine that cost $30,000 with a 4-year life and no salvage value.Wave is using an accelerated depreciation method for tax purposes.For accounting purposes, Wave has decided to use the straight-line method.Which of the following statements is true?

Accepted Answer

A)   There will be a temporary difference between accounting income and income for tax purposes.
B)   There will be a permanent difference between accounting income and income for tax purposes.
C)   Wave's accounting income and income for tax purposes will be equal.
D)   Accounting income will be lower than income for tax purposes, especially in the early years of the asset's life.E) All of the above
F) A) and B)

Question 17

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.E) A) and D)
F) None of the above

Question 18

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

Accepted Answer

A)   interest expense for each amortization period is constant.
B)   effective interest rate for each amortization period is constant.
C)   amount of interest expense decreases each period.
D)   cash interest payment is greater than the interest expense.E) B) and D)
F) B) and C)

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 10: Long-Term Liabilities

Amortization of bond discount results in a(n)

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Convertible bonds are attractive to investors because

Correct Answer
verified

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

Correct Answer
verified

Discount on Bonds Payable is classified as a current liability.

Correct Answer
verified

In 2016, Aspinwall Company issued $200,000 of bonds for $175,000.If the face rate of interest was 9% and the effective rate of interest was 7.99%, how would Aspinwall calculate the interest expense for the first year on the bonds using the effective interest method?

Correct Answer
verified

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

Correct Answer
verified

Neville Company issued $100,000 of 6%, 10 year bonds when the market rate of interest was 5%.The proceeds from this bond issue were $107,732.Using the effective interest method of amortization, which of the following statements is true? Assume interest is paid annually.

Correct Answer
verified

Stockton Corporation has made an accounting entry to record deferred taxes as a liability resulting from temporary differences between accounting income and taxable income.Which of the following statements is true?

Correct Answer
verified

The current portion of long-term debt is a balance sheet item for Flavorful Products Company.How would it most likely be classified on the balance sheet? A) Current liability B) Long-term liability C) Current asset D) Long-term liability

Correct Answer
verified

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

Correct Answer
verified

The deferred income taxes for a corporation represent

Correct Answer
verified

Which of the following terms does not describe the interest rate printed on the bond certificate?

Correct Answer
verified

When a bond is issued at a discount, the interest expense each year is less than the cash payment for interest.

Correct Answer
verified

A lease is accounted for as a capital lease if the lease term is 75% or more of the property's economic life.

Correct Answer
verified

Discount on Bonds Payable is shown on the balance sheet as a(n) ____________________________.

Correct Answer
verified

On January 1, 2016, 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, 2016, the balance in that same account was $20,000.This change would appear on the statement of cash flows as

Correct Answer
verified

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

Correct Answer
verified

The sum of the carrying value and the redemption price at the time bonds are redeemed results in the gain or loss on redemption.

Correct Answer
verified

Exam 10: Long-Term Liabilities

Amortization of bond discount results in a(n)

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Convertible bonds are attractive to investors because

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Discount on Bonds Payable is classified as a current liability.

Correct AnswerverifiedShow Answer

In 2016, Aspinwall Company issued $200,000 of bonds for $175,000.If the face rate of interest was 9% and the effective rate of interest was 7.99%, how would Aspinwall calculate the interest expense for the first year on the bonds using the effective interest method?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Neville Company issued $100,000 of 6%, 10 year bonds when the market rate of interest was 5%.The proceeds from this bond issue were $107,732.Using the effective interest method of amortization, which of the following statements is true? Assume interest is paid annually.

Correct AnswerverifiedShow Answer

Stockton Corporation has made an accounting entry to record deferred taxes as a liability resulting from temporary differences between accounting income and taxable income.Which of the following statements is true?

Correct AnswerverifiedShow Answer

The current portion of long-term debt is a balance sheet item for Flavorful Products Company.How would it most likely be classified on the balance sheet? A) Current liability B) Long-term liability C) Current asset D) Long-term liability

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The deferred income taxes for a corporation represent

Correct AnswerverifiedShow Answer

Which of the following terms does not describe the interest rate printed on the bond certificate?

Correct AnswerverifiedShow Answer

When a bond is issued at a discount, the interest expense each year is less than the cash payment for interest.

Correct AnswerverifiedShow Answer

A lease is accounted for as a capital lease if the lease term is 75% or more of the property's economic life.

Correct AnswerverifiedShow Answer

Discount on Bonds Payable is shown on the balance sheet as a(n) ____________________________.

Correct AnswerverifiedShow Answer

On January 1, 2016, 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, 2016, the balance in that same account was $20,000.This change would appear on the statement of cash flows as

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The sum of the carrying value and the redemption price at the time bonds are redeemed results in the gain or loss on redemption.

Correct AnswerverifiedShow Answer

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