Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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 3

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 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.E) C) and D)
F) A) and D)

Question 4

Tampa Corporation's balance sheet showed the following amounts for their liabilities and stockholders' equity accounts: Current Liabilities, $20,000; Bonds Payable, $60,000; Lease Obligations, $12,000; and Deferred Income Taxes, $2,000. Total stockholders' equity was $42,000. The debt-to-equity ratio is

Accepted Answer

A)   0.45
B)   0.58
C)   1.76
D)   2.24E) B) and D)
F) None of the above

Question 5

The Premium on Bonds Payable account is shown on the balance sheet as

Accepted Answer

A)   a contra asset.
B)   a reduction of an expense.
C)   an addition to a long-term liability.
D)   a subtraction from a long-term liability.E) B) and D)
F) All of the above

Question 6

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 7

Which of the following terms does not describe an interest rate used to calculate the interest expense on the income statement?

Accepted Answer

A)   Nominal rate
B)   Market rate
C)   Effective rate
D)   Yield rateE) None of the above
F) B) and C)

Question 8

Which of the following statements regarding bonds payable is true?

Accepted Answer

A)   Generally, bonds are issued in denominations of $100.
B)   When an issuing company's bonds are traded in the "secondary" market, the company will receive part of the proceeds when the bonds are sold from the first purchaser to the second purchaser.
C)   A debenture bond is backed by specific assets of the issuing company.
D)   Most bonds are term bonds, meaning that the entire principal amount will mature on a single date.E) B) and D)
F) All of the above

Question 9

Cash interest payment 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?

Accepted Answer

A)   Decrease
B)   Increase
C)   Remain constant
D)   Not enough information given to decide.E) All of the above
F) A) and B)

Question 10

In an operating lease, the lessee has acquired sufficient rights of ownership and control of the property to be considered its owner.

Accepted Answer

A) True 
 B)False

Question 11

When bonds are sold for less than the face amount, this means that the

Accepted Answer

A)   maturity value will be less than the face amount.
B)   maturity value will be greater than the face amount.
C)   bonds are sold at a premium.
D)   face rate of interest is less than the market rate of interest.E) A) and B)
F) A) and C)

Question 12

Most long­term liabilities are related to a firm's investing activities.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A)   41,000.
B)   410,000.
C)   4,100,000.
D)   41,000,000.E) C) and D)
F) A) and B)

Question 14

Serial bonds are unique because the interest is paid as a series of daily payments.

Accepted Answer

A) True 
 B)False

Question 15

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?

Accepted Answer

A)   Weather's annual interest expense on the bonds will be greater than the amount of interest payments to bondholders each year.
B)   Weather's annual interest expense on the bonds will be less than the amount of interest payments to bondholders each year.
C)   Weather will receive $94,800 as the issue price.
D)   The cash paid to bondholders will be $520 each interest period.E) All of the above
F) B) and C)

Question 16

Deferred income taxes is a balance sheet item for Iowa Products Company. How would it most likely be classified on the balance sheet?

Accepted Answer

A)   Owners' equity
B)   Long-term liability
C)   Expense
D)   Contra liabilityE) A) and B)
F) All of the above

Question 17

Match the following bond and long-term liability related terms to the appropriate definition.
-The difference between the carrying value and the redemption price at the time bonds are redeemed. This amount is presented as an income statement account.

Accepted Answer

A)  Long-term liability
B)  Face value
C)  Debenture bonds
D)  Serial bonds
E)  Callable bondsF) Face rate of interestG) Market rate of interestH) Bond issue priceI) PremiumJ) DiscountK) Effective interest method of amortizationL) Carrying valueM) Gain or loss on redemptionN) G) and H)
O) L) and M)

Question 18

Deferred tax is an amount that reconciles the differences between the income for financial purposes with the income reported for tax purposes. In most cases, it is a long-term liability.

Accepted Answer

A) True 
 B)False

Question 19

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)   Both as a current asset and a long-term asset
B)   Both as a long-term liability and a current liability
C)   A stockholders' equity
D)   Contra-liabilityE) A) and C)
F) None of the above

Question 20

Bonds are typically issued in denominations of $10,000.

Accepted Answer

A) True 
 B)False

Exam 10: Long-Term Liabilities

Which of the following terms does not describe an interest rate used to calculate the interest expense on the income statement?

Correct Answer
verified

Deferred tax is an amount that reconciles the differences between the income for financial purposes with the income reported for tax purposes. In most cases, it is a long-term liability.

Correct Answer
verified

Which of the following statements regarding leases is false?

Correct Answer
verified

Most longterm liabilities are related to a firm's investing activities.

Correct Answer
verified

In an operating lease, the lessee has acquired sufficient rights of ownership and control of the property to be considered its owner.

Correct Answer
verified

Cash interest payment 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?

Correct Answer
verified

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?

Correct Answer
verified

When bonds are sold for less than the face amount, this means that the

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

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

Correct Answer
verified

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?

Correct Answer
verified

The Premium on Bonds Payable account is shown on the balance sheet as

Correct Answer
verified

Serial bonds are unique because the interest is paid as a series of daily payments.

Correct Answer
verified

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

Correct Answer
verified

Match the following bond and long-term liability related terms to the appropriate definition. -The difference between the carrying value and the redemption price at the time bonds are redeemed. This amount is presented as an income statement account.

Correct Answer
verified

Which of the following statements regarding bonds payable is true?

Correct Answer
verified

Deferred income taxes is a balance sheet item for Iowa Products Company. How would it most likely be classified on the balance sheet?

Correct Answer
verified

Bonds are typically issued in denominations of $10,000.

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Exam 10: Long-Term Liabilities

Which of the following terms does not describe an interest rate used to calculate the interest expense on the income statement?

Correct AnswerverifiedShow Answer

Deferred tax is an amount that reconciles the differences between the income for financial purposes with the income reported for tax purposes. In most cases, it is a long-term liability.

Correct AnswerverifiedShow Answer

Which of the following statements regarding leases is false?

Correct AnswerverifiedShow Answer

Most long­term liabilities are related to a firm's investing activities.

Correct AnswerverifiedShow Answer

In an operating lease, the lessee has acquired sufficient rights of ownership and control of the property to be considered its owner.

Correct AnswerverifiedShow Answer

Cash interest payment 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?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

When bonds are sold for less than the face amount, this means that the

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

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

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

The Premium on Bonds Payable account is shown on the balance sheet as

Correct AnswerverifiedShow Answer

Serial bonds are unique because the interest is paid as a series of daily payments.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Match the following bond and long-term liability related terms to the appropriate definition. -The difference between the carrying value and the redemption price at the time bonds are redeemed. This amount is presented as an income statement account.

Correct AnswerverifiedShow Answer

Which of the following statements regarding bonds payable is true?

Correct AnswerverifiedShow Answer

Deferred income taxes is a balance sheet item for Iowa Products Company. How would it most likely be classified on the balance sheet?

Correct AnswerverifiedShow Answer

Bonds are typically issued in denominations of $10,000.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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Most longterm liabilities are related to a firm's investing activities.

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