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Exam 10: Long-Term Liabilities

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Question 1

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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

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

E) None of the above
F) C) and D)

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Question 2

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An alternate term for a timing difference is a __________.

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temporary difference

Question 3

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

The Premium on Bonds Payable account is shown on the balance sheet as a(n)

The current balance sheet of Blawnox Inc.reports total assets of $20 million,total liabilities of $2 million,and owners' equity of $18 million.Blawnox Inc.is considering several financing possibilities in order to expand operations.What is the additional amount that Blawnox Inc.can borrow and not exceed a debt-to-equity ratio of 0.3?

Convertible bonds are attractive to investors because

In an operating lease,the lessee acquires the right to use an asset for only a limited period of time.

__________ is either the bond's face value minus any unamortized discount or plus any unamortized premium.

__________ bonds may be retired by the issuing company before their specified due date.

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

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

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

Connor Martin Corporation's balance sheet showed the following amounts: Current Liabilities,$10,000;Bonds Payable,$3,000;Lease Obligations,$4,000;and Notes Payable,$600.Total stockholders' equity was $12,000.The debt-to-equity ratio is

The current balance sheet of Blawnox Inc.reports total assets of $20 million,total liabilities of $2 million,and owners' equity of $18 million.Blawnox Inc.is considering several financing possibilities in order to expand operations.If Blawnox Inc.'s owner invests an additional $2 million to finance the expansion,the debt-to-equity ratio

Bonds are sold at a premium if the

On January 1,2017,Sharpsburg,Inc.issued $400,000,ten-year,10% bonds for $354,200.The bonds pay interest on June 30 and December 31.The market rate is 12%.The cash payment on June 30,2017,is

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.

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

Bonds are generally issued in denominations of $1,000.

Which of the following statements regarding amortization is true?