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Intermediate Accounting II > Chapter 14 - Long-Term Liabilities > Flashcards

Chapter 14 - Long-Term Liabilities Flashcards

1
Q

Is unearned revenue a long-term liability?

A

No

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2
Q

Are bonds payable a long-term liability?

A

Yes

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3
Q

Is a lease payable a long-term liability?

A

Yes

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4
Q

Is a mortgage payable a long-term liability?

A

Yes

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5
Q

Bonds arise from a contract known as a bond _____.

A

Debenture

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6
Q

How often do bonds normally pay interest?

A

Semiannually

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7
Q

What is the typical face value of a single bond?

A

$1,000

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8
Q

The covenants and other terms of the agreement between the issuer of bonds and the lender are set forth in the bond ____.

A

Indenture

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9
Q

Bonds that are not recorded in the name of the bondholder are called ____ bonds.

A

Coupon

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10
Q

____ bonds give the issuer the right to retire bonds prior to maturity.

A

Callable

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11
Q

A bond that matures in installments is called a _____ bond.

A

Serial

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12
Q

Bonds which do not pay interest unless the issuing company is profitable are called ____ bonds.

A

Income

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13
Q

A debenture bond is a (an) (unsecured/secured) bond.

A

Unsecured

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14
Q

A bond issued in the name of the owner is a ____ bond.

A

Registered

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15
Q

When the effective rate of a bond is lower than the stated rate, the bond sells at a (discount/premium).

A

Premium

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16
Q

If a bond is sold at 98, the market rate was (greater/less than/equal to) the stated rate.

A

Greater than

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17
Q

Bond issue costs are recorded as a(n):

expense, asset, reduction in bonds payable, deferred charge

A

Deferred charge

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18
Q

Bond issue costs are amortized over the life of the bond. (True/False)

A

True

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19
Q

When bonds are sold between interest dates, why does the buyer pay the seller accrued interest?

A

Because the buyer will receive interest for the entire period at the next interest payment date.

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20
Q

What rate is used to determine the selling price of a bond?

stated, nominal, coupon, market

A

Market

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21
Q

What is the interest rate actually earned by bondholders?

stated, nominal, coupon, market

A

Market

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22
Q

What is another term for market rate?

A

Effective rate

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23
Q

What interest rate is written in the terms of the bond indenture?

(effective, market, coupon)

A

Coupon

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24
Q

What are two other terms for a coupon rate?

A

Nominal rate, Stated rate

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25
Q

Bond printing costs and legal fees are known as bond ____ costs.

A

Issue

26
Q

Which method is preferred when amortizing bond premiums and discounts?

(effective interest, straight-line)

A

effective interest

27
Q

Bond premium amortization _____ interest expense and ____ the premium on bonds payable balance.

(increases, decreases)

A

decreases

decreases

28
Q

The effective interest method calculates interest expenses by multiplying the carrying value of the bonds by the _____ rate of interest.

(Market, Stated)

A

market

29
Q

Discount on bonds payable and premium on bonds payable are liability _____ accounts.

A

Valuation

30
Q

If bonds are sold at a discount, interest expense in earlier years is higher with the ______ method than with the ______ method.

(straight line, effective interest)

A

Straight line

Effective interest

31
Q

Over the term of the bonds, the straight-line method and effective-interest method produce (the same, different) amounts of interest expense.

A

the same

32
Q

When a bond sells at a premium, bond interest expense is (greater than/less than/equal to) the bond interest payment.

A

Less than

33
Q

Should gains and losses on early extinguishment of debt be reported as other gains and losses on the income statement, or as extraordinary items?

A

Other gains and losses

34
Q

In an early extinguishment of premium bonds in between interest dates, what must be amortized up to the purchase date?

A

Bond issue costs

Bond premium

35
Q

In an early extinguishment of premium bonds in between interest dates, what must be accrued up to the purchase date?

A

Interest

36
Q

In an early extinguishment of a bond, how are gains or losses calculated?

A

The difference between the reacquisition price and the net carrying amount of the bond.

37
Q

Long-term notes payable are valued at their ____ value.

A

present

38
Q

The discount on a zero-interest bearing note is amortized to interest expense how?

(in the period the note is issued, over the life of the note)

A

Over the life of the note

39
Q

When a debt instrument with no ready market is exchanged for property whose fair market value is indeterminable, how is the present value of the debt instrument approximated?

A

By using an imputed interest rate

40
Q

The most common form of long-term notes payable are ____ notes.

A

Mortgage

41
Q

A ____ note payable is a promissory note secured by a document that pledges title to property as security for the loan.

A

Mortgage

42
Q

How are mortgage notes payable reported?

Long-term liability
Part current, part long-term liability

A

Part current, part long-term liability

43
Q

Are there any comparable institutions to the SEC in the international securities market?

A

No

44
Q

Is a non-interest bearing note an example of off-balance-sheet financing?

A

Yes

45
Q

Is an operating lease an example of off-balance-sheet financing?

A

No

46
Q

Is a non-consolidated subsidiary an example of off-balance-sheet financing?

A

Yes

47
Q

Is a special purpose entity an example of off-balance-sheet financing?

A

Yes

48
Q

Is a consolidated subsidiary an example of off-balance-sheet financing?

A

No

49
Q

When a business enterprise enters into off-balance-sheet financing, the company can enhance the quality of its financial position and perhaps permit credit to be obtained more readily and at less cost. (True/False)

A

True

50
Q

When a business enterprise enters into off-balance-sheet financing, the company is attempting to conceal the debt from shareholders by having no information about the debt included in the balance sheet. (True/False)

A

False

51
Q

When a business enterprise enters into off-balance-sheet financing, the company wishes to confine all information related to the debt to the income statement and the statement of cash flows. (True/False)

A

False

52
Q

Off-balance-sheet financing is a violation of GAAP.

A

False

53
Q

Are capital leases an example of off-balance-sheet financing?

A

No

54
Q

What is the “times interest earned” ratio?

A

Income before interest and taxes divided by interest expense

55
Q

Assets pledged as security are included in note disclosures for long-term debt. (True/False)

A

True

56
Q

Call provisions and conversion privileges are included in note disclosures for long-term debt. (True/False)

A

True

57
Q

Restrictions imposed by the creditor are included in note disclosures for long-term debt. (True/False)

A

True

58
Q

Names of specific creditors are included in note disclosures for long-term debt. (True/False)

A

False

59
Q

Does the IFRS allow recognition of liabilities for future losses?

A

No

60
Q

Does GAAP allow recognition of liabilities for future losses?

A

No

61
Q

Long-term debt that matures within one year and is to be converted into stock should be reported as:

(Current/Non-Current)

A

Non-Current

Intermediate Accounting II (6 decks)

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