Common Long Term Liabilities

Question 1

Represent a contractual obligation to make periodic interest payments on the amount borrowed and to repay the principal upon maturity. Long-term debt balance reports the obligations of a company that will mature beyond one year’s time. They are recorded at the present value of all future cash payments.

Answer 1

Long-Term Debt

Question 2

Estimates of future costs, asset impairments, or liabilities that have been recorded and charged to income. For example, environmental liabilities or restructuring charges associated with a downsizing.

Answer 2

Provisions and Contingencies

Question 3

The present value amount of the future payments specified in the lease contract. A lease contract that meets any one of four capital lease tests must be recorded on the balance sheet as both an intangible asset, capital lease, and a liability, obligation under capital lease. The liability is broken down on the balance sheet into its current portion and long-term portion.

Answer 3

Obligations under Capital Lease

Question 4

The application of deferred tax accounting arises due to temporary differences, which result from the company’s usage of different accounting methods and estimates for book and tax purposes. Deferred income tax liabilities will be recorded when taxable income is lower than book income due to the rapid charge off of depreciable assets for tax purposes. For example, the usage of the accelerated method of depreciation for taxes will result in lower taxable income in the early years of a depreciable asset’s life versus book income that uses the straight-line methods of depreciation.

Answer 4

Deferred Income Taxes