Far 4

Question 1

Asset retirement obligation (ARO) exists when an asset is __________ and there are legal requirements to incur _________ costs related to the constructed asset. An ARO increases the value of the asset and will be depreciated over time

Answer 1

constructed; removal-type

Question 1

______ bonds mature in ___________ and will not mature on the same _____. _________ bonds, _____ bonds and ________ fund bonds all bonds that mature on the same date on a particular bonds issuance

Answer 1

SERIAL; INSTALLMENTS; DATE; DEBENTURE; TERM; SINKING

Question 2

when a company issues stock with detachable stock warrants, __________ the warrant portion of the issuance to get the total long-term debt

Answer 2

subtract

Question 3

when a company issues $4,000,000 of bonds at 101 premium, fair value is __________ *1.01. If there are cost associated with the issuance, you __________ to get the effective premium

Answer 3

$4,000,000; SUBTRACT

Question 4

when calculating bonds take note of the _________ the interest is payable and if the interest rate is higher or lower than that of comparable bonds

Answer 4

FREQUENCY

Question 5

when a bond is issued at a discount, the discount is a _______ and when a bond is issued at a premium, the premium is a ________

Answer 5

DEBIT; CREDIT

Question 6

What happens to interest expense over the life of the bond under the effective interest rate method? (Increase or Decrease?)

Answer 6

INCREASE

Question 7

when a premium on a bond payable is not amortized, interst expense would be ___________and stoCkholders’ equity would be __________

Answer 7

OVERSTATED; UNDERSTATED

Question 8

when a bond is issued a discount and incurred a cost to issue the bond, the cost and cost of issuance will be __________ over the life of the bond

Answer 8

amortized

Question 9

Interest is calculated based on the ______ amount of the bond

Answer 9

FACE

Question 10

when the straight-line method is used instead of the effective interest method, on dec 31, the carrying amount of bond is ________ . At the maturity date, the bond carrying amount will not be affected as that is the maturity date (T or F)

Answer 10

OVERSTATED; TRUE

Question 11

Amortization of a discount of a note is not reported as interest expense (T or F)

Answer 11

FALSE, AMORTIZATION OF A DISCOUNT OF A NOTE IS REPORTED AS INTEREST EXPENSE

Question 12

When debt is issued at a discount, interest expense over the term of the debt _________ the cash interest paid plus amortization of the discount

Answer 12

EQUALS

Question 13

Is a deferred tax liability arising from depreciation reported as a current liability?

Answer 13

NO, IT IS RECORDED AS A NON-CURRENT LIABILITY

Question 14

When calculating amortization on a bond discount, you ________ on bonds payable and ________ on bonds payable when calculating amortization on a bond premium

Question 15

a bond originally issued at a discount and is then extinguished at 102, a _____ would be recognized

Answer 15

LOSS

Question 16

a lease classified as a finance lease would negatively impact cash flow from operations because the lease will change _________ at the end of the lease term

Answer 16

OWNERSHIP

Question 17

for a lease to classify as a finance lease under GAAP is must meet these criteria (5) 1) ownership ___________ at the end of the lease 2) written purchase option the lessee is reasonable certain to _________ 3) PV of lease payments = ____ _______ of asset (approximately ___% of FV of leased property 4) lease term = major part of (___%) of asset useful life 5) asset is __________ such that it has no alternative use to the lessor

Answer 17

TRANSFERS; EXERCISE; FAIR VALUE; 90; 75; SPECIALIZED

Question 18

At the beginning of a lease, lease payments are calculated based on ________ payments, __________ payments, exercise price of purchase option, termination penalties and probably amount owed of the guaranteed residual

Answer 18

FIXED; VARIABLE

Question 19

An equal amount for premium on bond payable is credited for amortization each period under the straight-line method when amorting for a bond premium (T o F)

Answer 19

FALSE:

Question 20

Gain on restructuring on debt is calculated based on FMV of the asset exchanged and not NBV (T or F)

Answer 20

True

Question 21

Checks outstanding are Check written and not

Answer 21

cashed