Ch14
Terms
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- Which of the following is NOT generally classified as a long-term liability?
- A. STOCK DIVIDENDS DISTRIBUTABLE
- A contract representing the covenants and other terms of the agreement between the issuer of bonds and the lender is known as
- B. BOND INDENTURE
- The term used for bonds that are backed by collateral is
- B. SECURED BONDS
- Bonds frequently used by schools and municipalities that mature in instalments are called
- C. SERIAL BONDS
- The rate of interest actually earned by bondholders is called the
- D. EFFECTIVE YIELD or MARKET RATE
- Moss corp issued ten year bonds with a maturity value of $400,000. If the bonds were issued at a premium, this indicates that
- B. the STATED rate was HIGHER than the MARKET rate
- If bonds are initially sold at a discount and the straight-line method of amortization is used, interest expense in the earlier years will be
- A. HIGHER than it would have been had the EFFECTIVE interest method of amortization been used.
- Using the effective interest method of bond discount of premium amortization, the periodic interest expense is equal to the
- D. MARKET RATE multiplied by the beginning-of-period carrying value of the bonds
- When the effective interest method is used to amortize bond premium or discount, the periodic amortization
- D. INCREASE if the bonds were issued at EITHER A DISCOUNT OR PREMIUM
- If bonds are issued between interest dates, the entry on the books of the issuing corporation could include a
- C. CREDIT to INTEREST EXPENSE
- When the interest payment dates of a bond are May 1 and November 1, and a bond issue is sold on June 1, the amount of cash received by the issuer will be
- D. INCREASED by accrued interest from MAY 1 TO JUNE 1
- How should a long term bond initially be valued?
- B. At the PRESENT VALUE of the FUTURE CASH FLOWS
- A bonds face value is also called
- D. the PAR VALUE or the MATURITY VALUE
- A ten year bond was issued in 2010 at a discount with a call provision to retire the bonds. When the bond issuer exercised the call provision on an interest date in 2012, the carrying value of the bond was less than the call price. The amount of bond liability removed from the accounts in 2012 would be the
- C. CARRYING VALUE
- If a long term note is issued with zero interest or for non-monetary consideration,
- B. a REASONABLE interest rate must be IMPUTED
- When valuing financial instruments at fair value (the fair value option),
- C. IFRS REQUIRES that this option be used only where fair value results in more RELEVANT INFORMATION
- An early extinguishment of bonds payable, which were originally issued at a premium, is made by purchasing the bonds between interest dates. At the time of reacquisition
- D. all of these statements are correct
- If a debt refunding is viewed as a modification or renegotiation, then
- A. a NEW EFFECTIVE interest rate is calculated
- When a note payable is issued for property, goods, or services, the present value of the note is measured by
- B. The FAIR VALUE of the PROPERTY, GOODS, or SERVICES
- In a troubled debt restructuring in which the debt is continued with modified terms and the carrying amount of the debt is less than the total future cash flows,
- C. a NEW EFFECTIVE INTEREST rate must be calculated
- A troubled debt restructuring will generally result in a
- D. GAIN by the DEBTOR and a LOSS by the CREDITOR
- In a troubled debt restructuring in which the debt is settled by a transfer of assets with a fair market value less the carrying amount of the debt, the debtor would recognize
- B. a GAIN on the SETTLEMENT
- In a troubled debt restructuring in which the debt is continued with the modified terms and the carrying amount of the debt is less than the total future cash flows, the creditor should
- C. CALCULATE its LOSS using the HISTORICAL EFFECT
- When the debtor sets aside money in a trust such that the investment and any return will be sufficient to pay the principal and the interest to the creditor, but the creditor does not release the company from the primary obligation to settle the debt, this type of arrangement is known as
- A. IN-SUBSTANCE DEFEASANCE
- Which of the following arrangements may represent a possible example of "off-balance-sheet financing?
- D. All of the above
- Note disclosure for long-term debt generally include all of the following except
- B. NAMES of SPECIFIC CREDITORS
- The times interest earned ratio is calculated by dividing
- C. (INCOME before INCOME TAXES and INTEREST EXPENSE) by INTEREST EXPENSE
- The debt to total assets ratio is calculated by dividing
- A. TOTAL LIABILITIES by TOTAL ASSETS
- The times interest earned ratio measures
- D. An ENTERPRISE'S ABILITY to meet INTEREST PAYMENTS as they come due
- The debt to total assets earned ratio measures
- B. The PERCENTAGE of TOTAL ASSETS financed by CREDITORS