Chapter 14: Long-Term Liabilities

Bond issuance costs are: A. amortized into expense over the life time of the bond. B. added to the issue amount of the bond payable. C. recorded as an asset. D. recorded as an interest expense.

A. amortized into expense over the life time of the bond.

The covenants and other terms of the agreement between the issuer of bonds and the lender are set forth in the A. bond indenture. B. bond debenture. C. bond coupon. D. registered bond.

A. bond indenture.

If bonds are issued between interest dates, the entry on the books of the issuing corporation could include a A. credit to Interest Expense. B. debit to Interest Payable. C. credit to Interest Receivable. D. credit to Unearned Interest.

A. credit to Interest Expense.

The times interest earned is computed by dividing A. income before income taxes and interest expense by interest expense. B. net income and interest expense by interest expense. C. net income by interest expense. D. income before taxes by interest expense.

A. income before income taxes and interest expense by interest expense.

Premium on bonds payable is A. reported as a reduction of the bond liability. B. an adjunct account. C. debited to a deferred charge account and amortized over the life of the bonds. D. a contra account.

B. an adjunct account.

Long-term debt that matures within one year and is to be converted into stock should be reported A. in a special section between liabilities and stockholders' equity. B. as non-current and accompanied with a note explaining the method to be used in its liquidation. C. as a current liability. D. only as non-current.

B. as non-current and accompanied with a note explaining the method to be used in its liquidation.

The rate of interest actually earned by bondholders is called the A. nominal rate. B. effective rate. C. stated rate. D. coupon rate.

B. effective rate.

Bonds for which the owners' names are not registered with the issuing corporation are called A. secured bonds. B. debenture bonds. C. bearer bonds. D. term bonds.

C. bearer bonds.

The interest rate written in the terms of the bond indenture is known as the A. nominal rate. B. stated rate. C. coupon rate, nominal rate, or stated rate. D. coupon rate.

C. coupon rate, nominal rate, or stated rate.

The interest rate actually earned by bondholders is called the A. stated rate. B. coupon rate. C. effective yield. D. nominal rate.

C. effective yield.

Bond interest paid is equal to the A. carrying value of the bonds multiplied by the stated interest rate. B. face amount of the bonds multiplied by the effective-interest rate. C. face amount of the bonds multiplied by the stated interest rate. D. carrying value of the bonds multiplied by the effective-interest rate.

C. face amount of the bonds multiplied by the stated interest rate.

A long-term note is valued at its A. market value. B. maturity value. C. present value. D. face value.

C. present value.

The face value of bonds is also called each of the following except A. principal. B. maturity value. C. stated value. D. par value.

C. stated value.

The term used for bonds that are unsecured as to principal is A. mortgage bonds. B. callable bonds. C. indebenture bonds. D. debenture bonds.

D. debenture bonds.

Bonds that pay no interest unless the issuing company is profitable are called A. revenue bonds. B. collateral trust bonds. C. debenture bonds. D. income bonds.

D. income bonds.

The debt to assets ratio is computed by dividing A. current liabilities by total assets. B. total assets by total liabilities. C. long-term liabilities by total assets. D. total liabilities by total assets.

D. total liabilities by total assets.

Which of the following is not a typically classified as a long-term liability? A. Bonds Payable B. Mortgage Payable C. Lease Liability D. Unearned Revenue

D. Unearned RevenueBond issuance costs are:

An early extinguishment of bonds payable, which were originally issued at a premium, is made by purchase of the bonds between interest dates. At the time of reacquisition, A. any costs of issuing the bonds must be amortized up to the purchase date. B. the premium must be amortized up to the purchase date. C. interest must be accrued from the last interest date to the purchase date. D. all of these answer choices are correct.

D. all of these answer choices are correct.