acct exam 4 pt 2
Tidal Corporation has a tax rate of 35%. It has one machine that cost $30,000 with a 4-year life and no salvage value. Tidal is using an accelerated depreciation method for tax purposes and depreciation expense is $8,060. What is the deferred tax amount? a.$450 b.$196 c.$560 d.There is not enough information to answer the question.
Tidal Corporation has a tax rate of 35%. It has one machine that cost $30,000 with a 4-year life and no salvage value. Tidal is using an accelerated depreciation method for tax purposes and depreciation expense is $8,060. What is the deferred tax amount? a.$450 b.$196 c.$560 d.There is not enough information to answer the question.
A company sold bonds with a face value of $100,000. The unamortized discount on these bonds is $4,500. The company retired these bonds at 97. What is the impact on the financial statements when bonds are retired? a.Decrease Cash $97,000; Decrease Bonds Payable $100,000; Decrease Discount on Bonds Payable $4,500; Increase Loss on Retirement of Bonds $1,500 b.Decrease Cash $97,000; Decrease Bonds Payable $100,000; Increase Discount on Bonds Payable $4,500; Increase Loss on Retirement of Bonds $1,500 c.Decrease Cash $97,000; Decrease Bonds Payable $100,000; Decrease Discount on Bonds Payable $4,500; Increase Gain on Retirement of Bonds $1,500 d.Decrease Cash $97,000; Decrease Bonds Payable $100,000; Increase Discount on Bonds Payable $4,500; Increase Gain on Retirement of Bonds $1,500
a
GLC Corp. had the following information available on its year-end balance sheet. What will the total of long-term liabilities be? Accounts payable$10,000 Salaries payable$5,000 Bonds payable$100,000 Notes Payable due in 3 years$20,000 a.$120,000 b.$135,000 c.$15,000 d.$125,000
a
GLC Corp. issued the following Bond:Date of issue and sale: April 1 Principal amount: $500,000 Denomination: $1,000 Life of Bonds: 10 years Stated rate: 8%, payable annually on April 1 If the market rate is 10%, what is the effect of the sale of the bonds? (Note to Contractor: Table 9-4 and Table 9-2) a.Activity: Financing; Increase Cash $438,553; Increase Bonds Payable $500,000; Increase Discount on Bonds Payable $61,447 b.Activity: Financing; Increase Cash $460,000; Increase Bonds Payable $500,000; Increase Discount on Bonds Payable $40,000 c.Activity: Financing; Increase Cash $528,274; Increase Bonds Payable $500,000; Increase Premium on Bonds Payable $28,274 d.Activity: Financing; Increase Cash $561,447; Increase Bonds Payable $500,000; Increase Premium on Bonds Payable $61,447
a
How is deferred tax calculated? a.Timing differences x Tax rate b.Income before tax x tax rate c.(Income before tax x tax rate) - estimated taxes paid d.Timing differences + Permanent differences
a
Omega Corporation issued a four-year, $1,000 bond with a nominal interest rate of 8%. At the time, the market rate of interest was 6%. What is the bond issuance price? (Note to Contractor: Table 9-4 and Table 9-2) a.$1,069 b.$937 c.$1,000 d.$1,300
a
Omega Corporation issued a four-year, $1,000 bond with a nominal interest rate of 8%. At the time, the market rate of interest was 6%.Select the correct statement. a.The bonds would have been issued at a premium. b.The bonds would have been issued at a discount. c.The bonds would have been issued at face value. d.There would have been 1% accrued interest at the time of issuance.
a
Select the term for an obligation that will not be satisfied within one year or the current operating cycle. a.Long-term liability b.Current liability c.Current asset d.Accrued liability
a
When a company uses the straight-line depreciation method for financial reporting purposes and an accelerated depreciation method for tax purposes, what is the result? a.A deferred tax b.No deferred taxes c.A violation of GAAP d.The company pays more taxes
a
Where does an increase in a long-term liability appear on the statement of cash flows? a.As an increase in the Financing Activities category b.As a decrease in the Financing Activities category c.As a decrease in the Operating Activities category d.As an increase in the Operating Activities category
a
Which is true of an unsecured bond? a.It is backed solely by the general credit of the corporation. b.It is backed by specific assets of the corporation. c.It is referred to as a callable bond. d.It is convertible to stock.
a
Which of the following statements regarding leases is not true? a.If a lease is classified as an operating lease, the lessee records a lease liability on its balance sheet. b.Lease agreements are a popular form of financing the purchase of assets because leases do not require a large initial outlay of cash. c.Accounting recognizes two types of leases; operating and capital leases. d.If a lessor classifies a lease as a capital lease, then the lessor records a lease liability on its balance sheet.
a
Which statement is true of permanent differences between book accounting and tax reporting? a.Permanent differences should not be reflected on the balance sheet as deferred tax. b.Permanent differences should be reflected on the balance sheet as deferred tax. c.Permanent differences are items that have been excluded from both tax and financial statement calculation. d.Permanent differences occur when expenses are recognized in different periods for book and tax.
a
Wong Corporation's balance sheet showed the following amounts: Current Liabilities, $5,000; Bonds Payable, $1,500; Lease Obligations, $2,000, and Deferred Income Taxes, $300. Total stockholders' equity was $6,000. The debt-to-equity ratio is: a.1.47 b.0.83 c.1.42 d.0.63
a
Discount on Bonds Payable is what type of account? a.Asset b.Contra-liability c.Current liability d.Deferred revenue
b
How are capitalized lease transactions shown in the financial statements? a.Balance Sheet: Increase Leased Asset; Increase Lease Obligation; for the fair value of the leased asset when the asset is recorded. Income Statement: Depreciation Expense; Balance Sheet: Accumulated Depreciation; when depreciation is recorded over the life of the asset. Balance Sheet: Decrease Cash; Decrease Lease Obligation; when payments are made. b.Balance Sheet: Increase Leased Asset; Increase Lease Obligation; for the present value of the lease payments when the asset is recorded. Income Statement: Depreciation Expense; Balance Sheet: Accumulated Depreciation; when depreciation is recorded over the life of the asset. Balance Sheet: Decrease Cash; Decrease Lease Obligation; Income Statement: Increase Interest Expense; when lease payments are made. c.Income Statement: Lease Expense; Balance Sheet: Cash; for the lease payments d.Balance Sheet: Increase Leased Asset; Increase Lease Obligation; for the present value of the lease payments when the asset is recorded. Income Statement: Depreciation Expense; Balance Sheet: Accumulated Depreciation; when depreciation is recorded over the life of the asset. Balance Sheet: Decrease Cash; Decrease Lease Obligation; when payments are made.
b
How is the effective interest rate calculated? a.Annual Interest Payment/Carrying Value b.Annual Interest Expense/Carrying Value c.Annual Interest Expense/Discount or Premium d.Annual Interest Payment /Face Value
b
Omega Corporation issued a four-year, $1,000 bond with a nominal interest rate of 8%. At the time, the market rate of interest was 10%.Select the correct statement. a.The bonds would have been issued at a premium. b.The bonds would have been issued at a discount. c.The bonds would have been issued at face value. d.There would have been 2% accrued interest at the time of issuance
b
On January 1, Year 1, the long-term liability section of GLK Company's balance sheet showed a balance of $35,000 in the bonds payable account. On December 31, Year 1, the balance in that same account was $20,000. Where would this change appear on the statement of cash flows for the year ended December 31, Year 1? a.As a decrease of $15,000 in the investing activities category b.As a decrease of $15,000 in the financing activities category c.As an increase of $15,000 in the financing activities category d.As an increase of $15,000 in the investing activities category
b
What is the impact on the financial statements when bonds are sold at a discount? a.Activity: Operating; Decrease Cash; Increase Bonds Payable; Increase Discount on Bonds Payable b.Activity: Financing; Increase Cash; Increase Bonds Payable; Increase Discount on Bonds Payable c.Activity: Investing; Increase Cash; Increase Bonds Payable; Increase Discount on Bonds Payable d.Activity: Financing; Decrease Cash; Increase Bonds Payable; Increase Discount on Bonds Payable
b
What is the impact on the financial statements when bonds are sold at a premium? a.Activity: Operating; Decrease Cash; Increase Bonds Payable; Increase Premium on Bonds Payable b.Activity: Financing; Increase Cash; Increase Bonds Payable; Increase Premium on Bonds Payable c.Activity: Investing; Increase Cash; Increase Bonds Payable; Increase Premium on Bonds Payable d.Activity: Financing; Decrease Cash; Increase Bonds Payable; Increase Premium on Bonds Payable
b
Where does a decrease in a long-term liability appear on the statement of cash flows? a.As an increase in the Financing Activities category b.As a decrease in the Financing Activities category c.As a decrease in the Operating Activities category d.As an increase in the Operating Activities category
b
Which is not considered a long-term liability? a.Deferred taxes b.Accounts payable c.Bonds payable d.Leases
b
Which of the following is included in financing activities on the statement of cash flows? a.Net income b.Proceeds from issuing bonds c.Capital purchases d.Increases and decreases in current liabilities
b
A company sold bonds with a face value of $100,000. The unamortized discount on these bonds is $4,500. The company retired these bonds at 97. What amount would be the gain or loss on this retirement? a.No gain or loss b.$1,500 gain c.$1,500 loss d.Not enough information to complete the problem.
c
How does an investor view the debt-to-equity ratio of a company? a.A high value is generally viewed favorably. b.It is a measure of the company's liquidity. c.A low value is generally viewed favorably. d.It is a measure of the company's ability to generate cash.
c
How does an investor view the times interest earned ratio of a company? a.It is a measure of the company's liquidity. b.A low value is generally viewed favorably. c.A high value is generally viewed favorably. d.It is a measure of the company's ability to generate cash.
c
What criteria must be met for the lease to be classified as a capital lease? a.One or more of these: Title to the leased asset passes to the lessee at the end of the lease, the lease includes a bargain-purchase option, the lease term is 90% or more of the property's economic life, or the present value of the minimum lease payments is 75% or more of the fair market value of the property at the inception of the lease. b.One or more of these: Title to the leased asset passes to the lessee at the end of the lease, the lease includes a bargain-purchase option, the lease term is 70% of the property's economic life, or the present value of the minimum lease payments is 90% or more of the fair market value of the property at the inception of the lease. c.One or more of these: Title to the leased asset passes to the lessee at the end of the lease, the lease includes a bargain-purchase option, the lease term is 75% or more of the property's economic life, or the present value of the minimum lease payments is 90% or more of the fair market value of the property at the inception of the lease. d.One or more of these: Title to the leased asset passes to the lessee at the end of the lease, the lease includes a bargain-purchase option, the lease term is 90% or more of the property's economic life, or the fair market value of the property is less than the lease payments for the remainder of the lease term.
c
What generally occurs when bonds are retired or repaid at their due date? a.The issuer realizes a loss. b.The issuer realizes a gain. c.No gain or loss is realized. d.The bond holder realizes a gain.
c
Which bond is not backed by collateral? a.Sub-prime bond b.Secured bond c.Debenture bond d.Term bond
c
Which statement is true of the interest expense each year when a bond is issued at a discount? a.The interest expense is less than the cash payment for interest. b.The interest expense decreases over time using the effective interest method. c.The interest expense is greater than the cash payment for interest. d.The interest expense equals the cash payment for interest.
c
Assume at the interest payment date, interest expense is increased by $642 and cash is decreased by $800. What other account is impacted by this interest payment? a.Premium on bonds payable increases by $158 b.Discount on bonds payable increases by $158 c.Discount on bonds payable decreases by $158 d.Premium on bonds payable decreases by $158
d
If bonds are retired early, when is a gain recorded by the issuer? a.When redemption price is less than the maturity value b.When redemption price is greater than the maturity value c.When redemption price is greater than the carrying value d.When redemption price is less than the carrying value
d
If bonds are sold at a premium, what is true of the carrying value of the bonds? a.The carrying value increases over the life of the bond. b.The carrying value remains the same over the life of the bond. c.The carrying value is the face value less the premium. d.The carrying value decreases over the life of the bond.
d
What is the ratio of income before interest and taxes to interest expense? a.Interest turnover ratio b.The return on interest ratio c.A profitability ratio d.The times interest earned ratio
d
Which of the following is likely to appear in the Long-term Liabilities category of the balance sheet? a.Unearned revenue b.Accounts payable c.Warranty liability d.Bonds payable
d
Which statement is not true of the bond issue price? a.The issue price of a bond is determined by the present value of its cash flows. b.The issue price of a bond is the present value of the repayment of principal and the present value of the interest receipts. c.The issue price of a bond should be calculated using the market rate of interest. d.The issue price of a bond is the face value times the rate times the number of periods.
d