Study Guide Intermediate Accounting Volume 2 Chapters 15-24 14th Edition Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield - Solutions

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(S.O. 3) If bonds are issued initially at a premium and the effective interest method of amortization is used, interest expense in the earlier years will be:greater than if the straight-line method were used.greater than the amount of the interest payments.the same as if the straight-line method
(S.O. 2) Bonds with par value of $500,000 carrying a stated interest rate of 6% payable semiannually. on March | and September 1 were issued on July 1. The proceeds from the issue amounted to$510,000. The best explanation for the excess received over par value is:the bonds were sold at a
(S.O. 2) The interest rate actually earned by a bondholder who buys the bond at a discount, as 7 compared to the stated rate on the bond is:Higher Lower A. NYies No B. ies Yes C. No Yes D. No No
(S.O. 2) Bonds that are secured by stocks and bonds of other corporations are called:A. collateral trust bonds.Bi registered bonds.C. serial bonds.D. treasury bonds.
(S.O.2) Bonds that pay no interest unless the issuing company is profitable are called:collateral trust bonds.debenture bonds.revenue bonds.Vaw> income bonds.
(S.O. 2) Ifa corporation issues a debenture bond, it means the bond:A. is secured by stocks and bonds of other corporations.B. matures in installments.C. is unsecured.D. may be converted into other securities of the corporation for a specified time after issuance.
(S.O. 10) In a troubled debt restructuring the noncash assets or equity interest given should be accounted for at their fair value.==25 (S.O. 10) When a debtor's serious short-run cash flow problems leads to a modification of terms, the creditor's loss is based on expected cash flows discounted at
(S.O. 9) The times interest earned ratio indicates the company's ability to meet interest payments as they come due.
(S.O. 9) Long-term debt that matures within one year should be reported as a current liability, unless retirement is to be accomplished with other than current assets.=22. (S.O. 9) Disclosure is required of future payments for sinking fund requirements and maturity amounts of long-term debt during
(S.O. 8) In a project financing arrangement, a single company sets up a second company for the purpose of financing a specific project that has a maximum life of five years.
(S.O. 8) Two reasons often cited for off-balance sheet financing are: (a) keeping debt off the balance sheet enhances the quality of the balance sheet and permits credit to be obtained more easily and (b)loan covenants often impose a limitation on the amount of debt a company may have.
(S.O. 8) Off-balance-sheet financing is an attempt to borrow monies in such a way that the obligations are recorded in the retained earnings statement.
(S.O. 6) Mortgage "points" raise the effective interest rate above the rate specified in the note.
(S.O. 6) An imputed interest rate used to determine the present value of a debt instrument may change during the life of the debt if a change occurs in the prevailing interest rate.
(S.O. 6) When a zero-interest-bearing note is given in return for property, the present value of the note is measured by the fair value of the property or by an amount that reasonably approximates the market value of the note.
(S.O. 5) Any excess of the net carrying amount over the reacquisition price is a loss from extinguishment.
(S.O. 4) The expenses associated with the issuance of bonds (printing costs, legal fees, etc.), should be added to the bond discount or subtracted from the bond premium on the date the bonds are issued.
(S.O. 4) Under the effective interest method semiannual interest expense is computed by multiplying the effective interest rate times a constant carrying value of the bonds.
(S.0. 4) The amortization of a bond discount increases the amount of bond interest expense recorded each period.
(S.O. 4) Bond discount should be reported in the balance sheet as a direct deduction from the face amount of the bond.
(S.O. 4) If bonds are sold at a premium, the effective rate of interest is greater than the stated rate of interest.
(S.O. 3) The stated rate of interest on bonds is the rate set by the party issuing the bonds.
(S.O. 3) When bonds are issued between interest dates, the purchaser pays for interest accrued since the date the bonds were originally issued.
(S.O. 2) When bonds are issued by a corporation, the AICPA requires that the issue be placed with an independent underwriter.
(S.O. 2) Bonds issued by a corporation represent a means of borrowing funds from the general public or institutional investors on a long-term basis.
(S.O. 2) Revenue bonds are bonds whose interest rate is a function of the revenue earned by the company issuing the bonds.
(S.O. 2) Commodity-backed bonds are redeemable in measures of a commodity such as barrels of oil, tons of coal, or ounces of a rare metal.
(S.O. 1) Generally, long-term debt, in whatever form, is issued subject to various covenants or restrictions for the protection of corporate stockholders.
(S.O. 1) Long-term debt is ordinarily used by an enterprise as a more or less permanent means of financing to increase the earnings available to stockholders.
(S.O. 6) Because current liabilities tend to be liquidated within a short period of time, present value techniques are not normally applied.
(S.O. 6) Current liabilities are generally measured by the present value of the future outlay of cash required to liquidate them.
(S.O.5) When there is an absence of insurance, a firm should estimate the amount of possible future losses and record a liability at the date of the financial statements.
(S.O. 5) The number of outstanding premium offers that will be presented for redemption must be estimated in order to reflect the existing current liability and to match costs with revenues.
(S.O. 5) When a company offers premiums to its customers in return for coupons, the cost of the. premiums should be charged to expense when the premiums are distributed to customers.
(S.O. 5) Use of the cash basis method in accounting for product warranty costs is required when a company is unable to make a reasonable estimate of the amount of warranty obligations at the time of sale.
(S.0. 5) To report a loss and a liability in the financial statements, the cause for litigation must have occurred on or before the date of the financial statements.
(S.O. 5) One factor to consider in determining whether a liability should be recorded with respect to threatened litigation is the effect such a liability will have on a reported financial condition.
(S.O. 4) Ifa loss contingency is likely to occur and its amount can be reasonably estimated, it should be recorded in the accounts.
(S.O. 4) The term "loss contingency," as used in accounting, refers to situations that result in a liability after the passage of a specified period oft ime.
(S.O. 3) If sick pay benefits accumulate but do not vest, accrual is permitted but not required.
(S.O. 3) Vested rights exist when an employer has an obligation to make payment to an employee but not if the employee is terminated.
(S.O. 3) GAAP requires that a liability always be accrued for the cost of compensation for future absences of full-time employees.
(S.O. 3) The amount of unremitted employee and employer social security tax on gross wages paid should be reported by the employer as a current liability.
(S.O. 2) A current liability results when a company collects sales taxes from customers.
(S.O. 2) A stock dividend distributable is classified as a long-term liability because it will not be liquidated using current assets.
(S.O. 2) Preferred dividends in arrears should be recognized as a liability in the balance sheet.
(S.O. 2) If a short-term obligation is excluded from current liabilities because of refinancing, a footnote to the financial statements should be included disclosing the particulars of the refinancing arrangement.
(S.O. 2) When refinancing on a long-term basis is expected to be accomplished through the issuance of equity securities, it is not appropriate to include the short-term obligation in owners' equity.
(S.O. 2) A short-term obligation expected to be refinanced may be excluded from current liabilities if(a) a company intends to refinance the obligation on a long-term basis, and (b) the company demonstrates an ability to consummate the refinancing.
(S.O. 1) The currently maturing portion of a serial bond should not be classified as a current liability if it will be paid out of a long-term asset such as a sinking fund.
(S.O. 1) Discount on Notes Payable is an adjunct account to Notes Payable and therefore is added to Notes Payable on the balance sheet.
(S.O. 1) When a company issues a zero-interest-bearing note, the difference between the face amount of the note and the cash proceeds is most appropriately recorded as a discount on notes payable.
(S.O. 1) Notes payable are only classified as short-term.
(S.O. 1) The only requirement for an obligation to be classified as a current liability is that it be liquidated within the operating cycle or one year, whichever is longer.
(S.O. 4) On January 15, 2003, Machiavelli Corporation was granted a patent on a product. On January 2, 2012, to protect its patent, Machiavelli purchased a patent on a competing product that originally was issued on January 10, 2005. Because of its unique plant, Machiavelli does not feel that the
(S.O. 3) Smith Co. bought a window franchise from Paine, Inc., on January 2, 2012, for $100,000. A highly regarded independent research company estimated that the remaining useful life of the franchise was 50 years. Its unamortized cost on Paine's books at January 1, 2012, was $15,000. Smith has
(S.O. 3) Hooker Corporation acquired a franchise to operate a Good Pet Dog Kennel in January, 2009. The cost of the franchise was $125,000 and was estimated to have a limited life of 40 years.Early in the year 2015, the franchise was deemed worthless due to significant law suits that caused the
(S.O. 4) A large publicly held company has developed and registered a trademark during 2012. How should the cost of developing and registering the trademark be accounted for if it is considered to have a limited-life?Charged to an asset account that should not be amortized.Amortized over 10 years
(S.O. 4) When a company develops a trademark or trade name the costs directly related to securing it should generally be capitalized. Which of the following costs associated with a trademark or trade name would not be allowed to be capitalized?Attorney fees.Consulting fees.Research and development
(S.O. 3) One factor that is not considered in determining the useful life of an intangible asset is:legal life.expected actions of competitors.salvage value>U AW provisions for renewal or extension.
(S.O. 3) Under current accounting practice, intangible assets are classified as:amortizable or unamortizable.limited-life or indefinite-life.specifically identifiable or goodwill-type.OOw> legally restricted or goodwill-type.
(S.O. 2) When intangible assets are amortized, a journal entry may be made by debiting an expense account and crediting The Intangible Accumulated Asset Amortization Yes Yes Yes No Yes pG TA No No Ze °
(S.O. 1) Which oft he following is not an intangible asset?A. Accounts receivable.B. Patents.Cc Copyrights.1D: Franchises.
(S.O. 10) Acceptable accounting practice requires that disclosure be made in the financial statements(generally in the notes) of the total R & D costs charged to expense each period for which an income statement is presented.
(S.O. 10) If goodwill is present, it should be reported as a separate item on the balance sheet.
(S.O. 9) Start-up costs are usually charged to an account called Start-Up Costs and may be carried as an asset on the balance sheet.
(S.O. 9) The costs of services performed by others in connection with the reporting company's R & D should be expensed as incurred.
(S.O. 8) All research and development (R & D) costs should normally be charged to expense when incurred.
(S.O. 7) When determining the impairment, if any, of goodwill, the fair value of the reporting unit should be compared to its carrying amount including goodwill.
(S.O. 7) The impairment loss is reported as an extraordinary item.
(S.O. 7) Under the recoverability test, the fair value of an asset is measured by its market value if an active market for it exists. If no active market exists, the present value of expected future net cash flows should be used.
(S.O. 7) For indefinite-life intangibles a recoverability test is used to determine whether an impairment has occurred.
(S.O. 6) The general rules that apply to impairments of long-lived assets also apply to intangibles.
(S.O. 6) A bargain purchase arises when the fair value of the asset acquired is higher than the purchase price of the asset.
(S.O. 6) Goodwill should be amortized over its useful life.
(S.O. 6) Use of the master valuation approach to measure goodwill requires an estimate of a firm's excess earning power.
(S.O. 6) Goodwill is often identified on the balance sheet as the excess of the fair value over the cost of the net assets acquired.
(S.O. 6) Goodwill generated internally should be capitalized in the accounts.
(S.O. 4) Legal fees and other costs incurred in successfully defending a patent suit are expensed as incurred.
(S.O. 4) Marsilius Company secured a copyright on a unique literary work. All conservative estimates indicate that the copyright will be useful for its maximum useful life; thus, this is the period over which the copyright should be amortized.
(S.O. 4) A copyright would generally not be amortized.
(S.O. 4) A copyright is granted for the life of the creator or 70 years, whichever is longer.
(S.O. 3) A trademark may properly be considered to have an indefinite life.
(S.O. 3) Intangible assets are amortized over their useful lives unless the intangible can remain in existence indefinitely.
(S.O. 3) Amortization is the systematic charge to income of the cost of an intangible asset.
(S.O. 2) Costs incurred internally to create intangibles are generally the basis for recording intangible assets, which are then amortized over the estimated life of the intangible asset.
(S.O. 2) Cost is the basis for recording intangible assets, including acquisition price and all expenditures incurred to prepare the asset for its intended use.
(S.O. 1) Lack of physical substance is the only characteristic of intangible assets that distinguishes them from all other assets reported on the balance sheet.
(S.O. 8) Which of the following is not one of the differences between the computation of depreciation under GAAP and the computation under the Modified Accelerated Cost Recovery System (MACRS)?A. The recording of depreciation expense is taken directly to retained earnings under the MACRS method.B;
(S.O. 7) Which of the following disclosures is not required in the financial statements regarding depreciation?Accumulated depreciation, either by major classes of depreciable assets or in total.Details demonstrating how depreciation was calculated.Depreciation expense for the period.VOw> Balances
(S.O. 6) In January 2012, the Lucky Mine Corporation purchased a mineral mine for $3,400,000 with removable ore estimated by geological surveys at 4,000,000 tons. The property has an estimated value- of $200,000 after the ore has been extracted. The company incurred $800,000 of development costs
(S.O. 6) The Xenophon Company acquired a tract of land containing an extractable natural resource.Xenophon Company is required by its purchase contract to restore the land to a condition suitable for recreational use after it extracts the natural resource. Geological surveys estimate that
(S.O. 6) Of the following costs related to the development of natural resources, which one is not a part of depletion cost?A. Acquisition cost of the natural resource deposit.B. Exploration costs.c. Tangible equipment costs associated with machinery used to extract the natural resource.D.
(S.O. 5) On December 31, 2011, Aquinas Company had equipment that had a carrying amount of$300,000 which the company wrote down to its $250,000 fair value. At the end of 2012 it was determined that the fair value of the equipment had risen to $320,000. At December 31, 2012, assuming Aquinas does
(S.O. 5) Maimonides Inc. bought a machine on January 1, 2002 for $100,000. The machine had an expected life of 20 years and was expected to have a salvage value of $10,000. On July 1, 2012, the company reviewed the potential of the machine and determined that its undiscounted future net cash flows
(S.O. 5) An impairment in the value of property, plant, and equipment is recorded by recognizing a:Reduction in Asset Loss Book Value A. WES No B. Yes Yes(C. No Yes D. No No
(S.O. 4) Plato Corporation purchased a machine with a cost of $165,000 and a salvage value of$9,000 on April 1, 2011. The machine will be depreciated over a 12 year useful life using the sum-ofyears'-digits method. The amount of depreciation Plato Corporation would record for the year ended
(S.O. 4) The estimated life of a building that has been depreciated for 30 of its originally estimated life of 50 years has been revised to a remaining life of 10 years. On the basis of this information the accountant should:A. continue to depreciate the building over the original 50-year life.B.
(S.O. 4) Each year a company has been investing an increasing amount in machinery. Because there are a large number of small items with relatively similar useful lives, the company has been applying straight-line depreciation method at a uniform rate to the machinery as a group. The ratio of this
(S.C. 5) Thucydides Company purchased a new machine on May 1, 2002, for $25,000. At the time of acquisition, the machine was estimated to have a useful life of 10 years and an estimated salvage value of $1,000. The company has recorded monthly depreciation using the straight-line method. On March

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Study Guide Intermediate Accounting Volume 2 Chapters 15-24 14th Edition Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield - Solutions

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