Non-current (Long-term) Liabilities

9 questions

1. 1. On the initial issuance of a bond, the sales proceeds received are reported as:
   Operating activityFinancing activityInvesting activity
2. 2. Which of the following statements is FALSE with respect to the treatment of issuance costs related to the bond issue?
   Under IFRS, the bond payables are reduced by the amount of issuance costs.Under US GAAP, issuance costs are shown as an asset (a deferred charge).Under both IFRS and US GAAP, the issuance costs are expensed as incurred.
3. 3. A firm issues a 5-year, annual coupon pa, 6% coupon paying, $1 million bond. The market price of the bond is $95,000.

   What is the initial book value of the bond?

   $89,000$95,000$100,000
4. 4. A firm issues a 5-year, annual coupon pa, 6% coupon paying, $1 million bond. The market price of the bond is $95,000.

   What is the interest expense for the first period?

   $6,000$7,000$11,000
5. 5. When the effective interest method of amortization is used for bonds issued at a premium, the amount of interest payable for an interest period is calculated by multiplying the:
   Face value of the bonds at the beginning of the period by the contractual interest rate. Face value of the bonds at the beginning of the period by the effective interest rates. Carrying value of the bonds at the beginning of the period by the contractual interest rate.
6. 6. A company has a defined benefit pension plan for its employees. On December 31, year 1, the accumulated benefit obligation is $45,000, the projected benefit obligation is $70,000, and the fair value of the plan assets is $65,000. What amount, if any, related to the defined benefit plan should be recognized in the balance sheet at December 31, year 1
   An asset of $25,000. A liability of $5,000. Nothing, as the fair value of the plan assets exceeds the accumulated benefit obligation.
7. 7. On January 1, a company issued bonds with a face value of $500,000 at a discount to yield 10%. The bonds pay interest semi-annually. After 6 months, the company paid bond interest of $15,000. After the company recorded amortization of the bond discount of $5,000, the bonds had a carrying amount of $465,000. What amount did Vole receive upon issuing the bonds?
   $470,000 $485,000$500,000
8. 8. The funded status of a defined benefit pension plan for a company should be reported in:
   The income statementThe statement of cash flows The balance sheet
9. 9. Which of the following conditions is not a criterion for classifying a lease as a capital lease?
   The present value of the minimum lease payments is at least 75% of the fair value of the leased asset.The lessee has the option of acquiring the asset at the end of the lease term at a bargain price.The lease term is greater than three-quarters of the economic life of the asset.