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TEST BANK FOR INTERMEDIATE ACCOUNTING: IFRS EDITION, 2E
TEST BANK FOR INTERMEDIATE ACCOUNTING: IFRS EDITION, 2E TEST BANK FOR INTERMEDIATE ACCOUNTING: IFRS EDITION, 2E
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Test bank CHAPTER 14TEST BANK FOR INTERMEDIATE ACCOUNTING:
IFRS EDITION, 2E
written by
ASCORERS
, CHAPTER 14
NON-CURRENT LIABILITIES
CHAPTER LEARNING OBJECTIVES
1. Describe the formal procedures associated with issuing long-term debt.
2. Identify various types of bond issues.
3. Describe the accounting valuation for bonds at date of issuance.
4. Apply the methods of bond discount and premium amortization.
5. Explain the accounting for long-term notes payable.
6. Describe the accounting for the extinguishment of non-current liabilities.
7. Describe the accounting for the fair value option.
8. Explain the reporting of off-balance-sheet financing arrangements.
9. Indicate how to present and analyze non-current liabilities.
,14 - Test Bank for Intermediate Accounting: IFRS Edition, 2e
2
TRUE FALSE—Conceptual
1. Companies usually make bond interest payments semiannually, although the
interest rate is generally expressed as an annual rate.
2. A mortgage bond is referred to as a debenture bond.
3. Bond issues that mature in installments are called serial bonds.
4. If the market rate is greater than the stated rate, bonds will be sold at a premium.
5. The interest rate written in the terms of the bond indenture is called the
effective yield or market rate.
6. The stated rate is the same as the coupon rate.
7. The proceeds of a bond with a face amount of ¥100,000,000 which sells at 102
will be
¥100,200,000.
8. The proceeds of a bond with a face amount of ¥100,000,000 which sells at 98
will be
¥98,000,000.
9. When bonds are issued at a discount, the bonds payable account is
credited for the proceeds from the issue.
10. When bonds are issued at a premium, the bonds payable account is credited
for the face amount.
11. At any point during the term of the bond, the balance in the bonds payable
account should be the carrying value of the bond.
12. The semi-annual interest payment on a 6.5% HK$10,000,000 bond is HK$650,000.
13. The journal entry to record amortization of bond discount includes a debit
to the bonds payable account.
14. Amortization of bond premium reduces the balance in bonds payable.
15. Amortization of a premium increases bond interest expense, while
amortization of a discount decreases bond interest expense.
16. A bond may only be issued on an interest payment date.
17. The cash paid for interest will always be greater than interest expense
when using effective-interest amortization for a bond.
18. If a long-term note payable has a stated interest rate, that rate should be
considered to be the effective rate.
19. The process of interest-rate approximation is called imputation, and the
resulting interest rate is called an imputed interest rate.
, Non-Current Liabilities 14 - 3
20. When a zero-interest bearing note is issued, the note payable account will be
credited for the present value of the maturity value.
21. Amortization of the discount on a zero-interest bearing note decreases the
balance in notes payable.
22. The replacement of an existing bond issue with a new one is called refunding.
23. The IASB’s position is that fair value measurement for financial liabilities is
more relevant and understandable than amortized cost.
24. Under IFRS, subsidiaries in which the parent company holds a less than 50
percent interest do not have to be included in consolidated financial
statements.
25. Off-balance-sheet financing is an attempt to borrow monies in such a way to
minimize the reporting of debt on the balance sheet.
26. The debt to assets ratio will go up if an equal amount of assets and liabilities
are added to the balance sheet.
27. If a company plans to retire long-term debt from a bond retirement fund, it
should report the debt as current.
28. The times interest earned is computed by dividing income before interest
expense by interest expense.
29. Debt issuance costs are recorded as an asset and amortized to expense over
the life of the bond.
30. IFRS recognition criteria for environment liabilities are more stringent than
that of US GAAP.
True False Answers—Conceptual
Item Ans. Item Ans. Item Ans. Item Ans. Item Ans. Item Ans.
1. T 6. T 11. T 16. F 21. F 26. T
2. F 7. F 12. F 17. F 22. T 27. F
3. T 8. T 13. F 18. F 23. T 28. F
4. F 9. T 14. T 19. T 24. T 29. F
5. F 10. F 15. F 20. T 25. T 30. F
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