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Chapter 14 Concept Overview Videos

Terms in this set (10)

Which of the following statements about financial statement disclosures appropriate to long-term debt are true? (Select all that apply.)
- Both interest expense and interest revenue are reported among operating activities on the statement of cash flows.
- In a statement of cash flows, issuing bonds or notes are reported as cash flows from investing activities by the issuer and cash flows from financing activities by the investor.
- Long-term debt is reported at its face amount accompanied by a separate valuation account for the discount or premium.
- The fair value of financial instruments must be disclosed either in the body of the financial statements or in disclosure notes.
- Both interest expense and interest revenue are reported among operating activities on the statement of cash flows.
- The fair value of financial instruments must be disclosed either in the body of the financial statements or in disclosure notes.
Assume that Levier Corporation elected the fair value option for reporting bonds and the bonds decreased in fair value during the year. Which of the following statements is correct?
- The portion of that that gain that is a result of a change in general interest rates is reported as part of as other comprehensive income (OCI), while any portion of that gain that is a result of a change in the "credit risk" of the debt is reported as part of net income.
- The entire gain is reported as part of other comprehensive income (OCI).
- The portion of that that gain that is a result of a change in general interest rates is reported as part of net income, while any portion of that gain that is a result of a change in the "credit risk" of the debt is reported as other comprehensive income (OCI).
- The entire gain is reported as part of net income.
- The portion of that that gain that is a result of a change in general interest rates is reported as part of net income, while any portion of that gain that is a result of a change in the "credit risk" of the debt is reported as other
Touché, Inc. issued 9%, $1,300,000 bonds for $1,600,000. Touché reacquired these bonds for $1,365,000 when their book value was $1,436,500. What was the gain or loss on the early extinguishment of this debt?
Gain of $71,500

(1,436,500-1,365,000=71,500)
Which of the following statements about the accounting for convertible bonds is true? (Select all that apply.)
- Under IFRS, convertible debt is divided into its liability and equity elements.
- Under GAAP, convertible debt is divided into its liability and equity elements.
- Under IFRS, the entry used to record convertible bonds is the same as that currently used under U.S. GAAP.
- If the fair value of the bonds cannot be determined, that value can be calculated as the present value of the bonds' cash flows, using the market rate of interest.
- Under IFRS, convertible debt is divided into its liability and equity elements.
- Under IFRS, the entry used to record convertible bonds is the same as that currently used under U.S. GAAP.
On January 1, Parma, Inc. borrowed $100,000 cash from First National and issued a two-year promissory note in that amount. Interest of $5,000 was payable semiannually on June 30 and December 31. Which account will be debited when Parma records the entry relating to each of the four interest payments?
Interest expense
Bonds for which the holder is not entitled to receive any liquidation payments until the claims of other specified debt issues are satisfied
Subordinated debentures
Bonds that allow the issuing company to buy back outstanding bonds from the bondholders before their scheduled maturity date
Callable bonds
Bonds that are backed only by the "full faith and credit" of the issuing corporation
Debenture bonds
Bonds that are retired as a consequence of bondholders choosing to convert them into shares of stock
Convertible bonds
Bonds that must be redeemed on a prespecified year-by-year basis specified debt issues are satisfied
Sinking fund debentures
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