Question

1.Long-term debt:

Multiple Choice

• consists of monetary obligations that fall due beyond two years from the balance sheet date.

• when issued, is carried at an amount based on the proceeds received.

• usually has an effective yield that is much different than the cost of borrowing.

• never has any portion classified as a current liability.

2.Current liabilities are reported on the balance sheet at:

Multiple Choice

• current market value.

• historical cost.

• discounted present value.

• future value.

3.The Additional Paid-In Capital account is reported on the balance sheet at the

Multiple Choice

• current market value of the stock minus par value.

• original sales price of the stock minus the par value.

• net realizable value of the stock minus par value.

• discounted present value of the future dividends minus par value.

4.Other comprehensive income

Multiple Choice

• consists of certain gains and losses included in comprehensive income but not yet recognized in the income statement.

• is never adjusted for tax effects.

• does not include gains and losses.

• is consistently defined in international balance sheet presentation.

Answer 1

1. Long Term Debt never has any portion classified as a current liability

Long term Debt are obligations which fall due beyond one year from the balance sheet date. The repayment of the long term debt fall beyond one year from the Balance Sheet date hence, it is never classified as current liability. When a long term loan is issued, it is not valued on the basis of the proceeds received. It is valued based on the present value of the repayment due for the loan.

2. Current liabilities are reported on the balance sheet at discounted present value.

3. The Additional Paid-In Capital account is reported on the balance sheet at the original sales price of the stock minus the par value.

The additional paid-in capital is the amount which an investor pays over and above the par value of the stock.

Additional Paid-in capital = ( Issue Price - Par value ) * No. of shares

4.Other comprehensive income consists of certain gains and losses included in comprehensive income but not yet recognized in the income statement.

Other comprehensive income includes gains and losses and are also adjusted to give tax effects. In international balance sheet presentation it is not defined.