ACCOUNTING F/GOV.+NON...(LL)
18th Edition
ISBN: 9781266785580
Author: RECK
Publisher: MCG
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Chapter 10, Problem 17.10EP
To determine
Identify the correct explanation for debt service percent ratio from the given statements.
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If the provision for doubtful debt is increased, the accounting adjustment will be:
Select one:
a.
Debit: Bad debt expense
Credit: Trade receivables
b.
Debit: Bad debt expense
Credit: Provision for bad debts
c.
Debit: Provision for bad debts
Credit: Bad debt expense
d.
Debit: Trade receivables
Credit: Bad debt expense
A note of caution in interpreting the debt ratio is that ____________
(a) all debt decreases liquidity ratios.
(b) financing arrangements, such as leases, may be off-balance sheet arrangement and not be classified as debt on the balance sheet.
(c) financing arrangements, such as leases, may be classified as debt when in fact they do not require interest payments.
(d) long-term debt may be inflated because of a desire to reduce the current ratio.
When bonds and other debt securities are issued, payments such as legal costs, printing costs, and underwriting fees, are referred to as debt issuance costs (called transaction costs under IFRS). If Rushing International prepares its financial statements using IFRS: a. the recorded amount of the debt is increased by the transaction costs. b. the decrease in the effective interest rate caused by the transaction costs is reflected in the interest expense. c. the transaction costs are recorded separately as an asset. d. the increase in the effective interest rate caused by the transaction costs is reflected in the interest expense.
Chapter 10 Solutions
ACCOUNTING F/GOV.+NON...(LL)
Ch. 10 - The GASB indicates that economic condition is...Ch. 10 - What is the Financial Trend Monitoring System and...Ch. 10 - The International City/County Management...Ch. 10 - Prob. 4QCh. 10 - Prob. 5QCh. 10 - Prob. 6QCh. 10 - Prob. 7QCh. 10 - Illustration 104, adapted front Crawford and...Ch. 10 - What is EMMA and when would someone want to use...Ch. 10 - Prob. 10Q
Ch. 10 - Prob. 11QCh. 10 - Prob. 17.1EPCh. 10 - Which of the following terms or concepts focuses...Ch. 10 - Prob. 17.3EPCh. 10 - Prob. 17.4EPCh. 10 - Prob. 17.5EPCh. 10 - Prob. 17.6EPCh. 10 - Prob. 17.7EPCh. 10 - Prob. 17.8EPCh. 10 - Prob. 17.9EPCh. 10 - Prob. 17.10EPCh. 10 - Prob. 17.11EPCh. 10 - Which of the following would be considered a sign...Ch. 10 - Prob. 17.13EPCh. 10 - Prob. 17.14EPCh. 10 - What is Electronic Municipal Market Access, or...Ch. 10 - Prob. 18EPCh. 10 - Examine the following tables from the Financial...Ch. 10 - Prob. 20EPCh. 10 - Prob. 21EP
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- Which of the following is stated correctly? a. Current liabilities follow non-current liabilities on the statement of financial position under GAAP but non-current liabilities follow current liabilities under IFRS. b. IFRS does not treat debt modifications as extinguishments of debt. c. Bond issuance costs are recorded as a reduction of the carrying value of the debt under GAAP but are recorded as an asset and amortized to expense over the term of the debt under IFRS. d. Under GAAP, bonds payable is recorded at the face amount and any premium or discount is recorded in a separate account. Under IFRS, bonds payable is recorded at the carrying value so no separate premium or discount accounts are used.arrow_forwardIn accounting for short-term debt expected to be refinanced to long-term debt: a. GAAP uses the authorization date to determine classification of short-term debt to be refinanced. b. IFRS uses the authorization date to determine classification of short-term debt to be refinanced. c. IFRS and GAAP use the financial statement date to determine classification of short-term debt to be refinanced. d. GAAP uses the date of issue, but only for secured debt, to determine classification of short-term debt to be refinanced.arrow_forwardWhich method delays recognition of bad debt until the specific customer accounts receivable is identified? A. income statement method B. balance sheet method C. direct write-off method D. allowance methodarrow_forward
- Which of the following is true? Short-term notes payable should be discounted at its present value, more so, if it constitutes a financing transaction and the imputed interest can be measured without undue cost or effort. Transaction costs of issuing financial liabilities are expensed outright. The present value of a serial note's principal is computed by using the PV of 1 as the present value factor. Notes payable are obligations supported by creditor's promissory notes.arrow_forwardI have a little issue with one accounting assignment where they ask to calculate the WACC. However, in the financial statement provided, there are two types of long-term liabilities: long-term debt and other penalties. When calculating the Weight of long-term debt, should I use the total long-term liability or only the section indicated long-term debt?arrow_forwardIn accounting for short-term debt expected to be refinanced to long-term debt:(a) GAAP uses the authorization date to determine classification of short-term debt to be refinanced. (b) IFRS uses the authorization date to determine classification of short-term debt to be refinanced. (c) IFRS uses the financial statement date to determine classification of short-term debt to be refinanced. (d) GAAP uses the date of issue, but only for secured debt, to determine classification of short-term debt to be refinanced.arrow_forward
- True or False 1. if a credit risk has not increased significantly since initial recognition, an entity may recognize a loss allowance equal to 12-month expected credit loss 2. the effect of direct origination cost is a decrease in the effective interest rate of a loan receivable 3. The impairment model under IFRS 9 are applicable to all debt instrument including those that are measured at fair value through profit or loss 4. the impairment model under IFRS 9 are applicable to all debt instruments including those that are measured at fair value through profit or loss 5.arrow_forwardHow does collection policy influence sales, the collection period, and the bad debtloss percentage?arrow_forwardShort-term debt expected to be refinanced may be classified as long-term if off-statement of financial position financing is to be obtained after the statement of financial position date but before the issue date of the financial statements. TRUE or FALSEarrow_forward
- Which of the following is not true about the discount on short-term notes payable? a. The Discount on Notes Payable account should be reported as an asset on the balance sheet. b. When there is a discount on a note payable, the effective interest rate is higher than the stated discount rate. c.The Discount on Notes Payable account has a debit balance. d. Discount on Notes Payable is a contra account to Notes Payable.arrow_forwardWhich of the following statements is not correct? Select the correct response: The principal amount of a debt is the cash or cash equivalent amount borrowed The carrying amount of a noninterest-bearing note payable due in lump sum will decrease as time goes by When a noncash asset is acquired and the stated rate of interest is different from the current market rate of interest, the cost of the asset is the present value of the future cash payments discounted at the current market rate of interest rather than at the stated interest rate. A company that receives cash in an amount less than the face amount of a noninterest-bearing note payable should record the note at its discounted present value.arrow_forwardCompare and contrast the percent of sales and analysis of receivables method for determining bad debt. Both are acceptable under US GAAP, which one do you think is a better more accurate method and why?arrow_forward
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