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Chapter 10: Long-Term Liabilities
True / False
1. Discount on Bonds Payable is classified as a current liability.

a. True
b. False
ANSWER: False
DIFFICULTY: Easy
LEARNING OBJECTIVES: FACC.PONO.13.10-01 - LO: 10-01
KEYWORDS: Bloom's: Remembering
2. All liabilities that are not classified as current liabilities are classified as long-term.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
3. Bonds are generally issued in denominations of $1,000.

a. True
b. False
ANSWER: True
DIFFICULTY: Easy
4. Serial bonds are unique because the interest is paid as a series of daily payments.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
5. Bonds are typically issued in denominations of $10,000.

a. True
b. False
ANSWER: False
DIFFICULTY: Easy
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
6. If Tanner Company becomes less creditworthy, the market price of its bonds will decline.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
KEYWORDS: Bloom's: Understanding
7. Debenture bonds are backed by specific collateral of the issuing company.

a. True
b. False
ANSWER: False
DIFFICULTY: Easy
8. Convertible bonds normally sell at a higher price than non-convertible bonds.

a. True
b. False
ANSWER: True
DIFFICULTY: Easy
9. If an investor has the right to retire the bonds, they are referred to as callable.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
10. Callable bonds may be retired by the issuer before their specified due date.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
11. The most obvious risk to bond investors is that a company will fail and be unable to pay its debts.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
12. The face rate is also called the nominal or stated rate.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
13. A bond issue price is the present value of the cash flows that the bond will produce.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
14. The issue price of a bond is always present valued using the market rate of interest.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
15. When the market rate of interest is less than the face rate, then the bond issue will be sold at a discount.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
16. The excess of the face value of bonds over the issue price is known as a premium.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
17. The effective interest rate method of amortization amortizes the discount or premium in a manner that produces a
constant amount of interest expense from period to period.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
18. The interest rate used to calculate interest expense in the effective interest method of amortization is equal to the
market rate of interest at the time the bonds are issued.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
19. The amortization of bond discount increases the effective interest expense incurred each period for the issuer while
amortization of bond premium decreases it.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
20. When a bond is issued at a discount, the interest expense each year is less than the cash payment for interest.
a. True
b. False
ANSWER: False
DIFFICULTY: Moderate
21. The sum of the carrying value and the redemption price at the time bonds are redeemed results in the gain or loss on
redemption.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
LEARNING OBJECTIVES: FACC.PONO.13.10-06 - LO:10-06
22. When a bond issue is retired early, the amount of unamortized discount or premium is not considered in the
calculation of a gain or loss.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
23. In an operating lease, the lessee acquires the right to use an asset for only a limited period of time.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
24. A lease is accounted for as a capital lease if the lease term is 75% or more of the property's economic life.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
25. When a lease is classified as an operating lease, the lease liability should be presented on the balance sheet of the
lessee.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
26. IFRS typically uses a more “rule-based” approach than U.S. GAAP.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
27. In general, the international accounting standards provide lease criteria that are similar to the U.S. standards.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
28. The accounting for leases is an excellent example of the differences in how U.S. and IFRS accounting standards are
applied.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
29. The terms of a lease can only be structured in one way to meet the lessor and lessee and satisfy accounting standards.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
30. In an operating lease, the lessee is not required to record the right to use the property as an asset or to record the
obligation for payments as a liability.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
31. In an operating lease, the lessee has acquired sufficient rights of ownership and control of the property to be
considered its owner.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
32. If the lease term is 75% or more of the property’s economic life, the lease agreement should be accounted for as an
operating lease.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
33. The asset leased under an operating lease requires the lessee to record depreciation expense.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
34. An investor views a high debt-to-equity ratio and a low times interest earned as a favorable sign of a company’s
abilities to meet its long-term obligations.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
35. Long-term liabilities are a component of the “capital structure” of a company.

a. True
b. False
ANSWER: True
DIFFICULTY: Easy
36. The debt-to-equity ratio is defined as total long-term liabilities divided by total stockholders' equity.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
37. Most investors would prefer to see equity rather than debt on the balance sheet.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
38. Stock investors view equity as a claim against the company that must be satisfied before they get a return on their
money.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
39. All changes in long-term liabilities are reflected in the financing activities category of the statement of cash flows.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
40. Most long-term liabilities are related to a firm’s investing activities.

a. True
b. False
ANSWER: False
DIFFICULTY: Easy
41. The change in the Deferred Taxes account is reflected in the Operating Activities category of the statement of cash
flows.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
42. [APPENDIX] Deferred tax is an amount that reconciles the differences between the income for financial purposes
with the income reported for tax purposes. In most cases, it is a long-term liability.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
43. [APPENDIX] A permanent difference with respect to taxes is a difference that affects the tax records but not the
accounting records, or vice versa.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
44. [APPENDIX] Temporary differences occur when an item affects both book and tax calculations but not in the same
time period.
a. True
b. False
ANSWER: True
DIFFICULTY: Easy
45. [APPENDIX] The Deferred Tax account should reflect permanent differences but not items that are temporary
differences between book accounting and tax reporting.
a. True
b. False
ANSWER: False
DIFFICULTY: Easy
Multiple Choice
46. The current portion of long-term debt is a balance sheet item for Flavorful Products Company. How would it most
likely be classified on the balance sheet?
a. Current liability
b. Long-term liability
c. Current asset
d. Long-term liability
ANSWER: a
DIFFICULTY: Easy
KEYWORDS: Bloom's: Applying
47. A ten-year lease obligation appears on the balance sheet of Generic Products Company. How would it most likely be
classified on the balance sheet?
a. Long-term liability
b. Current asset
c. Long-term asset
d. Contra-liability
ANSWER: a
DIFFICULTY: Easy
48. Rent owed to the landlord is a balance sheet item for Generic Products Company. How would it most likely be
c. Current asset
d. Owners’ equity
ANSWER: a
DIFFICULTY: Easy
49. Which of the following statements is true with respect to long-term liabilities?
a. They are obligations that will be satisfied within one year.
b. An account payable is a good example of a long-term liability because it is interest-bearing.
c. Long-term liabilities include bonds, other long-term liabilities and deferred income taxes.
d. Accrued expenses are considered to be long-term liabilities.
ANSWER: c
DIFFICULTY: Easy
50. Which of the following items should not appear in the long-term liability section of the balance sheet?
a. Accrued income taxes
b. Deferred income taxes
c. Bonds payable
d. Pension obligations
ANSWER: a
DIFFICULTY: Easy
51. A convertible bond is one where

a. the issuer can convert from a fixed interest rate to a floating one.
b. the issuer can convert it from long-term to short-term.
c. the issuer can retire the bond before its specified due date.
d. the holder can convert the bond into common stock at a future time.
ANSWER: d
DIFFICULTY: Easy
52. Irwin, Inc. issued $41,000,000 of bonds. Assuming the most common denomination of bonds, the number of bonds
sold was
a. 41,000,000
b. 410,000.
c. 4,100,000.
d. 41,000
ANSWER: d
KEYWORDS: Bloom's: Analyzing
53. Which of the following statements regarding bonds payable is true?

a. Generally, bonds are issued in denominations of $100.
b. When an issuing company's bonds are traded in the "secondary" market, the company will receive part of the
proceeds when the bonds are sold from the first purchaser to the second purchaser.
c. A debenture bond is backed by specific assets of the issuing company.
d. Most bonds are term bonds, meaning that the entire principal amount will mature on a single date.
ANSWER: d
DIFFICULTY: Easy
54. If a company's bonds are callable,
a. the investor or buyer of the bonds has the right to retire the bonds.
b. the issuing company is likely to retire the bonds before maturity if the bonds are paying 9% interest while the
market rate of interest is 6%.
c. the bonds are never allowed to remain outstanding until the maturity date.
d. the investor never knows what the redemption price will be until the bonds are actually called.
ANSWER: b
55. Convertible bonds are attractive to investors because

a. they usually carry a higher rate of interest than non-convertible bonds.
b. they carry a convertible interest rate that can be increased when the prime rate of interest increases.
c. they can be converted into stock at the issuer’s option.
d. the issuing company cannot retire the bonds before maturity.
ANSWER: c
DIFFICULTY: Easy
56. Which of the following statements regarding serial bonds is true?

a. They are likely to be issued by food companies.
b. They have shorter lives than term bonds.
c. They are strongly backed by the issuer's collateral.
d. The bonds do not all mature on the same date.
ANSWER: d
DIFFICULTY: Easy
57. Bonds are a popular source of financing because

a. bond interest expense is deductible for tax purposes, while dividends paid on stock are not.
b. financial analysts tend to downgrade a company that has raised large amounts of cash by frequent issues of
stock.
c. a company having cash flow problems can postpone payment of interest to bondholders.
d. the bondholders can always convert their bonds into stock if they choose.
ANSWER: a
58. On January 2, 2016, Roof Master Construction, Inc. issued $500,000, 10-year bonds for $574,540. The bonds pay
interest on June 30 and December 31. The face rate is 8% and the market rate is 6%. At the maturity date, besides an
interest payment, Roof Master would repay the bondholders
a. $574,540.
b. $520,000.
c. $500,000.
d. only the last interest payment.
ANSWER: c
DIFFICULTY: Easy
59. When bonds are issued by a company, the accounting entry shows an
a. increase in liabilities and a decrease in stockholders’ equity.
b. increase in liabilities and an increase in stockholders’ equity.
c. increase in assets and an increase in liabilities.
d. increase in assets and an increase in stockholders’ equity.
ANSWER: c
DIFFICULTY: Easy
60. Bonds in the amount of $100,000 and a life of 10 years were issued by the Focus Company. If the face rate is 6% and
interest is paid semiannually, what would be the total amount of interest paid over the life of the bonds?
a. $60,000
b. $120,000
c. $30,000
d. $6,000
ANSWER: a
RATIONALE: $100,000 × .06 or 6% = $6,000 (Interest for one year)
$6,000 × 10 years = $60,000 (Interest over the life of the bonds)
61. When determining the amount of interest to be paid on a bond, which of the following information is not necessary?
a. The face amount of the bonds
b. The selling price of the bonds
c. The face rate of interest on the bonds
d. The length of the interest period, annually or semiannually
ANSWER: b
DIFFICULTY: Easy
62. Bennington Corp. issued a $40,000, 10-year bond at the face rate of 8%, paid semiannually. How much cash will the
bond investors receive at the end of the first interest period?
a. $800
b. $1,600
c. $3,200
d. $4,000
ANSWER: b
63. Which of the following statements is correct?

a. Bonds are issued at a price that reflects the stated rate of interest on the day the bond is purchased.
b. If the face rate of interest on a bond is not equal to the market rate of interest, then the company desiring to
issue the bonds must reprint its bond certificates.
c. The actual issue price of a bond represents the present value of all future cash flows related to the bond.
d. The market rate of interest has no bearing on the selling price of the bonds.
ANSWER: c
64. The bond issue price is determined by calculating the

a. present value of the stream of interest payments and the future value of the maturity amount.
b. future value of the stream of interest payments and the future value of the maturity amount.
c. future value of the stream of interest payments and the present value of the maturity amount.
d. present value of the stream of interest payments and the present value of the maturity amount.
ANSWER: d
DIFFICULTY: Easy
65. Fox Chapel Company wishes to issue $400,000 of 5-year, 6% bonds, with interest paid annually at the end of the year.
The market rate of interest is currently 5%. What information is needed in order to determine the selling price?
a. The life of the bonds, the market rate of interest, the bond rating, and the face amount of the bonds.
b. The face amount of the bonds, the stated rate of interest, the market rate of interest, and the bond life.
c. The face amount of the bonds, the stated rate of interest, the market rate of interest, and the bond life.
d. The face amount of the bonds, the market rate of interest, the purpose of the issue, and the bond life.
ANSWER: c
DIFFICULTY: Easy
66. Which of the following statements about bond accounting under the effective interest method is correct?
a. The cash interest paid is calculated as the bond face value × the effective rate.
b. The interest expense is calculated as the carrying value × the effective rate.
c. The difference between the cash interest paid and the interest expense is added to the carrying value of the
bonds if bonds were sold at a premium.
d. The difference between the interest expense and the interest paid is deducted from the carrying value of the
bonds if bonds were sold at a discount.
ANSWER: b
67. Which of the following terms does not describe an interest rate used to calculate the interest expense on the income
statement?
a. Nominal rate
b. Market rate
c. Effective rate
d. Yield rate
ANSWER: a
68. Use the information provided in the time value of money tables (Tables 9-1 through 9-4) in the text to answer the
question that follows.
Global Company issued $1,000,000, 8%, 7 year bonds, interest payable semiannually. The market rate of interest was 6%.
The issuance price of the bonds is
a. $1,111,560
b. $1,000,000
c. $1,151,480
d. $1,112,840
ANSWER: d
69. All of the following refer to the face rate of interest on a bond except:
a. stated rate
b. effective rate
c. nominal rate
d. coupon rate
ANSWER: b
70. Endeavor Company issued 20-year bonds with a coupon rate of 6% when the market rate of interest was 9%. This
means that the bonds were issued
a. at a premium.
b. at a discount.
c. at the face value.
d. with an additional 3 years of interest.
ANSWER: b
71. Flagg Company issued $500,000 of bonds for $498,351, Interest is paid semiannually. The bond markets and the
financial press are likely to state the bond issue price as
a. 498.35.
b. 100.00.
c. 99.67.
d. 49.84.
ANSWER: c
72. If bonds are issued at 101.25, this means that

a. a $1,000 bond sold for $101.25.
b. the bonds sold at a discount.
c. a $1,000 bond sold for $1,012.50.
d. the bond rate of interest is 10.13% of the market rate of interest.
ANSWER: c
DIFFICULTY: Easy
73. When bonds are sold for less than the face amount, this means that the
a. maturity value will be less than the face amount.
b. maturity value will be greater than the face amount.
c. bonds are sold at a premium.
d. face rate of interest is less than the market rate of interest.
ANSWER: d
DIFFICULTY: Easy
74. Which of the following terms does not describe the interest rate printed on the bond certificate?
a. Coupon rate
b. Effective rate
c. Face rate
d. Stated rate
ANSWER: b
DIFFICULTY: Easy
75. Which of the following trends can be unfavorable from the viewpoint of a bondholder?
a. The issuing company’s debt ratio is steadily declining.
b. The issuing company’s interest coverage ratio is steadily rising.
c. Market interest rates are steadily rising.
d. The issuing company’s net cash flow from operating activities is steadily increasing.
ANSWER: c
76. On the issuance date, the Bonds Payable account had a balance of $50,000,000 and Premium on Bonds Payable had a
balance of $1,000,000. What was the issue price of the bonds?
a. $50,000,000
b. $49,000,000
c. $51,000,000
d. Unable to determine from the information given
ANSWER: c
DIFFICULTY: Easy
77. The Discount on Bonds Payable account is shown on the balance sheet as
a. an asset.
b. an expense.
c. a long-term liability.
d. a contra long-term liability.
ANSWER: d
DIFFICULTY: Easy
78. The Premium on Bonds Payable account is shown on the balance sheet as
a. a contra asset.
b. a reduction of an expense.
c. an addition to a long-term liability.
d. a subtraction from a long-term liability.
ANSWER: c
DIFFICULTY: Easy
79. Bonds are sold at a premium if the

a. issuing company has a better reputation than other companies in the same business.
b. market rate of interest was less than the face rate at the time of issue.
c. market rate of interest was more than the face rate at the time of issue.
d. company will have to pay a premium to retire the bonds.
ANSWER: b
DIFFICULTY: Easy
80. Churchill Company planned to raise $100,000 by issuing bonds. The bond certificates were printed bearing an interest
rate of 8%, which was equal to the market rate of interest. However, before the bonds could be issued, economic
conditions forced the market rate up to 9%. If the life of the bonds is 6 years and interest is paid annually on December
31, how much will Churchill receive from the sale of the bonds?
a. Exactly $100,000 because Churchill Company would still pay interest at the face rate of 8%.
b. Less than $100,000 because the market rate of interest at 9% was more than the face rate.
c. Greater than $100,000 because the face rate of interest at 8% was less than the market rate.
d. The bonds would not be sold at all; Churchill Company would have the certificates reprinted bearing the
market rate of 9%.
ANSWER: b
81. When will bonds sell at a discount?
a. The credit standing of the issuing company is not as good as other companies in a similar line of business.
b. The face rate of interest is less than the market rate of interest at the time of issue.
c. The face rate of interest is more than the market rate of interest at the time of issue.
d. The issuing company will be able to retire the bonds at less than face at maturity.
ANSWER: b
DIFFICULTY: Easy
82. Discount on Bonds Payable is a balance sheet item for Covington Products Company. How would it most likely be
c. Current asset
d. Contra-liability
ANSWER: d
DIFFICULTY: Easy
83. Premium on Bonds Payable is a balance sheet item for Ohio Products Company. How would it most likely be
a. An increase to a long-term liability
b. Revenue
c. Long-term asset
d. Contra liability
ANSWER: a
DIFFICULTY: Easy
84. Weather Corp. issued 10-year, 8%, $100,000 bonds paying interest on an annual basis, at a $5,200 premium. Which
one of the following statements is true?
a. Weather’s annual interest expense on the bonds will be greater than the amount of interest payments to
bondholders each year.
b. Weather’s annual interest expense on the bonds will be less than the amount of interest payments to
bondholders each year.
c. Weather will receive $94,800 as the issue price.
d. The cash paid to bondholders will be $520 each interest period.
ANSWER: b
85. With the effective interest method of amortization, the amortization of bond discount results in a(n)
a. increase in interest expense.
b. decrease of stockholders’ equity.
c. increase in stockholders’ equity.
d. decrease in interest expense.
ANSWER: a
86. With the effective interest method of amortization, the amortization of bond premium results in a(n)
a. increase in stockholders’ equity.
b. no change in stockholders’ equity.
c. increase in interest expense.
d. decrease in interest expense.
ANSWER: d
87. On January 2, 2016, Wynn Corporation sold $750,000 of bonds for $745,000. The bonds will mature in 10 years and
pay interest annually on December 31. Wynn properly recorded the payment of interest and amortization of the discount
using the effective interest method. Which of the following statements is true about the carrying value of the bonds and/or
the unamortized discount at the end of 2016?
a. The carrying value will be less than $745,000.
b. The carrying value will be $745,000.
c. The carrying value will be greater than $745,000.
d. The unamortized premium will be less than $5,000.
ANSWER: c
88. In 2016, Aspinwall Company issued $200,000 of bonds for $175,000. If the face rate of interest was 9% and the
effective rate of interest was 7.99%, how would Aspinwall calculate the interest expense for the first year on the bonds
using the effective interest method?
a. $175,000 × 7.99%
b. $175,000 × 9%
c. $10,000 × 7.99%
d. $10,000 × 9%
ANSWER: b
89. The result of using the effective interest method of amortization of discount on bonds is that the
a. interest expense for each amortization period is constant.
b. effective interest rate for each amortization period is constant.
c. amount of interest expense decreases each period.
d. cash interest payment is greater than the interest expense.
ANSWER: b
90. If bonds were initially issued at a premium, the carrying value of the bonds on the issuer's books will
a. decrease as the bonds approach their maturity date.
b. increase as the bonds approach their maturity date.
c. remain constant throughout the bonds’ life.
d. fluctuate throughout the bonds’ life.
ANSWER: a
91. If bonds were initially issued at a discount, the interest expense on the bonds calculated using the effective interest
method will
a. decrease as the bonds approach their maturity date.
b. increase as the bonds approach their maturity date.
c. remain constant throughout the bonds’ life.
d. fluctuate throughout the bonds’ life.
ANSWER: b
92. Under the effective interest method, the cash paid on each interest payment date will
a. decrease if bonds are issued at a premium.
b. increase if bonds are issued at a premium.
c. remain constant regardless of the issuance price.
d. increase if bonds are issued at a discount.
ANSWER: c
93. On January 1, 2016, Chain, Inc. issued $400,000, 10-year, 10% bonds for $354,200. The bonds pay interest on June
30 and December 31. The market rate is 12%. The interest expense on the bonds at June 30, 2016, is
a. $20,000
b. $24,000
c. $21,252
d. $17,710
ANSWER: c
94. On January 1, 2016, Sharpsburg, Inc. issued $400,000, 10-year, 10% bonds for $354,200. The bonds pay interest on
June 30 and December 31. The market rate is 12%. What is the carrying value of the bonds after the first interest payment
is made on June 30, 2016?
a. $352,960
b. $354,200
c. $355,452
d. $400,000
ANSWER: c
June 30 and December 31. The market rate is 12%. The cash payment on June 30, 2016, is
a. $20,000.
b. $21,200.
c. $24,000.
d. $17,710.
ANSWER: a
June 30 and December 31. The market rate is 12%. What is the carrying value of the bonds at the end of the ten years?
a. $400,000
b. $480,000
c. $380,000
d. $354,200
ANSWER: a
97. On January 2, 2016, Garage Master Construction, Inc. issued $500,000, 10-year bonds for $574,540. The bonds pay
interest on June 30 and December 31. The face rate is 8% and the market rate is 6%. The interest expense on the bonds at
June 30, 2016, is
a. $2,764.
b. $17,236.
c. $20,000.
d. $22,764.
ANSWER: b
98. On January 2, 2016, Hi-Tech Master Construction, Inc. issued $500,000, 10-year bonds for $574,540. The bonds pay
interest on June 30 and December 31. The face rate is 8% and the market rate is 6%. The annual cash payment (paid in
semiannual payments) on the bonds is
a. $40,000.
b. $30,000.
c. $20,000.
d. $15,000.
ANSWER: a
99. On January 2, 2016, Concrete Master Construction, Inc. issued $500,000, 10-year bonds for $574,540. The bonds pay
interest on June 30 and December 31. The face rate is 8% and the market rate is 6%. What is the carrying value of the
bonds after the first interest payment is made on June 30, 2016?
a. $574,540
b. $571,776
c. $568,920
d. $500,000
ANSWER: b
100. On January 2, 2016, Lawn Master Construction, Inc. issued $500,000, 10-year bonds for $574,540. The bonds pay
interest on June 30 and December 31. The face rate is 8% and the market rate is 6%. What is the carrying value of the
bonds at the end of ten years before the final maturity payment is made?
a. $574,540
b. $525,000
c. $500,000
d. $425,460
ANSWER: c
101. Which of the following statements regarding amortization is true?

a. Amortization of the premium causes the premium on bonds payable account to increase.
b. Amortization of the premium causes the amount of interest expense to increase.
c. Cash interest payments on bonds equals interest expense on the income statement when there is amortization
of bond premium.
d. Amortization of premium continues over the life of the bond until the balance in the account is reduced to
zero.
ANSWER: d
102. Amortization of bond discount results in a(n)

a. decrease of the bonds payable account.
b. decrease of stockholders’ equity.
c. increase of stockholders’ equity.
d. decrease in the cash account.
ANSWER: b
103. Amortization of bond premium results in a(n)

a. decrease of the carrying value of bonds.
b. no change in stockholders’ equity.
c. increase in interest expense.
d. decrease in the cash account.
ANSWER: a
104. Neville Company issued $100,000 of 6%, 10 year bonds when the market rate of interest was 5%. The proceeds from
this bond issue were $107,732. Using the effective interest method of amortization, which of the following statements is
true? Assume interest is paid annually.
a. Interest payments to bondholders each period will be $6,464.
b. Interest payments to bondholders each period will be $5,000.
c. Amortization of the premium for the first interest period will be $1,226.
d. Amortization of the premium for the first interest period will be $613.
ANSWER: d
105. Because of changing market conditions, Friendly Corporation made the decision to redeem $300,000 of its bonds
prior to maturity. The bonds had been issued at a discount and the balance in the discount account at the time of
redemption was $15,000. The corporation's bond certificates indicated that the bonds could be retired early at 103.
Friendly’s retirement of the bonds would result in a(n)
a. loss of $24,000.
b. gain of $6,000.
c. decrease in owners’ equity of $9,000.
d. increase in assets of $15,000.
ANSWER: a
106. Which of the following statements is true with regard to early retirement of bonds?
a. If the carrying value of the bonds is higher than the redemption price, the issuing firm must record a loss.
b. Firms always find it advantageous to retire bonds issued at lower rates with bonds issued at higher rates.
c. It is always advantageous to carry out early retirement for bonds issued at a premium but not for bonds issued
at a discount.
d. Any gain or loss resulting from early retirement of bonds would appear on the income statement of the issuing
company.
ANSWER: d
DIFFICULTY: Easy
107. A gain on bond redemption
a. is considered unusual and infrequent.
b. should be treated as part of operating income.
c. decreases a company’s income.
d. is always included when predicting a company’s future income.
ANSWER: b
DIFFICULTY: Easy
108. Shuttle Master Airlines has leased an aircraft from Streamline Aircraft Company. The annual payments are
$1,000,000 and the life of the lease is 18 years. It is estimated that the useful life of the aircraft is 20 years. How would
Shuttle Master Airlines record the acquisition of the aircraft? The effective rate of interest is 9%.
a. The company would not record the aircraft as an asset but would record rent expense of $1,000,000 per year
for 18 years.
b. The company would not record the aircraft as an asset but would record rent expense of $900,000 per year for
20 years.
c. The aircraft would be recorded as an asset with a cost of $8,756,000.
d. The aircraft would be recorded as an asset with a cost of $9,129,000.
ANSWER: c
109. Which of the following statements regarding leases is false?

a. Lease agreements are a popular form of financing the purchase of assets because leases do not require a large
initial outlay of cash.
b. Accounting recognizes two types of leases—operating and capital leases.
c. If a lessor classifies a lease as a capital lease, then the lessee records a lease liability on its balance sheet.
d. If a lease is classified as an operating lease, the lessee records a lease liability on its balance sheet.
ANSWER: d
DIFFICULTY: Easy
110. Which of the following lease conditions would result in a capital lease to the lessee?
a. The lessee will return the property to the lessor at the end of the lease term.
b. The lessee can purchase the property for $1 at the end of the lease term.
c. The fair market value of the property at the inception of the lease is $18,000; the present value of the
minimum lease payments is $15,977.
d. The lease term is 70% of the property's economic life.
ANSWER: b
DIFFICULTY: Easy
111. Surplus Mining Company has leased a machine from Craft Machinery Company. The annual payments are $6,000
and the life of the lease is 8 years. It is estimated that the useful life of the machine is 9 years. How would Surplus Mining
record the acquisition of the machine?
a. The machine would be recorded as an asset with a cost of $48,000.
b. The company would not record the machine as an asset but would record rent expense of $6,000 per year.
c. The machine would be recorded as an asset, at the present value of the annual cash payments, $6,000 for 8
years.
d. The machine would be recorded as an asset, at the present value of the annual cash payments, $6,000 for 9
years.
ANSWER: c
112. Which of the following accounts would not appear on the balance sheet of a lessee company recording a capital
lease?
a. Accumulated depreciation on the leased asset
b. Lease obligation in the current liability section
c. Lease obligation in the long-term liability section
d. Rent expense on the income statement
ANSWER: d
DIFFICULTY: Easy
113. Happy Corporation leased a building from Sensor Company. The 10-year lease is recorded as a capital lease. The
annual payments are $10,000 and the recorded cost of the asset is $67,100. The straight-line method is used to calculate
depreciation. Which of the following statements is true?
a. Depreciation expense of $6,710 will be recorded each year.
b. Depreciation expense of $10,000 will be recorded each year.
c. No depreciation expense will be recorded by Happy Corporation.
d. No interest expense will be recorded by Happy Corporation.
ANSWER: a
114. All of the following statements are true except:
a. The criteria to determine whether a lease contract should be considered a capital lease are applied in a more
rigid way under U.S. GAAP than IFRS.
b. The criteria to determine whether a lease contract should be considered a capital lease are applied in a more
rigid way under IFRS than U.S. GAAP.
c. The lease criteria under IFRS are to be used as guidelines rather than rules.
d. IFRS requires more accounting judgment than U.S. GAAP in the determination of whether a lease is classified
as an operating lease or a capital lease.
ANSWER: b
DIFFICULTY: Easy
115. The current balance sheet of Blawnox Inc. reports total assets of $20 million, total liabilities of $2 million, and
owners' equity of $18 million. Blawnox Inc. is considering several financing possibilities in order to expand operations. If
Blawnox Inc.’s owner invests an additional $2 million to finance the expansion, the debt to equity ratio will
a. stay the same
b. decrease
c. increase
d. cannot be determined from this information.
ANSWER: b
116. The current balance sheet of Blawnox Inc. reports total assets of $20 million, total liabilities of $2 million, and
owners' equity of $18 million. Blawnox Inc. is considering several financing possibilities in order to expand
operations. What is the additional amount that Blawnox Inc. can borrow and not exceed a debt to equity ratio of 0.3?
a. $5.4 million
b. $3.4 million
c. $5.5 million
d. $4.0 million
ANSWER: b
117. Line Corporation's balance sheet showed the following amounts for their liability and stockholders’ equity accounts:
Current Liabilities, $5,000; Bonds Payable, $1,500; Lease Obligations, $2,000; and Deferred Income Taxes, $300. Total
stockholders' equity was $6,000. The debt-to-equity ratio is
a. 0.63
b. 0.83
c. 1.42
d. 1.47
ANSWER: d
RATIONALE: $5,000 (Current Liabilities) + $1,500 (Bonds Payable) + $2,000 (Lease Obligations) + $300
(Deferred Income Taxes)/$6,000 (Total Stockholders’ Equity)
$8,800/$6,000 = 1.47
118. One way analysts measure the ability of a company to meet its obligations is to calculate the times interest earned
ratio for any outstanding debt the company may have. For Tempo Solutions Corporation, $10,000 of bonds paying 6.5%
annually is outstanding. Income before interest and taxes is $7,000. How would Tempo Solutions Corporation calculate
the times interest earned ratio?
a. Income before interest and taxes divided by the interest expense.
b. Income before interest and taxes divided by carrying value of the bonds outstanding.
c. Income before interest and taxes divided by the face rate on bonds.
d. Face amount of bonds divided by income before interest and taxes.
ANSWER: a
DIFFICULTY: Easy
119. Tampa Corporation's balance sheet showed the following amounts for their liabilities and stockholders’ equity
accounts: Current Liabilities, $20,000; Bonds Payable, $60,000; Lease Obligations, $12,000; and Deferred Income Taxes,
$2,000. Total stockholders' equity was $42,000. The debt-to-equity ratio is
a. 0.45
b. 0.58
c. 1.76
d. 2.24
ANSWER: d
RATIONALE: $20,000 (Current Liabilities) + $60,000 (Bonds Payable) + $12,000 (Lease Obligations) +
$2,000 (Deferred Income Taxes / $42,000 (Total Stockholders’ Equity) = $94,000/$42,000 =
2.238 or 2.24
120. A decreasing long-term liability account is presented on the statement of cash flows as
a. a decrease in cash in the Financing Activities category.
b. a decrease in cash in the Investing Activities category.
c. an increase in cash in the Operating Activities category.
d. an increase in cash in the Financing Activities category.
ANSWER: a
121. On January 1, 2016, the long-term liability section of Quick Silver Co. balance sheet showed a balance of $800,000
in the bonds payable account. On December 31, 2016, the balance in that same account was $765,000. This change would
appear on the statement of cash flows as
a. an outflow of cash of $35,000 in the financing activities category.
b. an inflow of cash of $35,000 in the financing activities category.
c. an outflow of cash of $35,000 in the investing activities category.
d. an inflow of cash of $35,000 in the investing activities category.
ANSWER: a
122. An example of a cash flow related to a liability that would not appear in the financing activities category of the
statement of cash flows is
a. mortgage payable.
b. bonds payable.
c. deferred income taxes.
d. a lease obligation.
ANSWER: c
DIFFICULTY: Easy
123. On January 1, 2016, the long-term liability section of Eden Company's balance sheet showed a balance of $35,000 in
the bonds payable account. On December 31, 2016, the balance in that same account was $20,000. This change would
appear on the statement of cash flows as
a. an outflow of cash of $15,000 in the financing activities category.
b. an inflow of cash of $15,000 in the financing activities category.
c. an outflow of cash of $15,000 in the investing activities category.
d. an inflow of cash of $15,000 in the investing activities category.
ANSWER: a
DIFFICULTY: Easy
124. [APPENDIX] The deferred income taxes for a corporation represent
a. the dollar amount of deductions that a corporation may claim for the year.
b. an additional assessment made by the IRS for underpaid taxes.
c. the estimated amount of next year's taxes.
d. the dollar amount that arises due to the difference between accounting for financial statements and accounting
for tax purposes.
ANSWER: d
DIFFICULTY: Easy
125. [APPENDIX] Deferred income taxes arise because

a. corporations often make errors in their tax estimations.
b. companies can use accounting methods that minimize net income for tax purposes and other methods that
maximize net income for reporting to shareholders.
c. the IRS owes a company a refund from last year.
d. large corporations generally have operations in foreign countries whose tax law is quite different from U.S. tax
law.
ANSWER: b
DIFFICULTY: Easy
126. [APPENDIX] One example of a temporary difference between financial and tax reporting results from
a. rent expense.
b. tax-exempt interest from municipal bonds.
c. life insurance proceeds resulting from the death of an executive.
d. depreciation of long-term assets.
ANSWER: d
127. [APPENDIX] Wave Corporation is determining its income tax liability. It has one machine that cost $30,000 with a
4-year life and no salvage value. Wave is using an accelerated depreciation method for tax purposes. For accounting
purposes, Wave has decided to use the straight-line method. Which of the following statements is true?
a. There will be a temporary difference between accounting income and income for tax purposes.
b. There will be a permanent difference between accounting income and income for tax purposes.
c. Wave’s accounting income and income for tax purposes will be equal.
d. Accounting income will be lower than income for tax purposes, especially in the early years of the asset's life.
ANSWER: a
128. [APPENDIX] Stockton Corporation has made an accounting entry to record deferred taxes as a liability resulting
from temporary differences between accounting income and taxable income. Which of the following statements is true?
a. Deferred tax will be decreased.
b. Stockholders’ equity will be increased.
c. Stockholders’ equity will be decreased.
d. Assets will be decreased.
ANSWER: c
129. [APPENDIX] For 2016, Wasabi Company has accounting revenues of $6,000. However, because of temporary
differences between tax and accounting, $1,000 of this is not subject to tax. If expenses are $3,000 for both tax and
accounting, and the tax rate is 40%, what is the amount of tax payable to the IRS?
a. $400
b. $800
c. $1,200
d. $1,600
ANSWER: b
130. [APPENDIX] When a company has a credit balance in its Deferred Tax account, this amount would appear as a(n)
a. contra asset on the balance sheet.
b. stockholders’ equity account on the balance sheet.
c. expense account on the income statement.
d. liability account on the balance sheet.
ANSWER: d
DIFFICULTY: Easy
131. [APPENDIX] The attitude of the Financial Accounting Standards Board toward deferred tax liabilities is that they
are
a. an amount that results in a future obligation and meets the definition of a liability.
b. a bookkeeping item that is used merely to maintain equality of the accounting equation.
c. not true liabilities because the balance increases every year.
d. not payable in the immediate future so it not necessary to record them.
ANSWER: a
DIFFICULTY: Easy
132. [APPENDIX] Deferred income taxes is a balance sheet item for Iowa Products Company. How would it most likely
be classified on the balance sheet?
a. Owners’ equity
c. Expense
d. Contra liability
ANSWER: b
DIFFICULTY: Easy
133. [APPENDIX] A decrease in deferred taxes (liability) would appear on the statement of cash flows, prepared using
the indirect method as a(n)
a. addition to net income in the operating activities category.
b. deduction to net income in the operating activities category.
c. inflow of cash in the financing activities category.
d. outflow of cash in the financing activities category.
ANSWER: b
134. [APPENDIX] O’hara Company uses the straight-line depreciation for financial reporting purposes and an accelerated
depreciation method for tax purposes. As a result, O’hara will record:
a. a deferred tax asset.
b. a deferred tax liability.
c. a permanent difference.
d. tax-exempt depreciation.
ANSWER: b
DIFFICULTY: Easy
135. All of the following are considered to be long-term liabilities for Parsons Company except:
a. Bonds issued this year (due in 10 years).

b. The third year payments for a three-year lease signed this year.
c. The current year portion of Deferred taxes.
d. The principal of a note payable signed this year, but due in five years.
ANSWER: c
DIFFICULTY: Easy
136. Which of the following statements is false with respect to bonds?
a. Firms issue bonds in very large single issues.
b. Bonds must be held until maturity by the initial investor.
c. The denomination of the bond is usually referred to as the face value.
d. Bonds that are not backed by specific collateral of the issuing company are known as debenture bonds.
ANSWER: b
DIFFICULTY: Easy
137. Connor Martin Corporation’s balance sheet showed the following amounts: Current Liabilities, $10,000; Bonds
Payable, $3,000; Lease Obligations, $4,000; and Notes Payable, $600. Total stockholders’ equity was $12,000. The debt-
to-equity ratio is:
a. 0.83.
b. 1.47.
c. 1.42.
d. 0.63.
ANSWER: b
138. Frank Crawford Corporation’s balance sheet showed the following amounts: Current Liabilities, $15,000; Bonds
Payable, $8,000; Lease Obligations, $9,000; and Notes Payable, $5,600. Total stockholders’ equity was $17,000. The
debt-to-equity ratio is:
a. 0.88.
b. 1.18.
c. 0.71.
d. 2.21.
ANSWER: d
139. When using the indirect method for preparing the statement of cash flows, all of the following will appear in the
operating activities section except:
a. Increase in deferred tax.
b. Depreciation expense on leased assets.
c. Interest expense.
d. An increase in long-term liabilities.
ANSWER: d
140. Cash interest payment is computed annually when a bond is issued for other than its face value. For a bond issued at
a discount, how will this component change as the bond approaches maturity?
a. decrease
b. increase
c. remain constant
d. not enough information given to decide
ANSWER: c
DIFFICULTY: Easy
141. Interest expense is computed annually when a bond is issued for other than its face value. For a bond issued at a
discount, how will this component change as the bond approaches maturity?
a. decrease
b. increase
c. remain constant
ANSWER: b
DIFFICULTY: Easy
142. Amortized discount is computed annually when a bond is issued for other than its face value. For a bond issued at a
a. decrease
b. increase
c. remain constant
ANSWER: b
DIFFICULTY: Easy
143. Carrying value is computed annually when a bond is issued for other than its face value. For a bond issued at a
a. decrease
b. increase
c. remain constant
ANSWER: b
DIFFICULTY: Easy
144. Cash interest is computed annually when a bond is issued for other than its face value. For a bond issued at a
premium, how will this component change as the bond approaches maturity?
a. decrease
b. increase
c. remain constant
ANSWER: c
DIFFICULTY: Easy
145. Interest expense is computed annually when a bond is issued for other than its face value. For a bond issued at a
a. decrease
b. increase
c. remain constant
ANSWER: a
DIFFICULTY: Easy
146. Amortized premium is computed annually when a bond is issued for other than its face value. For a bond issued at a
a. decrease
b. increase
c. remain constant
ANSWER: b
DIFFICULTY: Easy
147. Carrying value is computed annually when a bond is issued for other than its face value. For a bond issued at a
a. decrease
b. increase
c. remain constant
ANSWER: a
DIFFICULTY: Easy
Completion
148. All liabilities that are not classified as current liabilities are classified as ___________________.
ANSWER: long-term
DIFFICULTY: Easy
149. The denomination or principal amount of the bond is usually referred to as the _________________________.
ANSWER: face value
par value
DIFFICULTY: Easy
150. ____________________ bonds may be retired by the issuing company before their specified due date.
ANSWER: Callable
DIFFICULTY: Easy
151. The _____________________ rate of interest is the rate that bondholders could obtain by investing in other bonds
that are similar to the issuing firm's bonds.
ANSWER: market
DIFFICULTY: Easy
152. The bond issue price equals the _________________________ of the cash flows that the bond will produce.
ANSWER: present value
DIFFICULTY: Easy
153. Bonds were issued at a(n) _____________________ when the issue price exceeds the face value.
ANSWER: premium
DIFFICULTY: Easy
154. Discount on Bonds Payable is shown on the balance sheet as a(n) ____________________________.
ANSWER: contra liability
DIFFICULTY: Easy
155. If the market rate of interest is greater than the face rate, then the bonds are issued at a(n)
________________________.
ANSWER: discount
DIFFICULTY: Easy
156. ______________________ is the process of transferring an amount from the bond discount or premium to interest
expense each time period to adjust interest expense.
ANSWER: Amortization
DIFFICULTY: Easy
157. ______________________ is either the bond's face value minus any unamortized discount or plus any unamortized
premium.
ANSWER: Carrying value
DIFFICULTY: Easy
158. The effective interest method amortizes premium or discount in a manner that produces a(n)
______________________ rate of interest from period to period.
ANSWER: constant
DIFFICULTY: Easy
159. Under the effective interest method of amortization, the interest expense for each period is the carrying value times
the ______________________.
ANSWER: effective rate
market rate
DIFFICULTY: Easy
160. When a bond is retired early and the redemption price is greater than the bond's carrying value, there will be a(n)
______________________ on redemption.
ANSWER: loss
DIFFICULTY: Easy
161. A(n) ______________________ lease is recorded on the lessee's balance sheet as an asset and related liability.
ANSWER: capital
DIFFICULTY: Easy
162. Although operating leases are not recorded on the balance sheet by the lessee, they are disclosed in the
____________________________________.
ANSWER: notes to the financial statements
financial statements
DIFFICULTY: Easy
163. For a capital lease, the lessee must record both an asset and a liability. The amount of the asset is subsequently
reduced by the process of __________________________.
ANSWER: depreciation
amortization
DIFFICULTY: Easy
164. In calculating deferred income taxes, ___________________________________ occur when an item is included in
the tax calculation and is never included for financial accounting purposes, or vice versa.
ANSWER: permanent differences
DIFFICULTY: Easy
165. An alternate term for a timing difference is a _________________________.

ANSWER: temporary difference
DIFFICULTY: Easy
Matching
Match the following bond and long-term liability related terms to the appropriate definition.
a. Long-term liability
b. Face value
c. Debenture bonds
d. Serial bonds
e. Callable bonds
f. Face rate of interest
g. Market rate of interest
h. Bond issue price
i. Premium
j. Discount
k. Effective interest method of amortization
l. Carrying value
m. Gain or loss on redemption
DIFFICULTY: Easy
FACC.PONO.13.10-03 - LO: 10-03
FACC.PONO.13.10-04 - LO: 10-04
FACC.PONO.13.10-05 - LO: 10-05
FACC.PONO.13.10-06 - LO:10-06
166. The principal amount of the bond as stated on the bond certificate.
ANSWER: b
167. Bonds that are backed by the general creditworthiness of the issuer and are not backed by specific collateral.
ANSWER: c
168. An obligation that will not be satisfied within one year.

ANSWER: a
169. The excess of the issue price over the face value of bonds. It occurs when the face rate on the bonds exceeds the
market rate.
ANSWER: i
170. Bonds that do not all have the same due date. A portion of the bonds comes due each time period.
ANSWER: d
171. The excess of the face value of bonds over the issue price. It occurs when the market rate on the bonds exceeds the
face rate.
ANSWER: j
172. Bonds that may be redeemed or retired before their specified due date.
ANSWER: e
173. The process of transferring a portion of premium or discount to interest expense. This method transfers an amount
resulting in a constant effective interest rate.
ANSWER: k
174. The interest rate stated on the bond certificate. It is also called the nominal or coupon rate.
ANSWER: f
175. The face value of a bond plus the amount of unamortized premium or minus the amount of unamortized discount.
ANSWER: l
176. The interest rate that bondholders could obtain by investing in other bonds that are similar to the issuing firm’s
bonds.
ANSWER: g
177. The difference between the carrying value and the redemption price at the time bonds are redeemed. This amount is
presented as an income statement account.
ANSWER: m
178. The total of the present value of the cash flows produced by a bond. It is calculated as the present value of the
annuity of interest payments plus the present value of the principal.
ANSWER: h
Subjective Short Answer
Sewickley Company
Use the liabilities section of Sewickley Company’s balance sheet to answer the questions that follow.
Sewickley Company
Consolidated Balance Sheets
(in millions)
December 31,
2017 2016
Current liabilities
Short-term borrowings $ 354 $ 202
Accounts payable and other current liabilities 4,461 4,529
Income taxes payable 183 64
Total current liabilities $4,998 $4,795
Long-term debt $2,651 $3,009

Other long-term liabilities 3,876 3,960
Deferred income taxes (assume all are long-term) 1,496 1,367
179. Review the consolidated balance sheets of Sewickley Company.
Required:
(1) Which long-term liability would also be listed in the short-term liability section? Why?
(2) What percent of the total liabilities for 2017 and 2016 are long-term liabilities? What implication does this have?
ANSWER: (1) The long-term liability which is also listed in the short-term liability section is the portion
of long-term debt due within one year of the balance sheet date. The portion due in a period
longer than one year is classified as long-term debt.
(2) The percent of the total liabilities that are long-term liabilities for the two years are: 2017,
61.6%; 2016, 63.5%. The implication is that there were large amounts of long-term liabilities
that matured in 2017. The percent decreased from 2016 to 2017 due to the large increase in
short-term borrowings as compared with the other liability accounts. Management needs to
take steps to assure that the corporation will be able to generate the cash necessary to retire
the debt as it matures.
DIFFICULTY: Easy
Required:
Which one of the liabilities shown in the balance sheets is used in the calculation of the debt-to-equity ratio?
If we can assume that the stockholders' equity total remained relatively constant for the two years, how would the ratio
change (increase/decrease) from 2016 to 2017? What would this say about the company’s financial position?
ANSWER: All liabilities are used in the calculation of the debt-to-equity ratio: total liabilities/total
stockholders' equity. Total liabilities for the two years were: 2017, $13,021; 2016, $13,131
(in millions).
If it is assumed that stockholders' equity remained relatively constant for the two years, then
the company’s financial position would have improved slightly.
Required:
(1) What are the total long-term liabilities for the two years presented?
(2) What is the percent increase/decrease of long-term liabilities from 2016 to 2017? Which liability appears to have
caused the greatest change?
ANSWER: (1) 2017 – $8,023 (in millions)
$2,651 (Long-term debt) + $3,876 (Other long-term debt) + $1,496 (Deferred income taxes)
= $8,023
2016 – $8,336 (in millions)

$3,009 (Long-term debt) + $3,960 (Other long-term debt) + $1,367 (Deferred income taxes)
= $8,336
(2) a decrease of 3.75 or 3.8% (Rounded)

2016 Long-term liabilities—$8,336
2017 Long-term liabilities—$8,023
[($8,023 – $8,336)/$8,336] × 100 = 3.75 or 3.8%. (Rounded)
The long-term liability which appears to have caused the greatest change is long-term debt.
(2016 – $3,009; 2017 – $2,651)
DIFFICULTY: Easy
FACC.PONO.13.10-08 - LO: 10-08
182. On March 1, 2016, Farmer Co. issued at a price of 100 $20 million of 8%, 25-year bonds payable. Interest is payable
semiannually each March 1 and September 1.
Required:
Present the adjusting entry necessary at December 31, 2016, regarding this bond issue.
ANSWER: Dec. 31 Bond Interest Expense 533,333
Bond Interest Payable 533,333
(20,000,000 × 8% × 4/12)
Balance Sheet Income Statement
Stockholders’ Net
Assets = Liabilities + Equity Revenues – Expenses = Income
Bond Bond
Interest Interest
Payable Expense
533,333 (533,333) 533,333 (533,333)
183. East Liberty Corp. received authorization on December 31, 2016, to issue $7,000,000 face value of 6%, 10-year
bonds. The interest payment dates are June 30 and December 31. All the bonds were issued at par, plus accrued interest,
April 1, 2017. The bonds are callable by East Liberty at any time at 102.
Required:
Prepare the journal entry to record issuance of the bonds on April 1, 2017.
ANSWER: 2017
April 1 Cash 7,105,000
Bonds Payable 7,000,000
Bond Interest Payable 105,000
Stockholders’ Net
Bonds Payable
Cash
7,000,000
7,105,000
Bond Interest
Payable 105,000
Issued $7,000,000 face value bonds at par, plus three months’ accrued interest.
($7,000,000 × 6% × 3/12 = $105,000)
Required:
Prepare the journal entry to record the first semiannual interest payment on the bonds at June 30, 2017.
ANSWER: 2017
June 30 Bond Interest Payable 105,000
Bond Interest Expense 105,000
Cash 210,000
To record payment of semiannual interest.
($7,000,000 × 6% × 1/2)
Stockholders’ Net
Bond Bond
Cash Interest Interest
(210,000) Payable Expense
(105,000) (105,000) 105,000 (105,000)
Required:
1. What is the amount of bond interest expense that appears in East Liberty’s 2017 income statement relating to these
bonds?
2. What is the amount of accrued bond interest expense that appears in East Liberty's balance sheet at December 31, 2017,
with respect to these bonds?
ANSWER: 1. $315,000 interest expense.
Since the bonds were issued at par, interest expense is equal to the contractual interest for the
period that the bonds were outstanding. ($7,000,000 × 6% × 9/12 = $315,000)
2. $0 accrued bond interest payable. The interest payment date is Dec. 31; therefore, interest
for the last six months of a year is paid and does not appear as a liability in the balance sheet.
Required:
East Liberty exercises the call provision and retires one-half of the bond issue on July, 1, 2019. Prepare the journal entry
to record this transaction on July 1, 2019.
ANSWER: 2019
July 1 Bonds Payable 3,500,000
Loss on Retirement of Bonds 70,000
Cash 3,570,000
To record retirement of $3,500,000-face-value
bonds, originally issued at par, at 102.
Stockholders’ Net
Loss on
Cash Bonds Retirement
(3,570,000) Payable of Bonds
(3,500,000) (70,000) 70,000 (70,000)
187. A bond payable is dated January 1, 2016, and is issued on that date. The face value of the bond is $120,000, and the
face rate of interest is 6%. The bond pays interest semiannually. The bond will mature in five years.
Required:
1. What will be the issue price of the bond if the market rate of interest is 6% at the time of issuance?
2. What will be the issue price of the bond if the market rate of interest is 10% at the time of issuance?
ANSWER: 1. If the face rate is equal to the market rate, the bond will be issued at face value, or
$120,000.
2. $120,000 × 0.614 = $73,680 Table 9-2 n = 10, i = 5%
3,600 × 7.722 = 27,799 Table 9-4 n = 10, i = 5%
Issue price $101,479
188. A company issued 10-year bonds with a par value of $20,000,000 and an 8% annual face on January 2, 2016. The
issue price of the bond issue was $19,866,397 which reflected an 8.1% effective interest rate.
Required:
a) Determine the effect on the accounting equation upon recording the issuance of the bonds.
b) Determine the effect on the accounting equation upon recording the recognition of interest
expense at December 31, 2016. Any premium or discount should be amortized using the effective
interest rate method.
c) Determine the effect on the accounting equation upon recording the interest paid to the
bondholders on January 2, 2017.
d) Determine the effect on the accounting equation upon recognizing the interest expense at
December 31, 2017. Any premium or discount should be amortized using the effective interest
rate method.
ANSWER: a.
Stockholders’ Net
Cash Discount on
19,866,397 Bonds
(133,603)
Bonds
Payable
20,000,000
b.
Stockholders’ Net
Discount on Bonds
Payable 9,178 Interest
Interest Payable Expense
1,600,000 (1,609,178) 1,609,178 (1,609,178)
($19,866,397 × .081 = $1,609,178 – $1,600,000) = $9,178
c.
Stockholders’ Net
Cash Interest
(1,600,000) Payable
(1,600,000)
d.
Stockholders’ Net
Discount on Bonds
Payable
9,922 Interest
1,600,000 (1,609,922) 1,609,922 (1,609,922)
($19,866,397 + $9,178) × .081 = $1,609,922 – $1,600,000 = $9,922

FACC.PONO.13.10-05 - LO: 10-05
189. A company issued 5-year bonds with a par value of $35,000,000 and a 7% annual face on January 2, 2016. The issue
price of the bond issue was $35,216,127 which reflected a 6.85% effective interest rate.
Required:
a) Determine the effect on the accounting equation upon recording the issuance of the bonds.
b) Determine the effect on the accounting equation upon recording the recognition of interest expense at December 31,
2016. Any premium or discount should be amortized using the effective interest rate method.
c) Determine the effect on the accounting equation upon recording the interest paid to the bondholders on January 2, 2017.
d) Determine the effect on the accounting equation upon recognizing the interest expense at December 31, 2017. Any
premium or discount should be amortized using the effective interest rate method.
ANSWER: a.
Stockholders’ Net
Cash Bonds Payable
35,216,127 35,000,000
Premium on Bonds
Payable
216,127
b.
Stockholders’ Net
Premium on Bonds
Payable
(37,695) Interest
2,450,000 (2,412,305) 2,412,305 (2,412,305)
($35,216,127 × .0685 = $2,412,305 – $2,450,000) = $37,695
c.
Stockholders’ Net
Cash Interest
(2,450,000) Payable
(2,450,000)
d.
Stockholders’ Net
Interest Payable
2,450,000
Premium on Bonds Interest
Payable Expense
(40,277) (2,409,723) 2,409,723 (2,409,723)
($35,216,127 – $37,695) × .0685 = $2,409,723 – $2,450,000 = $40,277
FACC.PONO.13.10-05 - LO: 10-05
190. Bonds payable are dated January 1, 2016, and are issued on that date. The face value of the bonds is $200,000, and
the face rate of interest is 8%. The bonds pay interest semiannually. The bonds will mature in five years. The market rate
of interest at the time of issuance was 6%.
Required:
1. What is the bond issuance price?
2. Using the effective interest amortization method, what amount should be amortized for the first six-month period?
What amount of interest expense should be reported for the first six-month period?
3. Using the effective interest amortization method, what amount should be amortized for the period from July 1 to
December 31, 2016? What amount of interest expense should be reported for the period from July 1 to December 31,
2016?
ANSWER: 1.
$200,000 × 0.744 = $148,800 Table 9-2 n = 10, i = 3%
8,000 × 8.530 = 68,240 Table 9-4 n = 10, i = 3%
Issue price $217,040
Cash Interest Expense Amortized Present Value

$ 217,040.00
$8,000.00 $6,511.20* $1,488.80 215,551.20
8,000.00 6,466.54** 1,533.46 214,017.74
2. Amount amortized is $1,488.80.

Amount of interest expense is $6,511.20.*
3. Amount amortized is $1,533.46.

Amount of interest expense is $6,466.54.**
191. Stanton Heights Corporation issued $95,000 face value bonds at a discount of $5,000. The bonds contain a call price
of 102. Stanton Heights decides to redeem the bonds early when the unamortized discount is $2,750.
Required:
1. Calculate Stanton Heights Corporation’s gain or loss on the early redemption of the bonds.
2. Describe how the gain or loss would be reported on the income statement and in the notes to the financial statements.
ANSWER: 1.
Redemption price: $95,000 × 1.02 = $96,900
Carrying value: $95,000 – $2,750 = 92,250
$(4,650) loss
2. The gain or loss on bond redemption should be presented on the income statement. In most
cases, the gain or loss on bond redemption should not be considered unusual or infrequent
and therefore should not be presented in the section of the statement where extraordinary
items are presented.
192. Burger Barn Company issued $150,000 face value bonds at a premium of $6,000. The bonds contain a call provision
of 102. Burger Barn decides to redeem the bonds due to a significant decline in interest rates. On that date, Burger Barn
had amortized only $1,500 of the premium.
Required:
1. Calculate the gain or loss on early redemption of the bonds.
2. What journal entry should be recorded at the time of bond redemption?
3. Where should the gain or loss should be presented on the financial statements?
4. Why is the call price is normally higher than 100?
ANSWER: 1.
Redemption price $150,000 × 1.02 = $153,000
Carrying value $150,000 + ($6,000 – $1,500) = 154,500
Gain on redemption $ 1,500
2.
Bond redemption Entry: Bonds Payable 150,000
Premium on Bonds 4,500
Cash 153,000
Gain on Bond Redemption 1,500
Stockholders’ Net
Bonds
Cash Payable
(153,000)
(150,000)
Premium Gain on
on Gain on Bond Bond
Bonds Redemption Redemption
(4,500) 1,500 1,500 1,500
3. The gain or loss on bond redemption should be presented on the income statement. In most
cases, the gain or loss on bond redemption should not be considered un-usual or infrequent
and therefore should not be presented in the section of the statement where extraordinary
items are presented.
4. Bonds are redeemed early only if it is advantageous to the issuing firm. However, early
redemption is usually not favorable to the investor because it usually means the investor can
no longer benefit from a favorable interest rate. To compensate the investor for foregone
interest, as well as for the costs and inconvenience involved, the call price is normally set at
an amount higher than 100.
FACC.PONO.13.10-06 - LO:10-06
Antietam Corporation
Use the note on Disclosure of Leases for the Antietam Corporation to answer the questions that follow.
The Corporation leases office, warehouse and showroom space, retail stores and office equipment under operating leases,
which expire no later than 2030. The Corporation normalizes fixed escalations in rental expense under its operating leases.
Minimum annual rentals under non-cancelable operating leases, excluding operating cost escalations and contingent rental
amounts based upon retail sales, are payable as follows:
Fiscal year ending March 31,
2016 $10,051,000
2017 11,121,000
2018 10,161,000
2019 9,063,000
2020 8,814,000
Thereafter 46,681,000
Rent expense was $12,551,000; $8,911,000; and $5,768,000 for the years ended March 31, 2015, 2014, and 2013
respectively.
193. Review the information for Antietam Corporation.
Required:
(1) What are the two types of leases that a company can have? Describe each briefly.
(2) Does the note disclosure show evidence of the two types of leases?
ANSWER: (1) The two types of leases that a company can have are operating leases and capital leases.
Operating leases are in substance a rental. The user/lessee makes periodic payments to the
owner/lessor and at the end of the lease term, the property reverts back to the owner. The
lessee does not record the property as an asset, nor does it record depreciation. On the other
hand, a capital lease is in substance a purchase of an asset. The entry to record the acquisition
requires that a liability be established reflecting future payments to the seller.
(2) The note discloses operating leases. The capital leases are included on the balance sheet
as debt while the operating leases are only shown as an expense. The future lease payments
are shown so that creditors and investors will be aware of the cash amounts that Banner is
required to pay.
Required:
Determine the effect on the accounting equation when recording each type of lease described in the previous question.
ANSWER: The entry for an operating lease merely records cash payments made and rental expense.
Stockholders’ Net
Cash Rent
($xx) Expense
($xx) $xx ($xx)
The effects of a capital lease are more complicated. At the beginning of the lease term, the
following effects are recorded.
Stockholders’ Net
Leased
Asset Lease
$xx Obligation Sxx
Then when periodic lease payments are made, a portion of the payment is expensed while the
rest reduces the obligation.
Stockholders’ Net
Cash Lease Interest
($xx) Obligation Expense
$xx ($xx) ($xx) ($xx)
Also, the lessee must remember to record depreciation on the leased asset.
Stockholders’ Net
Accumulated
Depr. - Depreciation
Leased Asset Expense
($xx) ($xx) $xx ($xx)
Required:
The note disclosure mentions contingent rent payments. What do you think this means with regard to Antietam
Corporation?
ANSWER: The implication is that under certain circumstances additional rent (lease) payments are
required. Some of the lease payments are based upon retail sales and others have operating
cost escalation clauses. This would be similar to a personal rental of a car or truck with a
fixed daily rate and then a per mile charge for those miles in excess of a specified amount,
say 100. These rent payments are contingent because they depend on the outcome of future
events; i.e., the amount of actual usage.
196. Wet Paint Company signed a ten-year lease agreement on January 1, 2016. The lease requires payments of $65,000
per year every December 31. Wet Paint estimates that the leased property has a life of 11 years. The interest rate that
applies to the lease is 12%.
Required:
1. Should Wet Paint Company treat the lease as an operating lease or a capital lease?
2. If a balance sheet is presented on January 1, 2016, what amounts related to the lease will appear on the balance sheet?
3. Assume that the leased asset is depreciated using the straight-line method and the lease is amortized using the effective
interest method. What journal entries should Wet Paint make on December 31, 2016?
ANSWER: 1. This lease is a capital lease because the length of the lease exceeds 75% of the life of the
asset.
2.
Leased asset $65,000 × 5.650 = $367,250 Table 9-4, n =10, i = 12%
Lease obligation $367,250
3.
Interest Expense (12% × $367,250) 44,070
Lease Obligation 20,930
Cash 65,000
Stockholders’ Net
Lease
Cash Obligation Interest
Expense
(65,000) (20,930) (44,070) 44,070 (44,070)
Depreciation Expense: Leased Equipment

36,725
($367,250 / 10 years = $36,725)
Accumulated Depreciation: Leased Equipment 36,725
Stockholders’ Net
Accumulated Depreciation
Depreciation: Expense:
Leased Leased
Equipment Depreciation Equipment
Expense
(36,725) (36,725) 36,725 (36,725)
Padagonian Company
Use the deferred tax account that appears in the financial statements of Padagonian Company to answer the related
questions.
December 31,
(in millions) 2017 2016
Deferred income taxes $ 442 $ 358
Total assets 22,417 20,834
Total current liabilities 8,429 9,321
Total stockholders’ equity 11,366 9,316
197. [Appendix] Review the information for Padagonian Company.
Required:
(1) Where will the Deferred Income Taxes account most likely appear on a classified balance sheet?
(2) What percent is deferred income taxes of long-term liabilities for the two years?
2017 __________ 2016 ___________
(3) What percent is deferred income taxes of total liabilities for the two years?
2017 __________ 2016 ___________
ANSWER: (1) The Deferred Income Taxes account usually appears in the liability section of the balance
sheet. It is classified as a long-term (noncurrent) liability.
(2) The percent of long-term liabilities that is deferred income taxes for the two years is as
follows:
2017: 16.9%; $442/($22,417 – $8,429 – $11,366) = .169
2016: 16.3%; $358/($20,834 – $9,321 – $9,316) = .163
(3) The percent of total liabilities that is deferred income taxes for the two years is as follows:
2017: 4.0%; $442/($22,417 – $11,366) = .0399
2016: 3.1%; $358/($20,834 – $9,316) = .0310
DIFFICULTY: Easy
FACC.PONO.13.10-09 - LO: 10-09
198. [Appendix] Review the information for Padagonian Company.
Required:
(1) In your opinion, are deferred income taxes an appreciable portion of both long-term liabilities and total liabilities?
Why?
(2) What difference between accounting income and taxable income produces the Deferred Income Taxes account?
(3) Will Padagonian eventually pay the deferred tax liability? When?
ANSWER: (1) Deferred income taxes do not appear to be an appreciable portion of total liabilities. The
percentage did increase slightly from 3.1% to 4.0% of total liabilities; however, this is still an
insignificant part of the total. In 2016, it could be said that deferred income taxes were an
appreciable portion of total long-term liabilities. Deferred income taxes now represent 16.9%
of total long-term liabilities and usually anything greater than 10% is considered to be
material.
(2) The difference between accounting income and taxable income that produces the
Deferred Income Taxes account is a timing one. The IRS and the FASB may recognize
certain items as revenue in different periods. Likewise, expenses may be recognized in
different periods. Companies attempt to increase income for accounting purposes but reduce
it for income tax purposes thereby giving rise to the Deferred Income Taxes liability account.
The use of an accelerated depreciation method (MACRS) is the most common item creating a
Deferred Income Taxes liability.
(3) In the future, presumably all additional taxes which have been deferred, will be payable.
However, the amounts which are payable will probably be reduced by future timing
differences. In fact, in many companies the Deferred Income Taxes account grows year after
year as the business expands and its assets and liabilities increase.
FACC.PONO.13.10-10 - LO: 10-10
199. [APPENDIX] How do most changes in long-term liabilities on the balance sheet appear on the cash flow statement?
ANSWER: Most long-term liabilities are related to a company's financing activities. Accordingly, a
change in the balance of these long-term liabilities will be reflected in the financing activities
category of the cash flow statement. An increase in long-term debt will be shown as a cash
inflow. Similarly, the reduction of long-term debt represents a cash outflow.
There are a few long-term liabilities that are not related to a company's financing activities,
such as deferred income taxes and accrued pension costs. These long-term liabilities are
reflected in the operating activities category of the cash flow statement. An increase in these
liabilities is a positive amount or an addition to operating cash flows while a decrease is a
negative amount or a reduction to operating cash flows.
200. [APPENDIX] Describe briefly how each of the following long-term liabilities arises; i.e., what kind of transaction
produces the resulting long-term liability? You may want to include the appropriate accounts to increase or decrease
(ignore amounts) in your description.
a) Long-Term Debt
b) Deferred Income Taxes

ANSWER: Long-term debt arises from the issue of bonds which in fact is a long-term loan. If the debt is
interest bearing, periodic interest payments are required. Cash would be increased (an
increase in assets) and Bonds Payable would be increased (an increase in liabilities).
Deferred income taxes arise from timing differences in the calculation of accounting income
versus taxable income. These differences must be temporary ones. Income Tax Expense
would increase (a decrease in Net Income), Deferred Income Tax would increase (and
increase in a liability), and Income Taxes Payable would increase (an increase in a liability).
201. [APPENDIX] On January 1, 2016, Hart Company purchased an asset for $137,500. For financial accounting
purposes, the asset will be depreciated on a straight-line basis over five years with no residual value at the end of that
time. For tax purposes, the asset will be depreciated as follows: 2016, $45,000; 2017, $35,000; 2018, $25,000; 2019,
$20,000; and 2020, $12,500. Assume that the company is subject to a 35% tax rate.
Required:
1. What is the amount of deferred tax at December 31, 2016?
2. Does the deferred tax represent an asset or a liability?
3. What is the amount of deferred tax at December 31, 2020?

ANSWER: 1. Deferred Tax = $6,125 ($45,000 – $27,500*) × 0.35
2. The amount will be a deferred tax liability.
3. At December 31, 2020, the amount of deferred tax will be $0.

*Depreciation for Financial Accounting = ($137,500 – $0) /5 years = $27,500
202. A bond with a face value of $10,000 is issued at a discount of $800 on January 1, 2016. The face rate of interest on
the bond is 7%.
Required:
1. Was the market rate at the time of issuance greater than 7% or less than 7%?
2. If a balance sheet is presented on January 1, 2016, how will the bonds appear on the balance sheet?
3. If a balance sheet is presented on December 31, 2016, will the amount for the bonds be higher or lower than on January
1, 2016?
ANSWER: 1. If the bond was issued at a discount, then the market rate of interest exceeded the face rate
of 7%.
2.
Bonds payable $10,000

Less: Discount on bonds (800)
$ 9,200
3. Since the discount will be amortized, the amount will be higher than $9,200.
203. Stanton Heights Corporation decides to redeem its $100,000 face value bonds when the carrying value is
$107,019.48. The bonds are redeemed on December 31, 2016, at 102.
Required:
1. Calculate Stanton Heights Corporation’s gain or loss on the early redemption of the bonds.
2. What journal entry should be recorded at the time of bond redemption?

ANSWER: 1. Gain = Carrying Value – Call Price
Gain = $107,019.48 – $102,000.00
Gain = $5,019.48
2. Bonds Payable.................................................... 100,000.00

Premium on Bonds.............................................. 7,019.48
Cash............................................................. 102,000.00*
Gain on Bond Redemption.............................. 5,019.48
To record redemption of bonds.
*$100,000 × 102% = $102,000
FACC.PONO.13.10-06 - LO:10-06
Essay
204. One of your friends is majoring in Aeronautics. In this industry, leases are very important and he is interested in
knowing a little bit about how international accounting standards will affect the industry as compared to current U.S.
GAAP treatments for leasing. How would you explain the differences in their applications?
ANSWER: Under U.S. GAAP, the criteria to determine whether a lease contract should be considered a
capital lease are applied in a rather rigid way. If a lease meets any of the criteria, it must be
accounted for as a capital lease. If it does not meet the criteria, even by a small margin, then
it is considered an operating lease.
Under international accounting standards, however, the lease criteria are similar to U.S.
standards, but are used as “guidelines” rather than rigid rules. Therefore, there is much more
flexibility in applying the lease standards when using the international standards. This may be
a benefit or a disadvantage, depending on how you look at it. While the benefits are more
transparency in financial statements, the disadvantages are that IFRS will require more
judgment by accountants in applying those standards.
205. A friend of yours has asked you whether off-balance-sheet financing means that the amounts are immaterial and
therefore are not reported. In a short paragraph, tell him what off-balance-sheet financing is and why firms engage in off-
balance-sheet transactions?
ANSWER: Off-balance-sheet financing refers to transactions whereby a party obtains the use of an asset
but is not required to record the related liability on the balance sheet. These transactions can
be very material. Firms may favor off-balance-sheet arrangements because they believe there
are benefits in not recording an obligation as a liability. Benefits may include the
maintenance of borrowing capacity and flexibility in meeting debt/equity or similar
requirements in existing loan contracts. An example of off-balance-sheet financing is an
operating lease. The lessee is not required to record the right to use the property as an asset or
to record the obligation for payments as a liability.
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the other mountains. The information we possess about this region is
still very scanty, and it would be difficult to make any thing out of the
interpreters, even if my head were less affected. Groups of a
hundred and fifty to two hundred negroes are standing together on
all sides; they generally accompany us a short way, without uniting
themselves to the next swarm. This perhaps arises more from
accident than for the purpose of keeping their boundary stations on
the water, to prevent falling together by the ears, whilst watering their
herds, and on other occasions. Islands impede our course, and the
crew see, to their terror, a number of natives, holding their weapons
aloft, wade through the river from one side to the other. We
immediately take possession of a little islet in the middle of the river,
and surround it with our vessels; a regular military position, for it is
surrounded with deeper water. It is about a hundred paces long from
north to south, and from five to six broad, and the shores fall away
steeply to the river.
Feïzulla Capitan disembarks, and returns soon from Selim
Capitan, with the melancholy intelligence that there is “moje mafish,”
(no water). I was completely in despair, left the vessel, and set off to
the top of the islet, where Turks and Franks were assembled for
further consultation. The black people found on it were driven away
by us; they jumped into the water like frogs, so that we heard a
simultaneous fearful splash. They soon stood on the more shallow
ground, and shouted their huzza, “Hui, ii hui iih!” laughed and joked,
and offered their valuables, &c. We let some of the negroes come on
the islet, and gave them presents of beads. About evening a large
herd of cows appeared on the right shore; they were lean, possibly
having been long in want of fresh grass. The men, armed with
spears, bows, and arrows, drove the herds from the right to the left
shore, where we likewise remarked a herd of cattle. Our gentlemen
were horribly afraid when the people accumulated like a black swarm
of bees on all sides.
It was a lucky circumstance that a large bird of prey perched on
the mast, to take a view aloft of the flesh under him. All eyes were
directed to us and this bird, when Suliman Kashef seized his long
gun; the blacks watched us closely, jostled each other, and were on
tenter-hooks of anxiety, for they did not know what it meant. Suliman
Kashef fired; the report set them in momentary fear, and they were
about to run away, when the sight of the bird falling into the water,
noted them, as it were, to the ground. When, however, other birds of
prey flew down on the water, to see what fate had befallen their
feathered friend, the “Hui, ii hui iih,” immediately came to a close;
they ran as fast as they could, for this appeared too much for them to
stand, having seen no arrow or stone flying at the bird. This single
shot might be of importance at this moment, when the people
generally, though at a distance, might have shewn a bad feeling;
moreover the incident was of inestimable value to the expedition,
because it infused the feeling of our superiority, and even enhanced
it, in their dismayed hearts. If I had previously strained every nerve to
prevent the return already determined upon, and had got the again-
convalescent Kashef on my side, so now even the timorous Selim
Capitan was inclined to have the track more accurately examined.
22nd January.—There was not a breath of wind, and it is still
undetermined whether we shall proceed further. I therefore proposed
to the Frenchmen, whose courage I could naturally have no doubt of,
to take out some of the freight from their vessel, which is lightly built
and convenient, and thus to press on further. They agreed to this
proposal. I described the country, and we were having breakfast
together, when intelligence was brought to us that it was decided to
go on. No sooner does Selim Capitan see the long-legged blacks
going to their cattle, swimming over to the right shore, than fear
seizes him anew; we, however, by our joint efforts, manage to
remove it.
In the meanwhile, the chief of this country comes to us with his
grown-up son. A red cloth dress of honour is put on the old man; a
red chequered cotton handkerchief tied round his head; and glass
beads are hung round his neck. They also gave the son beads, and
bound a piece of calico round him like a napkin. It was plain to be
seen that they were delighted with these presents, and particularly at
the pleasure of conversing and communicating with us. The old
man’s name is Nalewadtshòhn, his son’s Alumbèh; but their great
Mattà (king or lord, perhaps analogous to the title of honour
previously conferred on us, “Màdam,)” is called Làkono. The latter is
said to possess a beautiful red woollen dress, of a different cut to the
Abbaie, presented to Nalewadtshòhn. It must be truly interesting to
see here, all of a sudden, a negro king in an English uniform,
although it may only come from the Ethiopian sea, or the Indian
Ocean. Sultan Làkono dwells on Mount Pelenja, and rules over a
large country, called Bari, pronounced by the Turks, however, without
further ceremony, Beri. We are said to have been within the limits of
this kingdom for the last two days: those men shot by us belonged
also to Bari.
According to Nalewadtshòhn, who is in general very talkative,
and does not appear very favourably inclined towards his king, all
the mountains in the neighbourhood have abundance of iron; and
Mount Pelenja, a quantity of copper, which is here in great
estimation. Iron-ochre, which the natives here and there use to
colour themselves with, is said to be found on all sides, formed by
them, however, into balls: by this preparation, perhaps, a cleansing
of the material takes place. The high mountain-chain we had already
seen, lies to the west, at some hours’ distance, over the left shore of
the Nile. Its name is Niakanja, and the mountains before us are
called Korèk and Lubèhk, which are said to be followed by many
other higher mountains. Both the men are strikingly handsome,
although not one of the whole multitude can be called ugly. They are
tall and strongly built; have a nose, somewhat broad indeed, but not
flat; on the contrary, slightly raised, such as we see in the heads of
Rhamses; a full mouth, not at all like that of negroes, but exactly the
same as in the Egyptian statues; a broad arched forehead, and a
speaking, honest-looking eye. The latter is not, as we have found
generally in the marsh regions, entirely suffused with blood, whereby
the countenances have a dismal appearance, but clear, full, and
black, yet not dazzling. We observed that their legs were well
formed, though not muscular; their naked bodies were adorned with
the very same decorations of ivory and iron as we had seen in the
others. The name of the village on the right side of the river is
Baràko; the village lying immediately opposite, under the trees,
before which are a small island and pastures, is called Niowàh.
Alumbèh was sent as our envoy to King Làkono.
We leave our island at noon, and have a larger island on our
right, a smaller one on the left, and tow to the south, accompanied
by the negroes in the water: they even come with their long bodies to
the side of the vessel, and part with every thing they have for the
beloved sug-sug.
At Asser (three o’clock in the afternoon), S.S.W., with oars and
sails. A village, on the right side of the river, contains only a few
tokuls; but a large herd of cattle, grazing there, sets our crew longing
again. About sun-set, S. I procure a beautiful spear for a single glass
bead—silly, childish people! Immediately after sun-set, W.S.W. On
the left a small island; a gohr, or arm of a river, appearing to form a
large island, pours forth from thence, if it be not a tributary stream.
The wood before us contrasts by its dark hue with the coloured
horizon, over which, as yet, no alpine country glows. On the right
shore stand a number of armed and laughing negroes, in
picturesque positions; this has been the case the whole time, both in
the water and on land. They walk arm-in-arm, quite in a brotherly
manner, or with their arms round one another’s necks, as the
students in Germany used to do in my time. They help each other in
getting up on shore, and have frequently one foot placed firmly
against the knee, standing like cranes. They lean on their spears, or
long bows, or squat down; but I see none of them sitting or lying on
the ground, according to the lazy custom of the orientals.
The north wind is so faint that we are obliged to lend assistance
with poles; the river has more water, thank God, than we thought;
and even our reïs, whom a longing fit for his wives every now and
then seizes, believes that this water-course will hold on for some
time. We anchor in the middle of the river, and the guards are
doubled in the vessels. I am tired of this constant variety of
sensations, and yet would like to see and hear much more. My head
is so heavy and stupid, that I cannot accept Suliman Kashef’s
invitation.
23rd January.—Half-past eight o’clock. We have gone so far in a
southerly direction by the rope, and we move S. by W. and S.W. The
rapidity of the river has increased from one mile and a half to two
miles. The walk on shore has tired me more, because I was followed
by the natives, with all their effects, and retarded, so that I was
obliged to break a road through them, half by violence, though I am
still very weak in my legs. I purchased for a couple of miserable
beads a little sheep, covered partly with wool, and partly with hair, as
the sheep here generally are, and having a long mane under the
throat, and horns twisted back. Selim Capitan says that a similar
species is found in Crete.
Tobacco is called here also tabac, as mostly on the White River.
The Arabs give it the name of dogàhn; this is the small-leaved sort,
with dun-coloured flowers, which is cultivated likewise in Bellet
Sudàn. I have not seen the tobacco-plant growing wild here;
therefore, I cannot say whether the name of tobacco is indigenous
here with the plant, or has been introduced by immigrants.
Nevertheless, the Arabs are not generally smokers, and it is unlikely
that tobacco was brought in by them; and it is less probable,
because, had it been so, it would have kept the name of dogàhn. In
Sennaar, however, a good but very strong tobacco has been
cultivated for ages, and was probably introduced by the Funghs, who
are likewise a well-formed negro race. Our usual title of honour is
matta, which they, however, only give to the whites. The shores are
very extensively intersected with layers of sand.
Ten o’clock. S. by E., and then S.W. Two villages on the right
shore. We sail with a slight north wind, but scarcely make one mile,
for the current is considerably against us. We meet continually with
some fire-eaters among the blacks on the shore; they are startled,
certainly, at the report, but are not particularly frightened, especially if
it be not close to their ears. We have Mount Korèk in a south-
westerly direction before us. It stands like the Niakanja, to which we
have only come within the distance of from three to four hours, and
which lies behind us, isolated from the other mountains. The summit
appears flat from where we are; it has many indentations, and
seems to rise only about six hundred feet above its broad basis, to
which the ground ascends from the river. The wind having nearly
ceased for half an hour, freshens again for three miles.
At noon. S.S.W. In a quarter of an hour, a gohr or arm of the Nile
comes from S. by E.; we make only two miles more, and the wind
deserts us again; we lie, therefore, as if stuck to the place, after
having been thrown by the current on to the island, formed by the
before-named arm on the right shore. But the wind soon freshens
again; we sail away cheerfully. The ships drive one against the other,
or upon the sand, but work themselves loose again; the negroes
come in the water; confusion here—confusion everywhere. A herd of
calves stop in the water before us; this is really tempting, but we sail
on. The log gives four miles, from which two miles must be deducted
for the rapidity of the current, though the reïs can not understand
this.
At half-past twelve o’clock, the end of the island; we sail S.S.E.,
and then S. by W. On the right shore a large durra-field, apparently
the second crop on the very same stalks. The natives there,
according to the custom of this country, have little stools to sit on,
and a small gourd drinking-cup by their side. As before, part of them
are unarmed, and have merely a long stick, with forks or horns at the
top, in their hands. The covering of the head is various. Several have
differently formed little wicker baskets on their heads, as a protection
against the sun. They wear strings of the teeth of dogs or apes on
various parts of the body, but mostly on the neck, as an ornament or
talisman. They have bracelets, the points of which being covered
with bits of fur, are curved outwards like little horns. Our envoy
Alumbèh imitated all the motions and the voice of an ox, in order to
make us understand the meaning of these bracelets. These, as well
as the forks on their houses and sticks, appear to denote in some
way a kind of symbolic veneration for the bull, whose horns I had
previously seen adorned with animals’ tails; for the bull is bold, and
the support of the family among the herds.
One o’clock. A number of negroes are squatting on the island at
the left, or rather are sitting on their stools, and wondering at us
sailing so merrily to S.S.W. I count eleven villages; but I do not trust
myself on deck, for we have 30° Reaumur. About evening the whole
scene will appear more surprising and pleasing to me; for even my
servants, looking in exultingly at the window, praise the beauty of the
country. On all sides, therefore, plenty of mountains, stones, and
rocks; the great buildings in the interior of Africa are no longer a
fable to me! If the nation of Bari has had internal strength enough to
pursue the road of cultivation for thousands of years, what has
prevented it not only from rising from its natural state, but also from
appropriating to itself the higher European cultivation? It has a
stream, navigable, and bringing fertility, full of eatable animals; a
magnificent land affording it everything: it has to sustain war with the
gigantic monsters of the land and water, and to combat with its own
kind; it possesses the best of all metals, iron, from which it
understands how to form very handsome weapons sought for far and
near; it knows how to cultivate its fields; and I saw several times how
the young tobacco plants were moistened with water, and protected
from the sun by a roof of shrubs. The men of nature it contains are
tall, and enjoying all bodily advantages; yet—it has only arrived at
this grade of cultivation. If the perfectibility of nature be so confined,
this truly susceptible people only requires an external intellectual
impetus to regenerate the mythic fame of the Ethiopians.
The hygrometer seems to have got out of order through Arnaud’s
clumsy handling, for it yesterday morning shewed 82°,
notwithstanding the air is far drier and clearer than this height of the
hygrometer would shew. Half-past ten o’clock. We are driven on the
sand, and there we stop to wait for the other vessels. Alas! the
beautiful wind! Two o’clock. We sail on southwards. On the right two
islands. Selim Capitan is said to have the Sultan’s brother on board
his vessel; we are making every exertion, therefore, to overtake him.
The commander no sooner remarks this than he halts at the nearest
island. I repaired immediately to his vessel, and found two relations
of King Làkono on board. Half-past two o’clock. We leave the island
and the previous direction of S.S.W., and approach the right shore of
the river E.S.E. On the right a gohr, or arm of the Nile, appears to
come from S.W., and indeed from Mount Korèk, or Korèg, as the
word is also pronounced.
The two distinguished guests sit upon their stools, which they
brought with them, with their own royal hands, in naked innocence,
and smoke their pipes quite delighted. An arm of the river leaves on
the left hand the main stream to the north, and may be connected
with a gohr previously seen. A village stands above the arm of the
river on the right shore of our stream, and an island is immediately
under it before the gohr itself. The name of the village is Ullibari, and
the arm Beregènn. It is said to flow down a very great distance
before it again joins the White Stream. The latter winds here to the
south; to the right we perceive a village on the left shore, called Igàh.
On the right shore we remark several villages, and those summer
huts, or rekùbas, already mentioned. All the tokuls have higher-
pointed roofs, of a tent-like form. The country generally, in the
neighbourhood of the residence of the great Negro-King, appears
very populous. The north wind is favourable. The black princes look
at the sails, and seem to understand the thing, although the whole
must appear colossal to them in comparison with their surtuks, as we
perceive from their mutually drawing each other’s attention to them.
The king’s brother, whose name is Nikelò, has a friendly-looking
countenance; and his handsome Roman-like head, with the tolerably
long curled hair, is encircled with a strip of fur instead of the laurel.
On the right he wears a yellow copper, on the left a red copper
bracelet. The latter might have been easily taken for an alloy of gold,
although the noble man did not know the gold which was shewn him
as being of higher value, but distinguished that it was a different
metal. Silver he did not know at all. These mountains being rich in
metals, must afford very interesting results with respect to the
precious metals. The other guest is called Tombé: he is the son-in-
law of the king; stronger and taller than Nikelò, and always cheerful.
We landed soon afterwards on the right shore, as the nearest
landing-place to the capital, Belènja, on the mountain of the same
name, which was at some distance. They gave us the names of all
the mountains lying around in the horizon. The river flows here from
S.S.W., or rather the right shore has this direction. To N. by W.
Mount Nerkonji, previously mentioned as Niakanja, long seen by us;
to W. by S., Mount Konnobih; behind it, in the far distance, the
mountain-chain of Kugelù; to S.W., the rocky mountain, Korek;
behind which the before-named mountain-chain still extends, and is
lost in misty heights. These do not appear, indeed, to be of much
greater height; but on a more accurate observation, I distinguished a
thin veil, apparently sunk upon them, clearer than the western
horizon, and the blue of the mountain forms vanishing from Kugelù
to the south. As I once looked for the alpine world from Montpellier,
and found it, trusting to my good eye-sight, so now I gazed for a long
time on this region of heights; their peaks were clearly hung round
with a girdle of clouds, apparently shining with a glimmering light in
opposition to the clouds hanging before them in our neighbourhood.
When I view the long undulating chain of Kugelù, distant at all
events, taking into consideration the clear atmosphere, more than
twenty hours behind Konnobih (some twelve hours off), the highest
summit of which, west by south, without losing its horizontal ridge,
disappears first evidently in the west, and is completely veiled behind
Korèk lying nearer over south-west, I conceive that this Kugelù well
deserves the name of a chain of mountains, even if we only take the
enormous angle of the parallax at twenty hours’ distance.
These mountains lie, to all external appearance, upon the left
side of the river, and Nikelò also confirms this. On the right side of
the Nile, we see the low double rocks of Lùluli to S.S.E., and a little
further to S.E. by S., the two low mountains or hills of Liènajihn and
Konnofih lying together. To S.E. Mount Korrejih, and then lastly to E.
the mountain chain of Belenjà, rising up in several peaks to a
tolerable height, but apparently scarcely elevated more than 1000
feet above the Nile. Far towards S., over the Lobèk, I remarked from
here several other misty mountains, the names of which I would
have willingly learned, for I feared, and with justice, that they would
be invisible in advancing nearer under the prominences of these
African Alps. The royal gentlemen, however, with whom we stood on
an old river bed of six feet high, were restless, and in a great hurry to
take home their presents of a red coat and glass beads. The city is
like all other villages, but large: the king’s palace consists of several
straw tokuls lying together, encompassed as usual with a seriba; this
also Nalewadtshòn had told us. The Ethiopian palaces, therefore,
have not much to boast of; it is sufficient if the men in them be
pleased and happy, and not oppressed by the cares of government
and want of sustenance. The durra was also here, as I had remarked
in other places, either cut away, or cropped before it became ripe by
the cattle; no matter,—it sprouted a second time, and promised a
good harvest, though only as yet about seven feet high. I had seen it
thrice as high in Taka, without the people thinking even of cutting it
down or mowing it. Selim Capitan dares not trust the natives; we
went, therefore, ashore at the island close at hand, fixed stakes in
the ground, and tied the vessels fast to them.
CHAPTER II.
RECEPTION OF ENVOYS FROM KING LÀKONO. — DESCRIPTION OF THEM.
— RELIGION OF THE BARIS: THEIR ARMS AND ORNAMENTS. — PANIC
CREATED AMONG THE NATIVES AT THE EXPLOSION OF CANNON. —
LIVELY SCENE ON SHORE. — COLOURED WOMEN. — ARRIVAL OF KING
LÀKONO AND SUITE. — HIS INTERVIEW WITH THE COMMANDERS: HIS
DRESS. — THE NATIONAL MUSICAL INSTRUMENTS OF BARI. —
PRESENTS TO KING LÀKONO AND HIS DEPARTURE.
24th January.—I repaired to Selim Capitan, to be present at the

reception of the Sultan Làkono. He had sent two other envoys to
announce to us that he would come, and we were to wait a little. One
of these ambassadors was likewise a younger brother of the king’s,
a real giant both in height and breadth, and coloured red from head
to foot; there was not even a single hair on the whole body of this
Hercules that was not red. His name is Dogalè. Nikelò, already
known to us, returned also, but entirely in his natural state, not
having even one of the strings of beads presented to him round his
neck. The other envoy, a relation of the king’s, is called Betjà.
Dogalè lolls very comfortably on the carpet extended before the
cabin, supporting his long ribs on the little stool placed under him.
Favoured by nature in every respect, he has regular features, and a
good-tempered though not intelligent countenance. All the questions
asked of these high and mighty lords were answered with the
greatest readiness. Sultan, or king, is called in their language Matta,
which means generally a lord, but there is no other lord besides him.
There is no one in these countries equal to their Matta in power and
strength. The word Làkono was also pronounced Làgono, for they
frequently change k for g, as well as p for b, vice versâ, and they
vary the fall of the accent, for example, Belènja and Pelenjà. Làkono
has forty wives and several children, amongst them many grown-up
sons. They shew us the number, not by stretching out the fingers of
both hands, but by holding their clenched fist towards the
questioners, in order to express by that means the number five or
ten. Each of the brothers of the king had six wives, and this appears
to be their usual appanage; for the women are purchased, and they
are probably allowed a certain number of wives, according to their
station. A private man, such as the sheikhs or chiefs of the
community, has only three; the others have only one or two wives,
exclusive of the slaves taken in war or purchased, like the male
ones, for iron weapons. The latter, I learned on my return to the
country of the Bokos, down to which place Làkono has navigated, for
the purpose of purchasing slaves, as they told us there.
We order the drum to be beat and the men to pipe; it was with
difficulty then that they could keep their seats. They do not display
any troublesome prying spirit, or impertinent curiosity; but they see
too much at once, the impression assails them too powerfully on all
sides. I gaze on these people,—they are men like ourselves, but
they are more bashful than we,—not, however, by any means
approaching that timidity and helplessness which we have
perceived, for example, among the Keks. They eat dates, almonds,
and raisins, but do not snatch them hastily or greedily. They take the
tinned-copper can (Brik) filled with water from the wash-hand basin
(Tisht), and drink directly from the curved spout, after having lifted up
the cover and ascertained the contents; yet they have never seen
such fruits and such a water-vessel. I observe them in their mutual
confidential conversation, perhaps referring to us,—what do they
think of us? They are not astonished at the white faces; perhaps they
take them to be coloured, like their own bodies, for our crew display
all possible tints of flesh.
I am led to this latter supposition from a couple of women having
previously tried the skin on my face with their wet fingers, to see if it
were painted. The features and form of the head are quite regular
among these gigantic people, and are a striking contrast to those of
our black soldiers, with their more negro-like physiognomy, although
they are not, on the whole, ugly. I compare the true Caucasian races,
who are present, with these men, and find that the latter have a
broader forehead. The inhabitants of the kingdom of Bari might be
designated a protoplasma of the black race; for not only do they
shoot up to a height of from six and a half to seven Parisian feet,[1]
which we have seen also in the other nations, but their gigantic mass
of limbs are in the noblest proportions. The form of the face is oval,
the forehead arched, the nose straight, or curved, with rather wide
nostrils,—the alæ, however, not projecting disagreeably; the mouth
full, like that of the ancient Egyptians; the orifice of the ears large,
and the temples a little depressed. The last we do not find in the
Baràbras, and the races akin to them in Abyssinia. The men of Bari
have, besides, well-proportioned legs, and muscular arms. It is a pity
that they also extract the four lower incisors, for not only is the face
disfigured by this custom when they are laughing, but their
pronunciation also becomes indistinct. They differ, moreover, from
the nations hitherto seen by having no holes in their ears for
ornaments; and they do not tattoo themselves. Yet I remarked some
who had incisions, as imaginary ornaments, on their shoulders: such
exceptions may originate from the mothers being of another race. I
have even seen in the land of Sudàn instances of a twofold
genealogical table in the countenance, because the father and
mother were of different nations. There appears to be no national
custom with respect to wearing the hair long or short; but generally
the hair is short, and not more woolly than that of the Baràbras and
Arabs. On some there was none to be seen, and it appears either to
be removed by a knife or a cauterising process, such as the women
in the harìm use for other parts. Some wear their hair like a cock’s
comb from the forehead down to the nape of the neck; others have
scarcely the crown of the head covered: the most, however, wear
tolerably long hair, in the natural manner, which gives a significant
look to many faces. Their good-natured countenances correspond
also to their jokes among themselves, which are, perhaps,
occasionally directed against us. I have never been able to discover
in the whole journey their reverence for our race and the god-like
descent, much as this was asserted by Thibaut, who was with the
first expedition.
It does not appear,—at least, we could not make out from them,
—that they recognise one God as the essence of all that is good and
beautiful, who punishes and rewards; but neither do they worship
idols, for that, I believe, I have fully ascertained. They treat one
another with frank brotherly love, stand embracing each other, divide
the fruits given to them, assist in embarking and disembarking from
the vessels to the shore; and all this in an affectionate manner. But
yet they must have their peculiar ideas of friends and enemies, of
injuries and revenge, and be drawn to commit acts, which we can
scarcely imagine, when we see such an apparently harmless people
of nature.
Skill in arms, which is generally not to be despised, is an
accomplishment most desirable of all to a man living in a state of
nature. The first things he seeks are weapons against the wild
beasts; the fist, therefore, which Nature has given for seizing and
striking, is used for this purpose. The first weapon is the club: even
the poorest person here carries this instrument of defence. Then
man learns to know the different arms of animals,—the eye, tooth,
and the horn; therefore, we see here some of the clubs pointed at
one end, in order to cut into the enemy’s ribs in case of necessity,
directly the blow from it is parried by the shield or casque. The stone,
used by monkeys, and especially by the large cynocephali, for
defence, as I was convinced, perforce, in the country of the
Troglodytes, among the rocks of Kàffela el Lus, and which the
modern Greeks are especially expert in throwing, does not appear to
be used here as an instrument of warfare. Iron spears and darts did
not come till later, although they may have had them long previously
of wood, such as we see even now. The most useful working
implements, the knife, hatchet, &c., are next introduced; and from
these also other weapons originate; the spear, not being fixed firmly
on the shaft, became used as a two-edged knife, and the battle-axe
might have followed the hatchet.
To speak of religious principles among these people would be out
of place. Family love, the mutual living together, and the same
customs and habits may form the basis of their moral principles, and
be the first axiom of mutual forbearance. The first external sight
which might produce, if not astonishment, at least a feeling of
attachment and love, even to veneration, must be what makes a
deep impression on the soul: for example, the sun and moon; or
what gives sustenance, as the corn, for instance; or protection and
comfort, as the shady tree, &c. The moon is, probably, in higher
esteem here than the burning sun, although the latter was certainly
very agreeable to the natives when they collected themselves before
daybreak on the shore, and stood each by his little fire, kindled on
account of the cold, and fed by the reed-stalks growing between their
extended legs. I could not ascertain that there was such a veneration
for these two heavenly bodies, nevertheless I believe as much from
their expressions and narrations. Although these were only repeated
to us in a fragmentary manner, and their explanation assisted by
gestures, yet they shew that valour, like the virtus of the Romans, is
the essence of all virtues, to which all others, springing from their
pure uncorrupted nature, are subordinate.
The man wears the skin of the wild beasts he has slain, not as a
covering, but as an ornament and triumphant spoil. If it were not so
hot here, he would, like the ancient Germans, wear their scalp on his
head as a war-cap. He carries the daring weapon of the wild boar
killed by him—the tusk—upon a bracelet or frontlet. I saw also some
wearing on the arm, as an ornament, an imitation of a boar’s tusk,
made of ivory; and, as already mentioned, they have iron bulls’ horns
on their bracelets. As the heads of these two animals so often
appear as emblems in German escutcheons, so here also they are
less considered as the memorials of dangers overcome than as
signs of reverence or esteem of this valiant beast. If the rings with
horns were more general, I should believe that, as the men on the
White Stream display an uncommon love and affection for their
cattle, they carried these horns, like the ancients did the phallus, as
the attribute of fertility, unless the custom here had not the narrower
signification of an Ethiopian Apis, or Father of Cattle.
In the meanwhile about fifteen hundred negroes may have been
collected on the shore, not including those scattered on every side.
They are armed without exception, and indeed with all their
weapons,—a sight sending a thrill of horror through the veins of the
Frenchmen and Turks, which is shewn plainly enough in various
ways. They have only the consolation, and this ought to have
prevented them before from feeling any fear at a danger not really
existing—that we have, in truth, the grandees of the kingdom on
board our vessels, and that they continue to be in the best humour,
and certainly have no evil design, for Nature’s stamp imprinted on
the human countenance cannot be deceptive here. Even Suliman
Kashef has become quiet, and is perhaps turning over in his mind
how he shall act in case of a sudden attack.
All the natives have set up their “hui ih!” several times, and at
every time we stretch out our necks towards the neighbouring shore
to see what is going on. This “hui ih” always resounds à tempo, as if
at word of command; there must be therefore an analogous signal,
though our ears cannot distinguish it over the water. It is a cry of joy
intended for their Matta. We are still waiting for him, but in vain; and
in the meantime we din the ears of our guests with drumming and
fifing. They are also plied continually with sweets. Again and again
they enjoy them, and do not prefer the sugar to the fruit, but eat
slowly one after the other, as if they had been accustomed to them
from youth upwards, and laugh and jest with us. We hear from them
that the kingdom of Bari extends for four days’ journey down the
river; that the latter is called, in their language, Tubirih, and has its
origin at a long distance off, but they know not whether from the
mountains or the valley. There are said to be several other nations
on its shores,—a sign, perhaps, of the considerable distance of its
sources. These tribes have also a different language, but there is no
matta so powerful as Làkono; which saying, since we have been in
the kingdom of Bari, they are never tired of repeating. The red
Goliath lolls and stretches himself in the most comfortable manner,
and the others also change their position from time to time, and do
not remain, like pagodas or the Egyptian statues of kings, in the lazy
repose called by the Turks kew. Dogalè is pleased at being
measured; he is six feet six inches, Parisian measure, in height, with
an unusual development in breadth, powerful shoulders, and a chest
that might be used as an anvil. The two others, however, are not so
large, although far overtopping us. The large brass bells, brought by
us as presents for the cattle, pleased them very much, and they give
us plainly to understand that they can hear the sound of such a bell
at a distance.
We tell them that we want wood for our vessels; they shout to the
people, but the latter appear to pay very little attention, or do not like
to go away from our vessels, keeping a sharp look out on them,
either from the interest of novelty, or in case of any future danger to
their men; and perhaps, in this respect, they are not armed in vain.
When our guests were repeatedly requested to procure wood, they
tell us to fire among the people, even if we should kill a couple of
men. They laugh whilst saying this, and it really appears that they do
not believe in the possibility of shooting a man dead, and only wish
to frighten their people by the report. They would have us, however,
fire; and Selim Capitan therefore ordered his long gun to be handed
him, and fired in the air close to them; they were dreadfully startled
by the report, but immediately afterwards laughed, and wanted us to
repeat it. This was done. I should have liked to have made a rough
sketch of the group, but I was far too unwell, and very thankful even
that I was able to sit, and write down on the spot what I heard and
saw. A fine field was open here for a painter or sculptor; these
colossal well-proportioned figures—no fat, all muscle—so that it was
delightful to look at them, with the exception of the calves of their
legs, which were formed like lumps of flesh. No beard is developed
either in young or old, and yet it does not appear that they use a
cosmetic to extirpate it. If Selim Capitan pleased them better with his
smooth shaven chin, than the long-bearded Suliman Kashef, yet
they exhibited a kind of horror when he shewed them his hairy
breast, which perhaps appeared to them more fit for a beast than a
man.
Therefore the supposition that they extract the four lower incisors
not to be similar to beasts, has at least some apparent foundation,
although the under jaw does not project, and, consequently, the lips
are not made smaller by this extraction. Man here is always indeed
elevated far above the beast, and needs, therefore, no such
mutilation of the teeth. Our Dinkas, who themselves want the four
lower incisors, have no other reason to allege for it, than that they do
it to avoid the similarity to a beast, especially to the ass (Homàr), as
is the general answer in Sennaar, to questions on this subject. The
Turks take it for a kind of circumcision, just as we might suppose it
meant a baptismal rite, being the sign of an act of incorporation by
that means in a vast Ethiopian nation, divided now into several
tribes. As this extraction of the teeth first takes place in boyhood, it
might be considered to denote the commencement of manhood, and
capability of bearing arms; but I have never heard of the ceremonies
which would necessarily, if that were the fact, take place on the
occasion. There is also another objection to this supposition, viz.,—
that a similar operation is performed on the girls. With respect to the
eyes, they are full and well formed, like those of all the negroes of
the White River, but with a dirty yellow white, which, in the
inhabitants of the marshes, is generally suffused with blood in a
shocking manner.
At last then it was determined to fire off a cannon, to see what
impression this thunder would make upon them. They sat upright
upon their stools—off went the gun, and the princes nearly kissed
the planks on the opposite side, as if they had been felled by a blow.
They sat up, however, immediately again, laughing loudly all the
time, and wanted us to fire again: their request was complied with,
but they crouched down low again to the side, were uncommonly
pleased, and requested one more repetition of this report. Not a
negro, however, was to be seen on all the shore; and it was feared,
with justice, that the Sultan, who could not be far off, might be struck
by a panic and return: the firing was therefore discontinued.
Intelligence arrives that King Làkono will be with us about three
o’clock in the afternoon; whereupon the blacks, being suitably
clothed by us, and hung round with strings of beads, took their leave
with the red Dogalè, all except Lombè, who is one of the king’s
subjects, and a sheikh in a neighbouring district down the river. The
latter is a very sensible, quiet man, with a more intellectual
physiognomy than the others; the Turks give themselves all possible
trouble to obtain information from him about the gold. He says that
Mount Pelenja itself does not contain copper; that Làkono, however,
has a good deal of copper in his house, brought from other
mountains at a distance; that Làkono’s dress also came from this
country, which is called Berri. Moreover, he took the gold bar shewn
to him for a different species of copper; and, as he does not know
how to distinguish gold, the latter may be found blended with copper
in the royal treasury, and the mountains of Berri may be auriferous.
The population is clearly very large, but he could not give us the
number. He named several districts, part of which bore the names of
the neighbouring mountains; and it almost seems to me as if there
had been earlier independent tribes, who were first subdued by the
great Làkono. He does not appear either to be a good royalist, and
was evidently glad when the king’s sons had withdrawn; he then put
on a familiar look, which their presence had hindered him from doing
previously. There seems to be no doubt that this country is a central
point of negro cultivation, although Berri and other succeeding
countries, may be superior to the kingdom of Bari. I am curious
about the Sultan’s dress. As Berri is said to lie to the east, perhaps it
was not made there, but has come, by means of barter, from India.
Lombè also went away richly decorated (for the Turks cannot contain
themselves now at the idea of gold El Dahab), in order, probably, to
meet the Sultan, or, perhaps, to get out of his sight with the treasures
he had acquired.
I returned to my house, or rather my ship, to take my usual nap at
noon; but the right shore being close at hand, separated only from
our island by a narrow canal, obliges me almost immediately to rise
again. The multifarious and manifold adorned and unadorned people
afford a pleasing sight as I look at them from my windows. I view, as
if from a box at the opera, the stage of black life on the whole length
of the shore. Two women appear among the others; their anteriora
and posteriora covered with two semicircular leathern aprons,
tanned red, according to the usual custom here. One is coloured red
from head to foot; the other has only her still youthful firm breasts
and her head of that hue. She looks, therefore, as if she wore a
black narrow jacket under the breasts, and breeches of the same
colour under the red apron. She may have been surprised in her
toilette by the news of our arrival, and have run off to the shore just
as she was; the whole lower part of the body from the breasts
downwards was tattooed in the manner customary on the White
River.
Buying and bartering are going on; cheating and robbing—the
latter, however, only on our side. My servants are on the shore, and
making gestures and signs with their fingers, to know what they shall
purchase for me of the national wares. I do not bargain in person, for
I am afraid of the sun. The people, in spite of their good humour, are,
as I have convinced myself here, surprisingly mistrustful. Goods and
the price of their purchase, are exchanging hands simultaneously. As
the people transact but little business among themselves, it is very
natural and right that they should exercise precaution in their
transactions with a foreign people like ourselves; and it is certain that
we have given the first cause for suspicion.
As I said before, the hair is generally kept short; they decorate it,
for want of something better, with a cock’s or guinea-fowl’s feather. A
more elaborate coiffure is of black ostrich-feathers, placed together
in a globular form, and the lower ends plaited, in a little basket, the
thickness of a fist. This tress-work, holding the feathers, stands on
the centre of the head, fastened by two strings round the neck, and
appears pretty generally worn. Prince Dogalè also wore one, but of
somewhat larger size. Some have their hair, which is tolerably long,
smeared so thick with ochre, that merely little tufts are to be seen
hanging about. Moreover, leather caps, fitting exactly to the skull,
were worn with long or short tassels, hardly to be distinguished from
the coloured hair. This antique kind of covering for the head, from
which the Greeks and Romans formed their helmets, is similar, as
regards form, to the modern fesi or tarbush and takië (the cotton
under-cap worn under the Turkish knitting-worsted cap). They
appear here to serve principally as a protection against the sun. It
was only with difficulty that I could procure two different specimens,

Financial Accounting The Impact On Decision Makers 10th Edition Porter Test Bank

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Financial Accounting The Impact On Decision Makers 10th Edition Porter Test Bank

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Financial Accounting The Impact on

Decision Makers 10th Edition Porter

Financial Accounting The Impact on Decision Makers 10th

Financial Accounting The Impact on Decision Makers 9th

Financial Accounting The Impact on Decision Makers 8th

Financial Accounting The Impact on Decision Makers 8th

Using Financial Accounting Information The Alternative

Using Financial Accounting Information The Alternative

Financial Management for Decision Makers Canadian 2nd

Financial Management for Decision Makers Canadian 2nd

1. Discount on Bonds Payable is classified as a current liability.

3. Bonds are generally issued in denominations of $1,000.

5. Bonds are typically issued in denominations of $10,000.

7. Debenture bonds are backed by specific collateral of the issuing company.

8. Convertible bonds normally sell at a higher price than non-convertible bonds.

35. Long-term liabilities are a component of the “capital structure” of a company.

40. Most long-term liabilities are related to a firm’s investing activities.

51. A convertible bond is one where

53. Which of the following statements regarding bonds payable is true?

55. Convertible bonds are attractive to investors because

56. Which of the following statements regarding serial bonds is true?

57. Bonds are a popular source of financing because

63. Which of the following statements is correct?

64. The bond issue price is determined by calculating the

72. If bonds are issued at 101.25, this means that

79. Bonds are sold at a premium if the

101. Which of the following statements regarding amortization is true?

102. Amortization of bond discount results in a(n)

103. Amortization of bond premium results in a(n)

109. Which of the following statements regarding leases is false?

125. [APPENDIX] Deferred income taxes arise because

a. Bonds issued this year (due in 10 years).

165. An alternate term for a timing difference is a _________________________.

168. An obligation that will not be satisfied within one year.

Subjective Short Answer

Long-term debt $2,651 $3,009

180. Review the consolidated balance sheets of Sewickley Company.

2016 – $8,336 (in millions)

(2) a decrease of 3.75 or 3.8% (Rounded)

Balance Sheet Income Statement

Balance Sheet Income Statement

Balance Sheet Income Statement

Balance Sheet Income Statement

2. $120,000 × 0.614 = $73,680 Table 9-2 n = 10, i = 5%

3,600 × 7.722 = 27,799 Table 9-4 n = 10, i = 5%

Issue price $101,479

($19,866,397 × .081 = $1,609,178 – $1,600,000) = $9,178

($19,866,397 + $9,178) × .081 = $1,609,922 – $1,600,000 = $9,922

($35,216,127 × .0685 = $2,412,305 – $2,450,000) = $37,695

($35,216,127 – $37,695) × .0685 = $2,409,723 – $2,450,000 = $40,277

Cash Interest Expense Amortized Present Value

2. Amount amortized is $1,488.80.

3. Amount amortized is $1,533.46.

Balance Sheet Income Statement

Fiscal year ending March 31,

193. Review the information for Antietam Corporation.

Balance Sheet Income Statement

Balance Sheet Income Statement

Balance Sheet Income Statement

Balance Sheet Income Statement

195. Review the information for Antietam Corporation.

Balance Sheet Income Statement

Depreciation Expense: Leased Equipment