M5 - M3 - Long-Term Liabilities

Question 1

_________ are probable sacrifices of economic benefits associated with present obligations that are not payable within the current operating cycle or reported year, whichever is greater.

Answer 1

Long-term liabilities

Question 2

__________ (contractual rights to pay money at a fixed or determinable rate) must be recorded at present value at the date of issuance.

Answer 2

Notes payable

Question 3

Notes payable (contractual rights to pay money at a fixed or determinable rate) must be recorded at ________

Answer 3

present value at the date of issuance

Question 4

If a note is noninterest bearing or the interest rate is unreasonable (usually below market), the value of the note must be determined by ___________ and by using the ____________

Answer 4

mputing the market rate of the note and effective interest method.

Question 5

Creditors use ________in lending agreements to protect their interest by limiting or prohibiting the actions of debtors that might negatively affect the positions of the creditor.

Answer 5

debt covenants

Question 6

When debt covenants are violated, the debtor is in _________and the creditor can ________. Most of the time, concessions are negotiated and real default, as opposed to technical default, is avoided.

Answer 6

“technical default”; demand repayment