Question

1. The IFRS definitions of current and​ long-term liabilities are much different than the U.S. GAAP definitions. T/F

2. The face value of a bond is $75,000​, its stated rate is 77​%, and the term of the bond is five years. The bond pays interest semiannually. At the time of​ issue, the market rate is 88​%. Determine the present value of the bonds at issuance.

Present value of​ $1:

	​4%	​5%	​6%	​7%	​8%
5	0.822	0.784	0.747	0.713	0.681
6	0.790	0.746	0.705	0.666	0.630
7	0.760	0.711	0.665	0.623	0.583
8	0.731	0.677	0.627	0.582	0.540
9	0.703	0.645	0.592	0.544	0.500
10	0.676	0.614	0.558	0.508	0.463

Present value of ordinary annuity of​ $1:

	​4%	​5%	​6%	​7%	​8%
5	4.452	4.329	4.212	4.100	3.993
6	5.242	5.076	4.917	4.767	4.623
7	6.002	5.786	5.582	5.389	5.206
8	6.733	6.463	6.210	5.971	5.747
9	7.435	7.108	6.802	6.515	6.247
10	8.111	7.722	7.360	7.024	6.710

A 71,991

B 75,000

C 53,709

D 21,291

3. Arena, Inc. uses the direct method to prepare its statement of cash flows. Use the following information reported for 2019 to compute the amount of cash paid for merchandise inventory.

Cost of Goods​ Sold, $135,000

Merchandise​ Inventory, beginning​ balance, $25,000

Merchandise​ Inventory, ending​ balance, $67,000

Accounts​ Payable, beginning​ balance, $7,800

Accounts​ Payable, ending​ balance, $ 5,700

A 177000

B179100

C174900

D93000

Answer 1

1. The IFRS definitions of current and​ long-term liabilities are much different than the U.S. GAAP definitions: True

The classification of debts under GAAP is split between current liabilities, where a company expects to settle a debt within 12 months, and noncurrent liabilities, which are debts that will not be repaid within 12 months. With IFRS, there is no differentiation made between the classification of liabilities, as all debts are considered noncurrent on the balance sheet.

2. Present value of bonds at Issuance = (75000*0.035*8.111) + (75000*0.676) = A   71,991 Answer

3) Purchases = 135000 + 67000 - 25000 = $177,000

Amount of cash paid for merchandise inventory = 177000 +7800 - 5700 = B. $179,100 answer