In Return for Promising to Make Future Payments, a Firm

question 66

Multiple Choice

In return for promising to make future payments, a firm receives cash or other assets with a measurable cash-equivalent value.The firm records a long-term liability for that amount and the book value of that borrowing at any time equals the

• A)future value of all the then-remaining promised payments using the historical market interest rate applicable at the time the firm originally incurred the liability.
• B)current value of all the then-remaining promised payments using the historical market interest rate applicable at the time the firm originally incurred the liability.
• C)present value of all the then-remaining promised payments using the market interest rate applicable at the current time.
• D)present value of all the then-remaining promised payments using the historical market interest rate applicable at the time the firm originally incurred the liability.
• E)future value of all the then-remaining promised payments using the using the market interest rate applicable at the current time.

---

Definitions:

Internal Revenue Service

The U.S. government agency responsible for tax collection and tax law enforcement.

Enabling Legislation

A statute enacted by Congress that authorizes the creation of an administrative agency and specifies the name, composition, purpose, and powers of the agency.

Administrative Agencies

Governmental bodies having jurisdiction to implement and enforce specific legislation.

Executive Branch

The branch of government responsible for implementing and enforcing laws, typically headed by the president or prime minister.