Exam 10: Financing: Long-Term Liabilities

On March 1, 2012, Enid Corporation borrowed $800,000 on a 30-year mortgage to purchase land and a building. The land and building are pledged as collateral on the mortgage, which has an interest rate of 6 percent compounded monthly. The payments of $4,800 are made at the end of each month, beginning on March 31, 2012. Prepare a mortgage amortization schedule for the first year of the mortgage. (Round amounts to the nearest dollar.)

On April 1, 2011, Jenkins Corporation issued $500,000 of 10 percent, 5-year bonds at a yield of 12 percent compounded semiannually. Interest is payable on April 1 and October 1 of each year. The corporation is a calendar-year corporation. Bond premiums and discounts are amortized on interest-paying dates and at year-end. On October 1, 2012, Jenkins reacquired the bonds for retirement when they were selling at 99 on the open market (assume no call premium). a. $\quad$ April 1, 2011 b. $\quad$ October 1,2011 c. $\quad$ December 31,2011 d. $\quad$ April 1, 2012 e. $\quad$ October 1,2012

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. - For a 10-year bond paying semiannual interest, how many compounding periods are there over the life of the bond?

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. -Generally accepted accounting principles specify that a long-term noncancelable lease for a period equal to the life of the equipment is

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. -The effective interest rate on bonds is higher than the stated rate when bonds sell

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. -IWhich of the following ratios is used to evaluate a company's ability to meet its periodic interest payments?

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. -Flute Corporation issued $200,000, 10-year, 9 percent bonds at a time when the market rate of interest was 7 percent. These bonds will be issued for

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. -A $100,000 bond with a carrying value of $104,000 was called at 107 and retired. In recording the retirement, the issuing company should

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. -The total interest expense on a $600,000, 8 percent, 10-year bond issued at 106 would be

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. -Riverview County issued a $500,000, 10 percent, 10-year bond on January 1, 2012, for 113.6 when the effective interest rate was 8 percent. Interest is payable on June 30 and December 31. Riverview uses the effective-interest method to amortize all premiums and discounts. How much premium or discount should be amortized on June 30, 2012?

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. -Debentures are

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. -On January 1, 2012, Cabuki Corporation issued $500,000 of 10 percent, 10-year bonds at 88.5. Interest is payable on December 31. If the market rate of interest was 12 percent at the time the bonds were issued, how much cash was paid for interest in 2012?

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. -Smith Corporation issued a $100,000, 10-year, 10 percent bond on January 1, 2010, for $112,000. Smith uses the straight-line method of amortization. On April 1, 2013, Smith reacquired the bonds for retirement when they were selling at 102 on the open market. Assuming no call premiums, how much gain or loss should Smith recognize on the retirement of the bonds?

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. - The amount of a company's future operating lease payments must be disclosed in the

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. - You are purchasing a home. You know the monthly mortgage payment amount that you can afford, and you want to calculate the corresponding mortgage total amount. The technique you will use is the

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. -On January 1, 2012, Lawton Corporation issued 10-year, $1,000,000 bonds with a stated interest rate of 10%. The effective interest rate is 10% and interest is paid semi-annually on January 1 and July 1. The journal entry to record the first semi-annual interest payment on July 1, 2012 would include a

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. -Bonds that have a pledge of company assets are called

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. -Hakeem, Inc. reported the following data in its 2011 financial statements: total liabilities $38,400; total stockholders' equity, $19,200; net income, $4,320; income tax expense, $2,880; and interest expense, $2,400. The debt-to-equity ratio is

Use the present value and the future value tables or a financial calculator to calculate answers to the following problems.

Use the present value and future value tables included in Appendix 8 and on the textbook companion website. -Assuming the straight-line method of amortization is used, the average yearly interest expense on a $450,000, 11 percent, 20-year bond issued at 106 would be