A) Require the issuer to set aside assets to retire the bonds at maturity. B) Require equal payments of both principal and interest over the life of the bond issue. C) Decline in value over time. D) Are registered bonds. E) Are bearer bonds. A) Require the issuer to set aside assets to retire the bonds at maturity. B) Require equal payments of both principal and interest over the life of the bond issue. C) Decline in value over time. D) Are registered bonds. E) Are bearer bonds.

Exam 14: Long-Term Liabilities

A company borrowed $50,000 cash from the bank and signed a 6-year note at 7%.The present value of an annuity for 6 years at 7% is 4.7665.The annual annuity payments equal:

(Multiple Choice)

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Question 41

On January 1,Year 1,Merrill Company borrowed $100,000 on a 10-year,7% installment note payable.The terms of the note require Merrill to pay 10 equal payments of $14,238 each December 31 for 10 years.The required general journal entry to record the first payment on the note on December 31,Year 1 is:

(Multiple Choice)

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Question 42

Match each of the following terms with the appropriate definitions.

Bonds that require the issuer to create a fund of assets at specified amounts and dates to repay the bonds at maturity.

Contract rate

The ratio of total liabilities to total stockholders' equity.

Debt-to-equity ratio

A series of equal payments at equal intervals.

Bond indenture

Correct Answer:

Verified

Bonds that require the issuer to create a fund of assets at specified amounts and dates to repay the bonds at maturity.

The ratio of total liabilities to total stockholders' equity.

A series of equal payments at equal intervals.

Bonds that have specific assets of the issuer pledged as collateral.

The difference between the par value of a bond and its higher issue price or carrying value.

Bonds that give the issuer an option of retiring them at a stated amount prior to maturity.

The interest rate specified in the bond indenture.

A written promise to pay an amount identified as the par value along with interest at a stated rate.

The net amount at which bonds are reported on the balance sheet.

The contract between the bond issuer and the bondholder(s); it identifies the rights and obligations of the parties.

(Matching)

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Question 43

A company issued 5-year,7% bonds with a par value of $100,000.The company received $97,947 for the bonds.Using the straight-line method,the amount of interest expense for the first semiannual interest period is:

(Multiple Choice)

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Question 44

Amortizing a bond discount:

(Multiple Choice)

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Question 45

_______________ bonds are bonds that mature at more than one date,often in a series,and thus are usually repaid over a number of periods.

(Short Answer)

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Question 46

Tart Company's most recent balance sheet reports total assets of $42,000,000,total liabilities of $16,000,000 and stockholders' equity of $26,000,000.Management is considering using $3,000,000 of excess cash to prepay $3,000,000 of outstanding bonds.What effect,if any,would prepaying the bonds have on the company's debt-to-equity ratio?

(Multiple Choice)

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Question 47

____________________ leases are long-term or noncancelable leases by which the lessor transfers substantially all risks and rewards of ownership to the lessee.

(Short Answer)

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Question 48

A corporation borrowed $125,000 cash by signing a 5-year,9% installment note requiring equal annual payments each December 31 of $32,136.What journal entry would the issuer record for the first payment?

(Multiple Choice)

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Question 49

Long-term bonds have relatively higher interest rates because they carry higher risk due to the longer time period.

(True/False)

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Question 50

On October 1 of the current year a corporation sold,at par plus accrued interest,$1,000,000 of its 12% bonds,which were dated July 1 of this year.What amount of bond interest expense should the company report on its current year income statement?

(Short Answer)

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Question 51

Return on equity _______________ when the expected rate of return from the acquired assets is greater than the rate of interest on the bonds used to finance the asset acquisition.

(Short Answer)

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Question 52

Bonds that have interest coupons attached to their certificates,which the bondholders detach during each interest period and present to a bank for collection,are called:

(Multiple Choice)

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Question 53

A company's debt-to-equity ratio was 1.0 at the end of Year 1.By the end of Year 2,it had increased to 1.7.Since the ratio increased from Year 1 to Year 2,the degree of risk in the firm's financing structure decreased during Year 2.

(True/False)

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Question 54

All of the following statements regarding leases are true except:

(Multiple Choice)

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Question 55

_________________________ leases are short-term or cancelable leases in which the lessor retains the risks and rewards of ownership.

(Short Answer)

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Question 56

Sinking fund bonds:

(Multiple Choice)

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Question 57

An installment note is an obligation of the issuing company that requires a series of periodic payments to the lender.

(True/False)

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Question 58

The effective interest method yields increasing amounts of bond interest expense and decreasing amounts of premium amortization over the bond's life for bonds issued at a premium.

(True/False)

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Question 59

A company issues bonds with a par value of $800,000 on their issue date.The bonds mature in 5 years and pay 6% annual interest in two semiannual payments.On the issue date,the market rate of interest is 8%.Compute the price of the bonds on their issue date.The following information is taken from present value tables: Present value of an annuity for 10 periods at 3% ...................8.5302 Present value of an annuity for 10 periods at 4% ...................8.1109 Present value of 1 due in 10 periods at 3%................... 0.7441 Present value of 1 due in 10 periods at 4% ...................0.6756

(Essay)

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Question 60

Showing 41 - 60 of 199

Exam 14: Long-Term Liabilities

A company borrowed $50,000 cash from the bank and signed a 6-year note at 7%.The present value of an annuity for 6 years at 7% is 4.7665.The annual annuity payments equal:

On January 1,Year 1,Merrill Company borrowed $100,000 on a 10-year,7% installment note payable.The terms of the note require Merrill to pay 10 equal payments of $14,238 each December 31 for 10 years.The required general journal entry to record the first payment on the note on December 31,Year 1 is:

A company issued 5-year,7% bonds with a par value of $100,000.The company received $97,947 for the bonds.Using the straight-line method,the amount of interest expense for the first semiannual interest period is:

Amortizing a bond discount:

_______________ bonds are bonds that mature at more than one date,often in a series,and thus are usually repaid over a number of periods.

____________________ leases are long-term or noncancelable leases by which the lessor transfers substantially all risks and rewards of ownership to the lessee.

A corporation borrowed $125,000 cash by signing a 5-year,9% installment note requiring equal annual payments each December 31 of $32,136.What journal entry would the issuer record for the first payment?

Long-term bonds have relatively higher interest rates because they carry higher risk due to the longer time period.

On October 1 of the current year a corporation sold,at par plus accrued interest,$1,000,000 of its 12% bonds,which were dated July 1 of this year.What amount of bond interest expense should the company report on its current year income statement?

Return on equity _______________ when the expected rate of return from the acquired assets is greater than the rate of interest on the bonds used to finance the asset acquisition.

Bonds that have interest coupons attached to their certificates,which the bondholders detach during each interest period and present to a bank for collection,are called:

A company's debt-to-equity ratio was 1.0 at the end of Year 1.By the end of Year 2,it had increased to 1.7.Since the ratio increased from Year 1 to Year 2,the degree of risk in the firm's financing structure decreased during Year 2.

All of the following statements regarding leases are true except:

_________________________ leases are short-term or cancelable leases in which the lessor retains the risks and rewards of ownership.

Sinking fund bonds:

An installment note is an obligation of the issuing company that requires a series of periodic payments to the lender.

The effective interest method yields increasing amounts of bond interest expense and decreasing amounts of premium amortization over the bond's life for bonds issued at a premium.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, natural Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Time Value of Money B

Activity-Based Costing C

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