Exam 9: Long-Term Liabilities

Match these terms with their definitions. a.Bond i.Lessor b.Contract, coupon, stated rate j.Leverage c.Discount k.Long-term debt d.Effective interest rate method l.Market rate, yield e.Face value, par value, principal m.Maturity f.Interest amortization n.Premium g.Lease o.Straight-line method h.Lessee -Term referring to the date that a bond's principal has to be repaid.

The debt-to-equity ratio is defined as total liabilities divided by total stockholders' equity.

A company issued $1,000,000 of 10% notes that resulted in interest expense of $100,000 per year. What is the company's net cash outflow if the effective tax rate is 40%?

The contract rate is also called the coupon or stated rate.

A bond's ____________________ is computed by taking the bond's face value, then either subtracting any unamortized discount or adding any unamortized premium.

A twenty-year lease obligation would appear on the balance sheet as

A capital leased asset would appear on the balance sheet as

Match these terms with their definitions. a. Callable bonds f. Mortgage bonds b. Capital lease g. Notes payable c. Convertible bonds h. Operating lease d. Debenture bonds i. Secured bonds -A non-cancelable agreement that is in substance a purchase of the leased asset.

When a bond is issued at a discount, the amortization of the bond interest increases each year using the straight line method.

-Refer to Korn Business Solutions. What are the two types of leases that a company can have? Describe each briefly.

When bonds are sold for less than the par amount, this means that the

On January 1, 2013, Kroger Corporation issued $10,000,000 of 8% bonds, due in five years with interest payable annually on December 31. The market yield rate is 9 percent. Calculate the present value (market value)of the bonds.

In periods of inflation, debt financing is preferable to equity financing because the company is able to repay the lender in dollars that have declined in purchasing power.

Which of the following lease conditions would result in a capital lease to the lessee?

Refer to Kaleidoscope Paint. What is the carrying value of the bonds on the maturity date?

On January 1, 2013, Krammer Company issued five-year, $50,000,000, 10% percent notes at 103. The premium was $1,500,000. Interest is paid semiannually on June 30 and December 31. Required:

Although operating leases are not recorded on the balance sheet by the lessee, they are disclosed in the ____________________.

Refer to Kalahari Limited. What is the carrying value of the bonds at the end of ten years before the final maturity payment is made?

Callable bonds may be retired by the issuer before their specified due date.

A bond issue price is the present value of the cash flows that the bond will produce.