Exam 14: Long-Term Liabilities

On April 1, 2015, Ardoos Products borrowed $100,000 on a 15%, 10-year note with annual installment payments of $10,000 plus interest due on April 1 of each succeeding year. Provide the journal entry for the first installment payment made on April 1, 2016.

If a company is financing more assets with debt than with equity, then the:

Which of the following statements is true of the debt to equity ratio?

On November 1, 2014, Archangel Services issued $300,000 of 8-year bonds with a stated rate of 9% at par. The bonds make semiannual payments on April 30 and October 31. At December 31, 2014, Archangel made an adjusting entry to accrue interest at year-end. How much Interest Expense will be recorded at December 31, 2014?

The interest rate that determines the amount of cash interest the borrower pays and the investor receives each year is called:

If a bond's stated interest rate is lower than the market rate, which of the following is true?

On December 1, 2013, Fine Products borrowed $80,000 on a 4%, 8-year note with annual installment payments of $10,000 plus interest due on December 1 of each succeeding year. On December 1, the principal amount was initially recorded as long-term notes payable. What amount of the note payable will be shown as current portion of Long-Term Note Payable on the balance sheet as of December 31, 2013?

If a bond's stated interest rate is the same as the market rate, which of the following is true?

On January 1, 2015, Bratios Company purchases equipment and signs a 6-year mortgage note for $80,000 at 15%. The note will be paid in equal annual installments of $21,139, beginning January 1, 2016. Calculate the portion of interest expense paid on the third installment.

The balance in the Bonds Payable account is a credit of $65,500. The balance in the Discount on Bonds Payable account is a debit of $2,150. How much is the bond's carrying amount?

Earning more income on borrowed money than the related interest expense is called:

A bond is sold for an amount equal to its face value. Which of the following statements is true?

Blanding Company issues $1,000,000 of 8%, 10-year bonds at 98 on February 28, 2014. The bonds pay interest on February 28 and August 31. Assume that Blanding uses the straight-line method for amortization. The journal entry to record the first interest payment on August 31, 2014 would be a:

When a bond is sold, the selling price is generally equivalent to the present value of the bond payments.

On January 1, 2015, Finch Company issued $72,000 of 5-year bonds with a stated rate of 8%. The market rate at time of issue was 12%, so the bonds were discounted and sold for $61,401. Finch uses the effective-interest method of amortization for bond discount. Semiannual interest payments are made on June 30 and December 31 of each year. Which of the following is the correct journal entry to record the first interest payment? (Round all amounts to the nearest whole dollar.)

On January 1, 2013, Davie Services issued $20,000 of 8% bonds that mature in five years. They were sold at a premium, for a total of $20,750. Provide the journal entry to issue bonds.

The debt to equity ratio of four companies is given below. Which of the following companies has less debt than equity in its capital structure?

If a bond is issued at a premium, it will sell for more than face value.

A bond once sold to a bondholder, can be resold to another investor on the bonds market.

Trek Company signed a 9%, 10-year note for $150,000. The company paid $1,900 as the installment for the first month. What portion of the first monthly payment is interest expense?