Question 1

A contract pledging title to assets as security for a note or bond is known as a(an):

Accepted Answer

A)  Mortgage. 
B)  Lease. 
C)  Sinking fund. 
D)  Indenture. 
E)  Equity. 
A)  Mortgage. 
B)  Lease. 
C)  Sinking fund. 
D)  Indenture. 
E)  Equity.

Question 2

On January 1, Year 1 Cleaver Company borrowed $85,000 cash by signing a 7% installment note that is to be repaid with 4 annual year-end payments of $25,094, the first of which is due on December 31, Year 1.
(a) Prepare the company's journal entry to record the note's issuance.
(b) Prepare the journal entries to record the first installment payment.

Accepted Answer

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Question 3

A company issued 9%, 10-year bonds with a par value of $100,000. Interest is paid semiannually. The market interest rate on the issue date was 10%, and the issuer received $95,016 cash for the bonds. On the first semiannual interest date, what amount of cash should be paid to the holders of these bonds for interest?

Accepted Answer

$100,000 *

Question 4

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

Accepted Answer

The answer of ___________leases are short-term or cancelable leases in...

Question 5

Sharma Company's balance sheet reflects total assets of $250,000 and total liabilities of $150,000. Calculate the company's debt-to-equity ratio.

Accepted Answer

$150,000/$

Question 6

The party that has the right to exercise a call option on callable bonds is:

Accepted Answer

A)  The bondholder. 
B)  The bond indenture. 
C)  The bond trustee. 
D)  The bond issuer. 
E)  The bond underwriter. 
A)  The bondholder. 
B)  The bond indenture. 
C)  The bond trustee. 
D)  The bond issuer. 
E)  The bond underwriter.

Question 7

Return on equity increases when the expected rate of return from the acquired assets is higher than the interest rate on the debt issued to finance the acquired assets.

Accepted Answer

A) True 
 B)False

Question 8

Bonds that mature at more than one date with the result that the principal amount is repaid over a number of periods are known as:

Accepted Answer

A)  Registered bonds. 
B)  Serial bonds. 
C)  Bearer bonds. 
D)  Callable bonds. 
E)  Sinking fund bonds. 
A)  Registered bonds. 
B)  Serial bonds. 
C)  Bearer bonds. 
D)  Callable bonds. 
E)  Sinking fund bonds.

Question 9

The carrying (book) value of a bond payable is the par value of the bonds plus any discount or minus any premium.

Accepted Answer

A) True 
 B)False

Question 10

A company issues 9%, 5-year bonds with a par value of $100,000 on January 1 at a price of $106,160, when the market rate of interest was 8%. The bonds pay interest semiannually. The amount of each semiannual interest payment is:

Accepted Answer

A)  $4,000. 
B)  $4,500. 
C)  $9,000. 
D)  $8,000. 
E)  $0. 
A)  $4,000. 
B)  $4,500. 
C)  $9,000. 
D)  $8,000. 
E)  $0.

Question 11

All of the following statements regarding leases are true except:

Accepted Answer

A)  For a capital lease the lessee records the leased item as its own asset. 
B)  For an operating lease the lessee reports the lease payments as rental expense. 
C)  For a capital lease the lessee depreciates the asset acquired under the lease, but for an operating lease the lessee does not. 
D)  Capital leases create a long-term liability on the balance sheet, but operating leases do not. 
E)  Capital leases do not transfer ownership of the asset under the lease, but operating leases often do. 
A)  For a capital lease the lessee records the leased item as its own asset. 
B)  For an operating lease the lessee reports the lease payments as rental expense. 
C)  For a capital lease the lessee depreciates the asset acquired under the lease, but for an operating lease the lessee does not. 
D)  Capital leases create a long-term liability on the balance sheet, but operating leases do not. 
E)  Capital leases do not transfer ownership of the asset under the lease, but operating leases often do.

Question 12

_________bonds reduce a bondholder's risk by requiring the issuer to create a fund of assets set aside as specified amounts and dates to repay the bonds.

Accepted Answer

The answer of _________bonds reduce a bondholder's risk by requiring...

Question 13

A company must repay the bank a single payment of $20,000 cash in 3 years for a loan it entered into. The loan is at 8% interest compounded annually. The present value factor for 3 years at 8% is 0.7938. The present value of the loan (rounded) is:

Accepted Answer

A)  $25,195. 
B)  $51,542. 
C)  $20,000. 
D)  $7,761. 
E)  $15,876. 
A)  $25,195. 
B)  $51,542. 
C)  $20,000. 
D)  $7,761. 
E)  $15,876.

Question 14

On January 1, a company issues bonds dated January 1 with a par value of $200,000. The bonds mature in 3 years. The contract rate is 4%, and interest is paid semiannually on June 30 and December 31. The market rate is 5%. Using the present value factors below, the issue (selling) price of the bonds is: n= i=
Present Value of an
Annuity Present value of $1
3 4)0 % 2.7751 0.8890
6 2)0 % 5.6014 0.8880
3 5)0 % 2.7232 0.8638
6 2)5 % 5.5081 0.8623

Accepted Answer

A)  $172,460. 
B)  $194,492. 
C)  $22,032. 
D)  $205,607. 
E)  $200,000. 
A)  $172,460. 
B)  $194,492. 
C)  $22,032. 
D)  $205,607. 
E)  $200,000.

A contract pledging title to assets as security for a note or bond is known as a(an):

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

Sharma Company's balance sheet reflects total assets of $250,000 and total liabilities of $150,000. Calculate the company's debt-to-equity ratio.

The party that has the right to exercise a call option on callable bonds is:

Return on equity increases when the expected rate of return from the acquired assets is higher than the interest rate on the debt issued to finance the acquired assets.

Bonds that mature at more than one date with the result that the principal amount is repaid over a number of periods are known as:

The carrying (book) value of a bond payable is the par value of the bonds plus any discount or minus any premium.

A company issues 9%, 5-year bonds with a par value of $100,000 on January 1 at a price of $106,160, when the market rate of interest was 8%. The bonds pay interest semiannually. The amount of each semiannual interest payment is:

All of the following statements regarding leases are true except:

_________bonds reduce a bondholder's risk by requiring the issuer to create a fund of assets set aside as specified amounts and dates to repay the bonds.

A company must repay the bank a single payment of $20,000 cash in 3 years for a loan it entered into. The loan is at 8% interest compounded annually. The present value factor for 3 years at 8% is 0.7938. The present value of the loan (rounded) is:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets Natural Resoures and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Investments

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

Present and Future Values in Accounting

Activity-Based Costing

Filters

Exam 14: Long-Term Liabilities

A contract pledging title to assets as security for a note or bond is known as a(an):

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

Sharma Company's balance sheet reflects total assets of $250,000 and total liabilities of $150,000. Calculate the company's debt-to-equity ratio.

The party that has the right to exercise a call option on callable bonds is:

Return on equity increases when the expected rate of return from the acquired assets is higher than the interest rate on the debt issued to finance the acquired assets.

Bonds that mature at more than one date with the result that the principal amount is repaid over a number of periods are known as:

The carrying (book) value of a bond payable is the par value of the bonds plus any discount or minus any premium.

A company issues 9%, 5-year bonds with a par value of $100,000 on January 1 at a price of $106,160, when the market rate of interest was 8%. The bonds pay interest semiannually. The amount of each semiannual interest payment is:

All of the following statements regarding leases are true except:

_________bonds reduce a bondholder's risk by requiring the issuer to create a fund of assets set aside as specified amounts and dates to repay the bonds.

A company must repay the bank a single payment of $20,000 cash in 3 years for a loan it entered into. The loan is at 8% interest compounded annually. The present value factor for 3 years at 8% is 0.7938. The present value of the loan (rounded) is:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets Natural Resoures and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Investments

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

Present and Future Values in Accounting

Activity-Based Costing

Filters