Question 1

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

Accepted Answer

The answer of The debt-to-equity ratio is defined as total...

Question 2

A long-term leased asset would appear on the balance sheet as

Accepted Answer

A) current liability. 
B) long-term lease liability. 
C) current asset. 
D) prepaid lease expense.

Question 3

Match these terms with their definitions.
-Under this method, equal amounts of premium or discount are amortized to interest expense each period.

Accepted Answer

A) Bond 
B) Contract, coupon, stated rate 
C) Discount 
D) Effective interest rate method 
E) Face value, par value, principal
F)Interest amortization
G)Lease
H)Lessee
I)Lessor
J)Leverage
K)Long-term debt
L)Market rate, yield
M)Maturity
N)Premium
O)Straight-line method

Question 4

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

Accepted Answer

A) maturity value will be less than the par amount. 
B) maturity value will be greater than the par amount. 
C) bonds are sold at a premium. 
D) stated rate of interest is less than the yield rate of interest.

Question 5

Knox Jewelers issued $1,000,000 of 8% interest bearing debt at the beginning of the year. The company reported net income before interest and taxes of $2,000,000 for the current year. Assuming a 40% tax rate, what is the company's net income for the year?
Korn Business Solutions
The following footnote accompanied the company's 2019 financial statements:
The Corporation leases office, warehouse and showroom space, retail stores, and office equipment under short-term leases, which expire no later than 2032. The Corporation normalizes fixed escalations in rental expense under its short-term leases. Minimum annual rentals under non-cancelable short-term leases, excluding operating cost escalations and contingent rental amounts based upon retail sales, are payable as follows:  Rent expense was $12,551,000; $8,911,000; and $5,768,000 for the years ended March 31, 2019, 2018, and 2017, respectively.

Accepted Answer

The answer of Knox Jewelers issued $1,000,000 of 8% interest...

Question 6

For a long-term lease, the lessee must record both an asset and a liability. The amount of the asset is subsequently reduced by the process of ____________________.

Accepted Answer

The answer of For a long-term lease, the lessee must...

Question 7

On the issuance date, the Bonds Payable account has a balance of $55,000,000 and Premium on Bonds Payable has a balance of $5,000,000. These bonds issued at

Accepted Answer

A) $50,000,000. 
B) $55,000,000. 
C) $60,000,000. 
D) a price that cannot be determined without knowing the stated and market interest rates.

Question 8

The result of using the effective interest method of amortization for bond discounts is that the
a.interest expense for each amortization period is constant.
b.effective interest rate for each amortization period is constant.
c.amount of interest expense decreases each period.
d.cash interest payment is greater than the interest expense.

Accepted Answer

The answer of The result of using the effective interest...

Question 9

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

Accepted Answer

The answer of A bond's ____________________ is computed by taking...

Question 10

Kauffman Tire Repair leased a machine that will enable it to repair tires found on monster vehicles. The annual payments are $9,000 and the life of the lease is 7 years. It is estimated that the useful life of the machine is 8 years. How would the company record the acquisition of the machine?

Accepted Answer

A) The machine would be recorded as an asset with a cost of $63,000. 
B) The company would not record the machine as an asset but would record rent expense of $6,000 per year. 
C) The machine would be recorded as an asset, at the present value of the annual cash payments, $9,000 for 7 years. 
D) The machine would be recorded as an asset, at the present value of the annual cash payments, $6,000 for 8 years.

Question 11

A company issued $10,000,000 of bonds. Assuming the most common denomination of bonds, the number of bonds sold was

Accepted Answer

A) 10,000. 
B) 100,000. 
C) 1,000,000. 
D) 10,000,000.

Question 12

Kalahari Limited
On January 2, 2019, this company issued 1,000,000, 10-year bonds for $1,150,000. The bonds pay interest on June 30 and December 31. The stated rate is 10% and the market rate is 8%. The company plans to use the effective interest method of amortizing bond discounts and premiums.
-Refer to Kalahari Limited. What is the carrying value of the bonds after the first interest payment is made on June 30, 2019?

Accepted Answer

A) $1,154,000 
B) $1,146,000 
C) $1,142,400 
D) $1,000,000

Question 13

Convertible bonds normally allow bondholders to convert the bond into another security.

Accepted Answer

A) True 
 B)False

Question 14

The times interest earned ratio divides __________________________ by interest expense.

Accepted Answer

The answer of The times interest earned ratio divides __________________________...

Question 15

Match these terms with their definitions.
-A contract that gives one party the right to use an asset that belongs to another party.

Accepted Answer

A) Bond 
B) Contract, coupon, stated rate 
C) Discount 
D) Effective interest rate method 
E) Face value, par value, principal
F)Interest amortization
G)Lease
H)Lessee
I)Lessor
J)Leverage
K)Long-term debt
L)Market rate, yield
M)Maturity
N)Premium
O)Straight-line method

Question 16

When will bonds sell at a discount?

Accepted Answer

A) The credit standing of the issuing company is not as good as other companies in a similar line of business. 
B) The stated rate of interest is less than the yield rate of interest at the time of issue. 
C) The stated rate of interest is more than the yield rate of interest at the time of issue. 
D) The issuing company will be able to retire the bonds at less than face at maturity.

Question 17

Match these terms with their definitions.
-The rate that reflects the provisions of the debt instrument, the credit standing of the borrowing business, and the current conditions in the credit markets and the economy as a whole.

Accepted Answer

A) Bond 
B) Contract, coupon, stated rate 
C) Discount 
D) Effective interest rate method 
E) Face value, par value, principal
F)Interest amortization
G)Lease
H)Lessee
I)Lessor
J)Leverage
K)Long-term debt
L)Market rate, yield
M)Maturity
N)Premium
O)Straight-line method

Question 18

Refer to Korn Business Solutions. Does the note disclosure show evidence of the two types of leases?

Accepted Answer

The answer of Refer to Korn Business Solutions. Does the...

Question 19

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%?

Accepted Answer

A) $100,000 
B) $ 60,000 
C) $ 40,000 
D) $160,000

Exam 9: Long Term Liabilities

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

A long-term leased asset would appear on the balance sheet as

Match these terms with their definitions. -Under this method, equal amounts of premium or discount are amortized to interest expense each period.

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

For a long-term lease, the lessee must record both an asset and a liability. The amount of the asset is subsequently reduced by the process of ____________________.

On the issuance date, the Bonds Payable account has a balance of $55,000,000 and Premium on Bonds Payable has a balance of $5,000,000. These bonds issued at

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

Kauffman Tire Repair leased a machine that will enable it to repair tires found on monster vehicles. The annual payments are $9,000 and the life of the lease is 7 years. It is estimated that the useful life of the machine is 8 years. How would the company record the acquisition of the machine?

A company issued $10,000,000 of bonds. Assuming the most common denomination of bonds, the number of bonds sold was

Convertible bonds normally allow bondholders to convert the bond into another security.

The times interest earned ratio divides __________________________ by interest expense.

Match these terms with their definitions. -A contract that gives one party the right to use an asset that belongs to another party.

When will bonds sell at a discount?

Match these terms with their definitions. -The rate that reflects the provisions of the debt instrument, the credit standing of the borrowing business, and the current conditions in the credit markets and the economy as a whole.

Refer to Korn Business Solutions. Does the note disclosure show evidence of the two types of leases?

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%?