Question 1

Describe installment notes and the nature of the typical payment pattern.

Accepted Answer

Installment notes are agreements to repa

Question 2

A lessee has substantially all of the benefits and risks of ownership in a finance lease.

Accepted Answer

A) True 
 B)False

Question 3

An advantage of lease financing is the lack of an immediate large cash payment for the leased asset.

Accepted Answer

A) True 
 B)False

Question 4

Identify the advantages and disadvantages of bond financing.

Accepted Answer

The advantages of bond financing include

Question 5

A company issued 10%,10-year bonds with a par value of $1,000,000 on January 1,at a selling price of $885,295 when the annual market interest rate was 12%.The company uses the effective interest amortization method.Interest is paid semiannually each June 30 and December 31.
(1)Prepare an amortization table for the first two payment periods using the format shown below:
   (2)Prepare the journal entry to record the first semiannual interest payment.

Accepted Answer

(1) @#IMG-DLM& 6/30/: Cash payment: $1,000,000 * 1

Question 6

The equal total payments pattern for installment notes consists of changing amounts of interest but constant amounts of principal over the life of the note.

Accepted Answer

A) True 
 B)False

Question 7

An ________ is an obligation requiring a series of payments to the lender.

Accepted Answer

The answer of An ________ is an obligation requiring a...

Question 8

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 9

The contract rate on previously issued bonds changes as the market rate of interest changes.

Accepted Answer

A) True 
 B)False

Question 10

The debt-to-equity ratio is calculated by dividing total stockholders' equity by total liabilities.

Accepted Answer

A) True 
 B)False

Question 11

A premium reduces the interest expense of a bond over its life.

Accepted Answer

A) True 
 B)False

Question 12

On January 1,a company issues 8%,5-year,$300,000 bonds that pay interest semiannually each June 30 and December 31.On the issue date,the annual market rate of interest is 6%.Compute the price of the bonds on their issue date.The following information is taken from present value tables:

Accepted Answer

The answer of On January 1,a company issues 8%,5-year,$300,000 bonds...

Question 13

Describe the journal entries required to record the issuance of bonds at par and the payment of bond interest.

Accepted Answer

The journal entry to record a bond issua

Question 14

On January 1,a company issues bonds dated January 1 with a par value of $400,000.The bonds mature in 5 years.The contract rate is 7%,and interest is paid semiannually on June 30 and December 31.The market rate is 8% and the bonds are sold for $383,793.The journal entry to record the second interest payment using the effective interest method of amortization is:

Accepted Answer

A) Debit Interest Expense $12,648.28; debit Premium on Bonds Payable $1,351.72; credit Cash $14,000.00. 
B) Debit Interest Payable $14,000.00; credit Cash $14,000.00. 
C) Debit Interest Expense $12,648.28; debit Discount on Bonds Payable $1,351.72; credit Cash $14,000.00. 
D) Debit Interest Expense $15,351.72; credit Discount on Bonds Payable $1,351.72; credit Cash $14,000.00. 
E) Debit Interest Expense $15,405.79; credit Discount on Bonds Payable $1,405.79; credit Cash $14,000.00. 
A) Debit Interest Expense $12,648.28; debit Premium on Bonds Payable $1,351.72; credit Cash $14,000.00. 
B) Debit Interest Payable $14,000.00; credit Cash $14,000.00. 
C) Debit Interest Expense $12,648.28; debit Discount on Bonds Payable $1,351.72; credit Cash $14,000.00. 
D) Debit Interest Expense $15,351.72; credit Discount on Bonds Payable $1,351.72; credit Cash $14,000.00. 
E) Debit Interest Expense $15,405.79; credit Discount on Bonds Payable $1,405.79; credit Cash $14,000.00.

Question 15

The market rate for bonds is generally higher when the time period to maturity is longer due to the risk of adverse events occurring over the time period.

Accepted Answer

A) True 
 B)False

Question 16

A company with a low level of liabilities in relation to stockholders' equity is likely to have a very high debt-to-equity ratio.

Accepted Answer

A) True 
 B)False

Question 17

What is a lease? Explain the difference between an operating lease and a finance lease.

Accepted Answer

A lease is a contractual agreement betwe

Question 18

________ bonds have specific assets of the issuing company pledged as collateral.

Accepted Answer

The answer of ________ bonds have specific assets of the...

Question 19

________ bonds are bonds that are scheduled for maturity on one specified date.

Accepted Answer

The answer of ________ bonds are bonds that are scheduled...

Question 20

On January 1,a company issued and sold a $400,000,7%,10-year bond payable,and received proceeds of $396,000.Interest is payable each June 30 and December 31.The company uses the straight-line method to amortize the discount.The journal entry to record the first interest payment is:

Accepted Answer

A) Debit Bond Interest Expense $14,000; credit Cash $14,000. 
B) Debit Bond Interest Expense $28,000; credit Cash $28,000. 
C) Debit Bond Interest Expense $14,000; debit Discount on Bonds Payable $200; credit Cash $14,200. 
D) Debit Bond Interest Expense $13,800; debit Discount on Bonds Payable $200; credit Cash $14,000. 
E) Debit Bond Interest Expense $14,200; credit Cash $14,000; credit Discount on Bonds Payable $200. 
A) Debit Bond Interest Expense $14,000; credit Cash $14,000. 
B) Debit Bond Interest Expense $28,000; credit Cash $28,000. 
C) Debit Bond Interest Expense $14,000; debit Discount on Bonds Payable $200; credit Cash $14,200. 
D) Debit Bond Interest Expense $13,800; debit Discount on Bonds Payable $200; credit Cash $14,000. 
E) Debit Bond Interest Expense $14,200; credit Cash $14,000; credit Discount on Bonds Payable $200.

Describe installment notes and the nature of the typical payment pattern.

A lessee has substantially all of the benefits and risks of ownership in a finance lease.

An advantage of lease financing is the lack of an immediate large cash payment for the leased asset.

Identify the advantages and disadvantages of bond financing.

The equal total payments pattern for installment notes consists of changing amounts of interest but constant amounts of principal over the life of the note.

An ________ is an obligation requiring a series of payments to the lender.

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.

The contract rate on previously issued bonds changes as the market rate of interest changes.

The debt-to-equity ratio is calculated by dividing total stockholders' equity by total liabilities.

A premium reduces the interest expense of a bond over its life.

On January 1,a company issues 8%,5-year,$300,000 bonds that pay interest semiannually each June 30 and December 31.On the issue date,the annual market rate of interest is 6%.Compute the price of the bonds on their issue date.The following information is taken from present value tables:

Describe the journal entries required to record the issuance of bonds at par and the payment of bond interest.

The market rate for bonds is generally higher when the time period to maturity is longer due to the risk of adverse events occurring over the time period.

A company with a low level of liabilities in relation to stockholders' equity is likely to have a very high debt-to-equity ratio.

What is a lease? Explain the difference between an operating lease and a finance lease.

________ bonds have specific assets of the issuing company pledged as collateral.

________ bonds are bonds that are scheduled for maturity on one specified date.

On January 1,a company issued and sold a $400,000,7%,10-year bond payable,and received proceeds of $396,000.Interest is payable each June 30 and December 31.The company uses the straight-line method to amortize the discount.The journal entry to record the first interest payment is:

Introducing Financial Statements

Financial Statements and the Accounting System

Adjusting Accounts for Financial Statements

Reporting and Analyzing Merchandising Operations

Reporting and Analyzing Inventories

Reporting and Analyzing Cash,fraud,and Internal Control

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Term Assets

Reporting and Analyzing Current Liabilities

Reporting and Analyzing Equity

Reporting and Analyzing Cash Flows

Analyzing and Interpreting Financial Statements

Applying Present and Future Values

Investments

International Operations

Filters

Exam 10: Reporting and Analyzing Long-Term Liabilities

Describe installment notes and the nature of the typical payment pattern.

A lessee has substantially all of the benefits and risks of ownership in a finance lease.

An advantage of lease financing is the lack of an immediate large cash payment for the leased asset.

Identify the advantages and disadvantages of bond financing.

The equal total payments pattern for installment notes consists of changing amounts of interest but constant amounts of principal over the life of the note.

An ________ is an obligation requiring a series of payments to the lender.

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.

The contract rate on previously issued bonds changes as the market rate of interest changes.

The debt-to-equity ratio is calculated by dividing total stockholders' equity by total liabilities.

A premium reduces the interest expense of a bond over its life.

On January 1,a company issues 8%,5-year,$300,000 bonds that pay interest semiannually each June 30 and December 31.On the issue date,the annual market rate of interest is 6%.Compute the price of the bonds on their issue date.The following information is taken from present value tables:

Describe the journal entries required to record the issuance of bonds at par and the payment of bond interest.

The market rate for bonds is generally higher when the time period to maturity is longer due to the risk of adverse events occurring over the time period.

A company with a low level of liabilities in relation to stockholders' equity is likely to have a very high debt-to-equity ratio.

What is a lease? Explain the difference between an operating lease and a finance lease.

________ bonds have specific assets of the issuing company pledged as collateral.

________ bonds are bonds that are scheduled for maturity on one specified date.

On January 1,a company issued and sold a $400,000,7%,10-year bond payable,and received proceeds of $396,000.Interest is payable each June 30 and December 31.The company uses the straight-line method to amortize the discount.The journal entry to record the first interest payment is:

Introducing Financial Statements

Financial Statements and the Accounting System

Adjusting Accounts for Financial Statements

Reporting and Analyzing Merchandising Operations

Reporting and Analyzing Inventories

Reporting and Analyzing Cash,fraud,and Internal Control

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Term Assets

Reporting and Analyzing Current Liabilities

Reporting and Analyzing Equity

Reporting and Analyzing Cash Flows

Analyzing and Interpreting Financial Statements

Applying Present and Future Values

Investments

International Operations

Filters