Question 1

How do changes in market interest rates lead to misstated balance sheet values for long-term debt?

Accepted Answer

If the market rate of interest remains c

Question 2

Interest expense calculated under GAAP is equal to the stated rate of interest times the maturity value if the interest-bearing obligation is issued at

Accepted Answer

A) a discount. 
B) either a discount or a premium. 
C) a premium. 
D) par. 
A) a discount. 
B) either a discount or a premium. 
C) a premium. 
D) par.

Question 3

Crosson Company uses the straight-line method of amortization and had a ten-year, 12 percent, $1,000,000 bond issue outstanding that had been sold at a $12,000 discount in 2015. The bonds pay interest on June 30 and December 31, and the company's fiscal year end is December 31. The journal entry on June 30, 2018, will include:

Accepted Answer

A) a $6,000 credit to Cash. 
B) a $1,200 credit to Premium on Bonds Payable. 
C) a $58,800 debit to Interest Expense 
D) a $600 credit to Discount on Bonds Payable. 
A) a $6,000 credit to Cash. 
B) a $1,200 credit to Premium on Bonds Payable. 
C) a $58,800 debit to Interest Expense 
D) a $600 credit to Discount on Bonds Payable.

Question 4

Woodsman Company issued $400,000 of 6-year, 6% bonds with interest payments occurring annually at the end of each year. What additional information is needed in order to determine the selling price of these bonds?

Accepted Answer

A) The face amount of the bonds 
B) The bond covenants 
C) The market rate of interest 
D) The stated rate of interest 
A) The face amount of the bonds 
B) The bond covenants 
C) The market rate of interest 
D) The stated rate of interest

Question 5

On January 1, 2017, Hooper Corporation issued 3-year bonds with a $40,000 face amount and a 6% annual coupon rate paid annually on December 31. The bonds were issued at $36,021 when the market rate of interest was 10%. Complete the amortization table for the bonds using the effective interest method. Round all amounts to the nearest dollar.
 $$\begin{array} { | c | l | l | l | l | } 
\hline \text { Date } & \text { Cash } & \text { Interest Expense } & \text { Amortization } & \text { Carrying Value } \
\hline 1 / 1 / 17 & & & & \
\hline 12 / 31 / 17 & & & & \
\hline 12 / 31 / 1 \mathrm { a } & & & & \
\hline 12 / 31 / 19 & & & & \
\hline
\end{array}$$

Accepted Answer

None

Question 6

On January 1, 2017, Everton Company leased equipment under a 3-year lease with payments of $10,000 on January 1, 2017, 2018, and 2019. The present value of the lease payments at a discount rate of 9% is $27,591, which includes the immediate cash payment on January 1, 2017. If the lease is considered an operating lease, how much is rent expense for 2017?

Accepted Answer

The answer of On January 1, 2017, Everton Company leased...

Question 7

Felton Incorporated is considering leasing equipment. It can either lease that equipment for five or ten years with the same annual lease payments under either agreement. The five-year lease allows Felton to classify the lease as an operating lease. However, the ten-year lease requires Felton to classify the lease as a capital lease. If Felton desires to measure net income higher in the initial year of the lease agreement, which lease contract would you advise Felton to sign? Why?

Accepted Answer

If Felton enters into an operating lease

Question 8

On January 1, 2016, Seaside Company leased equipment under a 5-year lease with payments of $3,000 on each December 31 of the lease term. The present value of the lease payments at a discount rate of 7% is $12,300. The lease is considered a capital lease. Calculate depreciation expense (straight-line with no salvage) and interest expense for 2016.

Accepted Answer

Depreciation expense

Question 9

The actual interest rate used to calculate the interest payments by the issuer of the obligation is

Accepted Answer

A) the market rate of interest. 
B) the effective interest rate. 
C) the stated interest rate. 
D) equal to the actual interest expense rate. 
A) the market rate of interest. 
B) the effective interest rate. 
C) the stated interest rate. 
D) equal to the actual interest expense rate.

Question 10

On January 1, 2016, Lundell Corporation issued a 5-year, 4%, $2,000 bond payable. Beginning in 2017, interest is payable every January 1 over the life of the bond. The bonds were issued at 105 3/4. How much cash did Lundell receive from issuing the bonds on January 1, 2016?

Accepted Answer

105 3/4 x

Question 11

The amount of amortized bond premium

Accepted Answer

A) reduces interest expense on the income statement. 
B) is reported as a deduction from bonds payable on the balance sheet. 
C) is reported as an addition to bonds payable on the balance sheet. 
D) is added to the present value of bonds. 
A) reduces interest expense on the income statement. 
B) is reported as a deduction from bonds payable on the balance sheet. 
C) is reported as an addition to bonds payable on the balance sheet. 
D) is added to the present value of bonds.

Question 12

Use the table below to answer the problems 30 through 33.
 $$\begin{array} { l r l l r } 
\text { Jan. } 1,2016 & & & & \$ 36,021 \
\text { Dec. 31, 2016 } & \$ 2,400 & \mathbf { 3 , 6 0 2 } & 1,202 & \mathbf { 3 7 , 2 2 3 } \
\text { Dec. 31,2017 } & \mathbf { 2 , 4 0 0 } & \mathbf { 3 , 7 2 2 } & 1,322 & \mathbf { 3 8 , 5 4 5 } \
\text { Dec. } 31,2018 & \mathbf { 2 , 4 0 0 } & \mathbf { 3 , 8 5 5 } & 1,455 & 40,000
\end{array}$$
-What is the nature of the table presented? What is being amortized?

Accepted Answer

This is a bond amort

Question 13

How do debt covenants impact a company's financial position?

Accepted Answer

Debt covenants are imposed by debt holde

Question 14

On January 1, a 5-year, $5,000 non-interest-bearing note payable was issued when the market rate of interest was 9%. What are the proceeds from this issue? Round your final answer to the nearest dollar.

Accepted Answer

$5,000 x .

Question 15

Describe the relationship between the stated rate of interest and the effective rate of interest as it relates to bonds.

Accepted Answer

The stated rate is the rate of interest

Question 16

Match between columns
                        Premises: Acquired the use of equipment under a capital lease
Paid the interest portion of the payment on a capital lease
Paid the principal portion of the payment on a capital lease
Depreciation of equipment leased under a capital lease
Acquired the use of equipment under an operating lease
Payment required on an operating lease

Accepted Answer

The Answer of + A and + L and + is...

Question 17

The debt/equity ratio will increase if a company

Accepted Answer

A) pays off its long-term debt. 
B) decides to pay cash for more of its capital purchases. 
C) purchases long-term investments for cash. 
D) declares more current cash dividends. 
A) pays off its long-term debt. 
B) decides to pay cash for more of its capital purchases. 
C) purchases long-term investments for cash. 
D) declares more current cash dividends.

Question 18

On January 1, 2016, Mango Corporation issued a 3-year, 4%, $3,000 bond payable. Beginning in 2017, interest is payable every year on January 1 over the life of the bond. The market rate of interest on January 1, 2016 is 6%. What are the proceeds received by Mercer from the issue of this bond on January 1, 2016?

Accepted Answer

\[\begin{array} { l l } 
\text { Present

Question 19

If a company issues a non-interest-bearing note payable, then

Accepted Answer

A) the cash received will exceed the maturity value of the note. 
B) the interest is not accrued. 
C) the cash received will be less than the maturity value of the note. 
D) the cash received will be more than the maturity value of the note. 
A) the cash received will exceed the maturity value of the note. 
B) the interest is not accrued. 
C) the cash received will be less than the maturity value of the note. 
D) the cash received will be more than the maturity value of the note.

Question 20

On January 1, 2017, Foster Corporation issued a 2-year, non-interest-bearing, $4,000 note payable. Interest is payable each December 31 during the life of the note. When the note was issued, the market rate of interest was 6%. Complete the following amortization schedule:
 $$\begin{array} { | l | l | l | l | } 
\hline \text { Date } & \text { Interest Expense } & \text { Cash Payment } & \text { BalanceSheet Value } \
\hline 1 / 1 / 17 & & & \
\hline 12 / 31 / 17 & & & \
\hline 12 / 31 / 18 & & & \
\hline
\end{array}$$

Accepted Answer

$4,000 x .89 = $3,560
 \[\begin{array} {

How do changes in market interest rates lead to misstated balance sheet values for long-term debt?

Interest expense calculated under GAAP is equal to the stated rate of interest times the maturity value if the interest-bearing obligation is issued at

Woodsman Company issued $400,000 of 6-year, 6% bonds with interest payments occurring annually at the end of each year. What additional information is needed in order to determine the selling price of these bonds?

The actual interest rate used to calculate the interest payments by the issuer of the obligation is

On January 1, 2016, Lundell Corporation issued a 5-year, 4%, $2,000 bond payable. Beginning in 2017, interest is payable every January 1 over the life of the bond. The bonds were issued at 105 3/4. How much cash did Lundell receive from issuing the bonds on January 1, 2016?

The amount of amortized bond premium

Use the table below to answer the problems 30 through 33. Jan. 1,2016 \ 36,021 Dec. 31, 2016 \ 2,400 1,202 Dec. 31,2017 1,322 Dec. 31,2018 1,455 40,000 -What is the nature of the table presented? What is being amortized?

How do debt covenants impact a company's financial position?

On January 1, a 5-year, $5,000 non-interest-bearing note payable was issued when the market rate of interest was 9%. What are the proceeds from this issue? Round your final answer to the nearest dollar.

Describe the relationship between the stated rate of interest and the effective rate of interest as it relates to bonds.

The debt/equity ratio will increase if a company

If a company issues a non-interest-bearing note payable, then

Financial Accounting and Its Economic Context

A Closer Look at the Financial Statements

The Measurement Fundamentals of Financial Accounting

The Mechanics of Financial Accounting

Using Financial Statement Information

The Current Asset Classification, Cash, and Accounts Receivable

Merchandise Inventory

Investments in Equity Securities

Long-Lived Assets

Introduction to Liabilities: Economic Consequences, Current Liabilities, and Contingencies

Stockholders Equity

The Complete Income Statement

The Statement of Cash Flows

The Time Value of Money

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Exam 11: Long-Term Liabilities: Notes, Bonds, and Leases

How do changes in market interest rates lead to misstated balance sheet values for long-term debt?

Interest expense calculated under GAAP is equal to the stated rate of interest times the maturity value if the interest-bearing obligation is issued at

Woodsman Company issued $400,000 of 6-year, 6% bonds with interest payments occurring annually at the end of each year. What additional information is needed in order to determine the selling price of these bonds?

The actual interest rate used to calculate the interest payments by the issuer of the obligation is

On January 1, 2016, Lundell Corporation issued a 5-year, 4%, $2,000 bond payable. Beginning in 2017, interest is payable every January 1 over the life of the bond. The bonds were issued at 105 3/4. How much cash did Lundell receive from issuing the bonds on January 1, 2016?

The amount of amortized bond premium

Use the table below to answer the problems 30 through 33. Jan. 1,2016 \ 36,021 Dec. 31, 2016 \ 2,400 1,202 Dec. 31,2017 1,322 Dec. 31,2018 1,455 40,000 -What is the nature of the table presented? What is being amortized?

How do debt covenants impact a company's financial position?

On January 1, a 5-year, $5,000 non-interest-bearing note payable was issued when the market rate of interest was 9%. What are the proceeds from this issue? Round your final answer to the nearest dollar.

Describe the relationship between the stated rate of interest and the effective rate of interest as it relates to bonds.

The debt/equity ratio will increase if a company

If a company issues a non-interest-bearing note payable, then

Financial Accounting and Its Economic Context

A Closer Look at the Financial Statements

The Measurement Fundamentals of Financial Accounting

The Mechanics of Financial Accounting

Using Financial Statement Information

The Current Asset Classification, Cash, and Accounts Receivable

Merchandise Inventory

Investments in Equity Securities

Long-Lived Assets

Introduction to Liabilities: Economic Consequences, Current Liabilities, and Contingencies

Stockholders Equity

The Complete Income Statement

The Statement of Cash Flows

The Time Value of Money

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