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

If a company issues a note payable when the market rate of interest is equal to the stated rate, then

On January 1, 2009, Mango Corporation issued a 3-year, 4%, $3,000 bond payable. Beginning in 2010, interest is payable every year on January 1 over the life of the bond. The market rate of interest on January 1, 2009 is 6%. What are the proceeds received by Mercer from the issue of this bond on January 1, 2009?

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

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

Various contractual forms specify additional terms such as collateral. Describe collateral as it pertains to a company's debt.

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?

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

Samuels Corporation issued a $40,000, 3-year, non-interest-bearing note payable on January 1, 2009. Reflecting a market rate of interest of 10%, Garrison received $30,053. Calculate interest expense (to the nearest dollar) for 2009 and 2010.

The amount of amortized bond premium

On January 1, a 3-year, $8,000, non-interest-bearing note payable was issued when the market rate of interest was 11%. To determine the amount at which the note will be valued on the balance sheet on the issue date, use the

If a company issues a note payable when the market rate of interest is less than the stated rate, then

On January 1, 2009, Precision Corporation issued a 3-year, 7%, $2,000 bond payable. Beginning in 2010, interest is payable every January 1 over the life of the bond. The market rate of interest on January 1, 2009 is 10%. If Precision uses the effective interest method, what is the balance sheet value of the bond payable on January 1, 2009?

Which one of the following is one of the capital lease criteria?

A provision of a contractual obligation that is designed to protect the interest of lenders is called

Perfectly effective hedges using interest rate swaps will always

Distinguish between an installment obligation and a non-interest-bearing obligation.

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.

On January 1, 2009, 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 2009.

On January 1, 2009, Action Corporation issued a two-year, 5%, $1,000 bond payable. Beginning in 2010, interest is payable every January 1 over the life of the bond. The market rate of interest on January 1, 2009 is 3%. Calculate the present value of the bond issued by Action on January 1, 2009.