Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

When convertible bonds are converted to a company's stock, the carrying value of the bonds is transferred to equity accounts and no gain or loss is recorded.

Accepted Answer

A) True 
 B)False

Question 3

A disadvantage of an operating lease is the inability to deduct rental payments in computing taxable income.

Accepted Answer

A) True 
 B)False

Question 4

On January 1, a company issued a $500,000, 10%, 8-year bond payable, and received proceeds of $473,845. Interest is payable each June 30 and December 31. The total interest expense on the bond over its eight-year life is $400,000.

Accepted Answer

A) True 
 B)False

Question 5

Match between columns
                        Premises: Bonds that can be exchanged by the bondholders for a fixed number shares of the issuing corporation's common stock.
An obligation requiring a series of periodic payments to the lender.
An accounting method that allocates interest expense over the bonds' life in a way that yields a constant rate of interest.
Bonds that are scheduled for maturity on one specified date.
Bonds with interest coupons attached to their certificates; the bondholders detach the coupons when they mature and present them to a bank or broker for collection.
Bonds that are payable to whoever holds them; also called unregistered bonds.
Bonds that are backed by the issuer's general credit standing.
The contract between the bond issuer and the bondholders; it identifies the rights and obligations of the parties.
Bonds that mature at more than one date and are usually paid over a number of periods.
The interest rate that borrowers are willing to pay and lenders are willing to accept for a particular bond at its risk level.

Accepted Answer

The Answer of Bond indenture and Term bonds and Bearer is...

Question 6

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.F) A) and B)
G) C) and D)

Question 7

A company has bonds outstanding with a par value of $100,000. The unamortized premium on these bonds is $2,700. If the company retired these bonds at a call price of 99, the gain or loss on this retirement is:

Accepted Answer

A)  $1,000 loss.
B)  $3,700 gain.
C)  $2,700 gain.
D)  $1,000 gain.
E)  $2,700 loss.F) B) and C)
G) A) and E)

Question 8

Adonis Corporation issued 10-year, 8% bonds with a par value of $200,000. Interest is paid semiannually. The market rate on the issue date was 7.5%. Adonis received $206,948 in cash proceeds. Which of the following statements is true?

Accepted Answer

A)  Adonis must pay $206,948 at maturity plus 20 interest payments of $8,000 each.
B)  Adonis must pay $200,000 at maturity plus 20 interest payments of $7,500 each.
C)  Adonis must pay $200,000 at maturity and no interest payments.
D)  Adonis must pay $206,948 at maturity and no interest payments.
E)  Adonis must pay $200,000 at maturity plus 20 interest payments of $8,000 each.F) A) and E)
G) B) and E)

Question 9

A company's debt-to-equity ratio was 1.0 at the end of Year 1. By the end of Year 2, it had increased to 1.7. Since the ratio increased from Year 1 to Year 2, the degree of risk in the firm's financing structure decreased during Year 2.

Accepted Answer

A) True 
 B)False

Exam 14: Long-Term Liabilities

Match each of the appropriate definitions with terms

A disadvantage of an operating lease is the inability to deduct rental payments in computing taxable income.

Correct Answer
verified

A company's debt-to-equity ratio was 1.0 at the end of Year 1. By the end of Year 2, it had increased to 1.7. Since the ratio increased from Year 1 to Year 2, the degree of risk in the firm's financing structure decreased during Year 2.

Correct Answer
verified

A company has bonds outstanding with a par value of $100,000. The unamortized premium on these bonds is $2,700. If the company retired these bonds at a call price of 99, the gain or loss on this retirement is:

Correct Answer
verified

When convertible bonds are converted to a company's stock, the carrying value of the bonds is transferred to equity accounts and no gain or loss is recorded.

Correct Answer
verified

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

Correct Answer
verified

Adonis Corporation issued 10-year, 8% bonds with a par value of $200,000. Interest is paid semiannually. The market rate on the issue date was 7.5%. Adonis received $206,948 in cash proceeds. Which of the following statements is true?

Correct Answer
verified

On January 1, a company issued a $500,000, 10%, 8-year bond payable, and received proceeds of $473,845. Interest is payable each June 30 and December 31. The total interest expense on the bond over its eight-year life is $400,000.

Correct Answer
verified

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:

Correct Answer
verified

Exam 14: Long-Term Liabilities

Match each of the appropriate definitions with terms

A disadvantage of an operating lease is the inability to deduct rental payments in computing taxable income.

Correct AnswerverifiedShow Answer

A company's debt-to-equity ratio was 1.0 at the end of Year 1. By the end of Year 2, it had increased to 1.7. Since the ratio increased from Year 1 to Year 2, the degree of risk in the firm's financing structure decreased during Year 2.

Correct AnswerverifiedShow Answer

A company has bonds outstanding with a par value of $100,000. The unamortized premium on these bonds is $2,700. If the company retired these bonds at a call price of 99, the gain or loss on this retirement is:

Correct AnswerverifiedShow Answer

When convertible bonds are converted to a company's stock, the carrying value of the bonds is transferred to equity accounts and no gain or loss is recorded.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Adonis Corporation issued 10-year, 8% bonds with a par value of $200,000. Interest is paid semiannually. The market rate on the issue date was 7.5%. Adonis received $206,948 in cash proceeds. Which of the following statements is true?

Correct AnswerverifiedShow Answer

On January 1, a company issued a $500,000, 10%, 8-year bond payable, and received proceeds of $473,845. Interest is payable each June 30 and December 31. The total interest expense on the bond over its eight-year life is $400,000.

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

Correct Answer
verified

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Correct Answer
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