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Exam 14: Long-Term Liabilities

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Question 121

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Sharma Company's balance sheet reflects total assets of $250,000 and total liabilities of $150,000. Calculate the company's debt-to-equity ratio.

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$150,000/$...

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Question 122

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A contract pledging title to assets as security for a note or bond is known as a(an) :

A) Mortgage.
B) Lease.
C) Sinking fund.
D) Indenture.
E) Equity.

F) B) and C)
G) A) and E)

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Question 123

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On January 1, Year 1 Cleaver Company borrowed $85,000 cash by signing a 7% installment note that is to be repaid with 4 annual year-end payments of $25,094, the first of which is due on December 31, Year 1. (a) Prepare the company's journal entry to record the note's issuance. (b) Prepare the journal entries to record the first installment payment.

A company issued 9%, 10-year bonds with a par value of $100,000. Interest is paid semiannually. The market interest rate on the issue date was 10%, and the issuer received $95,016 cash for the bonds. On the first semiannual interest date, what amount of cash should be paid to the holders of these bonds for interest?

The carrying (book) value of a bond payable is the par value of the bonds plus any discount or minus any premium.

A company must repay the bank a single payment of $20,000 cash in 3 years for a loan it entered into. The loan is at 8% interest compounded annually. The present value factor for 3 years at 8% is 0.7938. The present value of the loan (rounded) is:

The party that has the right to exercise a call option on callable bonds is:

On January 1, a company issues bonds dated January 1 with a par value of $200,000. The bonds mature in 3 years. The contract rate is 4%, and interest is paid semiannually on June 30 and December 31. The market rate is 5%. Using the present value factors below, the issue (selling) price of the bonds is: n= i= Present Value of an Annuity Present value of $1 3 4) 0 % 2.7751 0.8890 6 2) 0 % 5.6014 0.8880 3 5) 0 % 2.7232 0.8638 6 2) 5 % 5.5081 0.8623

A company issues 9%, 5-year bonds with a par value of $100,000 on January 1 at a price of $106,160, when the market rate of interest was 8%. The bonds pay interest semiannually. The amount of each semiannual interest payment is:

_________bonds reduce a bondholder's risk by requiring the issuer to create a fund of assets set aside as specified amounts and dates to repay the bonds.

All of the following statements regarding leases are true except:

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.

___________leases are short-term or cancelable leases in which the lessor retains the risks and rewards of ownership.

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: