FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 10: Liabilities

Show Answer

Share

---

All types

Filters

Study Flashcards

Question 21

Multiple Choice

Review LaterAdd Note

Review Later

The basic measure of the amount of leverage being applied within the capital structure of an organization is the:

A) Interest coverage ratio.
B) Debt ratio.
C) Return on assets.
D) Return on equity.

E) B) and C)
F) None of the above

Correct Answer

verified

Show Answer

Question 22

Multiple Choice

Review LaterAdd Note

Review Later

At December 31,Year 1,the adjusting entry with respect to this note includes a:

A) Credit to Interest Payable for $1,600.
B) Credit to Notes Payable for $1,600.
C) Debit to Interest Expense for $3,200.
D) Credit to Cash for $3,200.

E) A) and D)
F) A) and C)

Correct Answer

verified

Show Answer

Question 23

Multiple Choice

Review LaterAdd Note

Temple Corporation purchased a piece of real estate,paying $400,000 cash and financing $700,000 of the purchase price with a 10-year,15% installment note.The note calls for equal monthly payments that will result in the debt being completely repaid by the end of the tenth year.In this situation:

Deferred income taxes At the end of its first year of operations,Harding Construction,Inc. ,included in its balance sheet a long-term liability entitled "Deferred Income Taxes." (a)Briefly explain what deferred income taxes represents,including how this liability came into existence and whether such an item is generally perceived as favorable or unfavorable from company management's point of view. (b)If Harding Construction,Inc. ,is a successful,growing business,would you expect the liability for deferred income taxes to increase or decrease over the next few years? Explain.

Which of the following is not an accurate statement regarding the distinction between debt and equity?

Pension expense is:

Trego 's entry at June 30,2019,to record the first semiannual payment of interest and amortization of discount/premium on the bonds includes a:

The LBB Company recently took a mortgage on a property for $100,000.The interest is 12% and the monthly payment is $1,020.Prepare the first four months of the amortization table.

An operating lease:

Bond prices after issuance Several years ago,Clear-Air Systems issued $100 million of 30-year,8% bonds payable at a small premium.Since the bonds were issued,Clear-Air's financial strength and credit rating have actually improved,but today the bonds are trading among investors at a price of 98. (a)Explain the most probable reason why the market price of these bonds has declined,even though Clear-Air's credit rating has improved. (b)How will the drop in the market value of these bonds be reported (if at all)in Clear-Air's income statements and balance sheets? Explain.

The adjustment necessary at December 31,Year 1 (if any) ,related to this bond issue involves:

A bond that is not secured is also known as:

A liability for deferred income taxes represents:

The future value will always be less than the present value.

Fully amortizing installment notes When Sue Meadow purchased a home,she signed a $150,000,12%,fully amortizing mortgage note,payable at $1,543 per month.After making the first monthly payment,Meadow received a notice from the bank stating that $1,500 of the payment had applied to interest,and only $43 reduced the principal amount of the loan.Meadow does not understand how this loan is fully amortizing over a period of 30 years.She computes that at $43 per month,it will take approximately 3,488 months (or 290 years)to repay this loan.Evaluate Meadow's analysis.

The current portion of long-term debt should be reported:

Current liabilities are obligations that must be repaid within the shorter of one year or the operating cycle.

Bonds issued at par - basic concepts On March 1,Year 1,Hubbard Co.issued at a price of 100 $20 million of 8%,25-year bonds payable.Interest is payable semiannually each March 1 and September 1. (a)What is the amount of cash paid to bondholders for interest during Year 1? $________ (b)Give the adjusting entry necessary at December 31,year 1 (if any),regarding this bond issue. (c)Interest expense on this bond issue reported in Hubbard's Year 1 income statement is: $________ (d)With respect to this bond issue,Hubbard 's balance sheet at December 31,Year 1,includes bonds payable of $________ and interest payable of $________.(Indicate $0 or "none" if the item is not reported. ) (e)Give the journal entry made by Hubbard on March 1,Year 2,to record the semiannual payment of interest to bondholders.

The account Discount on Bonds Payable actually represents interest expense and will be amortized over the life of the bond.

How much of the first payment made on December 31,Year 1,represents interest expense?