FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 9: Long-Term Liabilities

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 1

Multiple Choice

Review LaterAdd Note

Review Later

A bond issue with a face amount of $500,000 bears interest at the rate of 7%.The current market rate of interest is 6%.These bonds will sell at a price that is:

A) Equal to $500,000.
B) More than $500,000.
C) Less than $500,000.
D) The answer cannot be determined from the information provided.

Correct Answer

verified

Show Answer

Question 2

True/False

Review LaterAdd Note

Review Later

Interest expense is calculated as the carrying value times the market rate.

Correct Answer

verified

True

Question 3

Multiple Choice

Review LaterAdd Note

Bond X and Bond Y are both issued by the same company.Each of the bonds has a face value of $100,000 and each matures in 10 years.Bond X pays 8% interest while Bond Y pays 7% interest.The current market rate of interest is 7%.Which of the following is correct?

The rate quoted in the bond contract used to calculate the cash payments for interest is called the:

When bonds are issued at a premium,what happens to the carrying value and interest expense over the life of the bonds?

Financial leverage is best measured by which of the following ratios?

The rate quoted on the bond contract used to calculate the cash payments for interest is called the:

The stated interest rate does not change over time.

Serial bonds are:

A gain or loss is recorded on bonds retired at maturity.

Bonds can be secured or unsecured.Likewise,bonds can be term or serial bonds.Which is more common?

As a company's level of debt increases,bankruptcy risk increases.

Use the following information to answer the next 4 questions: Discount-Mart issues $10 million in bonds on January 1,2015.The bonds have a ten-year term and pay interest semiannually on June 30 and December 31 each year.Below is a partial bond amortization schedule for the bonds: -What is the carrying value of the bonds as of December 31,2016?

The times interest earned ratio compares interest expense with income available to pay interest charges.

The amount reported on the balance sheet for bonds payable is equal to the carrying value at the balance sheet date.

Companies that are believed to have high bankruptcy risk generally receive higher credit ratings and pay a lower interest rate for borrowing.

When bonds are issued at a discount (below face amount),the carrying value and the corresponding interest expense increase over time.

Return on equity is calculated as net income divided by average stockholders' equity.

Use the following information to answer the next 4 questions: Discount-Mart issues $10 million in bonds on January 1,2015.The bonds have a ten-year term and pay interest semiannually on June 30 and December 31 each year.Below is a partial bond amortization schedule for the bonds: -What is the stated annual rate of interest on the bonds? (Hint: Be sure to provide the annual rate rather than the six month rate. )

A private placement is when a company chooses to sell the debt securities directly to a single investor.