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Question;1.;Bonds that have an option exercisable by;the issuer to retire them at a stated dollar amount prior to maturity are known;as;A.;Convertible bonds.;B.;Sinking fund bonds.;C.;Callable;bonds.;D.;Serial bonds.;E.;Junk bonds.;2.;A bond traded at 102? means that;A.;The bond pays 2.5% interest.;B.;The bond;traded at \$1,025 per \$1,000 bond.;C.;The market rate of interest is 2.5%.;D.;The bonds were retired at \$1,025 each.;E.;The market rate of interest is 2 ? % above;the contract rate.;3.;The contract between the bond issuer and;the bondholders, which identifies the rights and obligations of the parties, is;called a(n);A.;Debenture.;B.;Bond;indenture.;C.;Mortgage.;D.;Installment note.;E.;Mortgage contract.;4.;The carrying value of a long-term note;payable;A.;Is computed as the future value of all;remaining future payments, using the market rate of interest.;B.;Is the face value of the long-term note;less the total of all future interest payments.;C.;Is;computed as the present value of all remaining future payments, discounted;using the market rate of interest at the time of issuance.;D.;Is computed as the present value of all;remaining interest payments, discounted using the note's rate of interest.;E.;Decreases each time period the discount on;the note is amortized.;5.;A company must repay the bank \$10,000 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 is;A.;\$10,000.;B.;\$12,400.;C.;\$ 7,938.;D.;\$ 9,200.;E.;\$ 7,600.;\$10,000 x 0.7938 = \$7,938;6.;A pension plan;A.;Is a contractual agreement between an;employer and its employees in which the employer provides benefits to employees;after they retire.;B.;Can be underfunded if the accumulated;benefit obligation is more than the plan assets.;C.;Can include a plan administrator who;receives payments from the employer, invests them in pension assets, and makes;benefit payments to pension recipients.;D.;Can be a defined benefit plan in which;future benefits are set, but the employer's contributions vary depending on;assumptions about future pension assets and liabilities.;E.;All of;these.;7.;Operating leases differ from capital leases;in that;A.;For a capital lease the lessee records the;lease payments as rent expense, but for an operating lease the lessee reports;the lease payments as depreciation expense.;B.;For an operating lease the lessee;depreciates the asset acquired under lease, but for the capital lease the;lessee does not.;C.;Operating leases create a long-term;liability on the balance sheet, but capital leases do not.;D.;Operating;leases do not transfer ownership of the asset under the lease, but capital;leases often do.;E.;Operating lease payments are generally;greater than capital lease payments.;8.;A disadvantage of bonds is;A.;Bonds require payment of periodic interest.;B.;Bonds require payment of principal.;C.;Bonds can decrease return on equity.;D.;Bond payments can be burdensome when income;and cash flow are low.;E.;All of;these.;9.;A company's total liabilities divided by;its total stockholders' equity is called the;A.;Debt ratio.;B.;Return on total assets ratio.;C.;Pledged assets to secured liabilities;ratio.;D.;Debt-to-equity;ratio.;E.;Times secured liabilities earned ratio.;10.;When a bond sells at a premium;A.;The;contract rate is above the market rate.;B.;The contract rate is equal to the market;rate.;C.;The contract rate is below the market rate.;D.;It means that the bond is a zero coupon;bond.;E.;The bond pays no interest.;11.;A company issues 9%, 20-year bonds with a;par value of \$750,000. The current market rate is 9%. The amount of interest;owed to the bondholders for each semiannual interest payment is.;A.;\$ 0.;B.;\$ 33,750.;C.;\$ 67,500.;D.;\$ 750,000.;E.;\$1,550,000.;\$750,000 x.09 x ? year = \$33,750;12.;Amortizing a bond discount;A.;Allocates;a part of the total discount to each interest period.;B.;Increases the market value of the Bonds;Payable.;C.;Decreases the Bonds Payable account.;D.;Decreases interest expense each period.;E.;Increases cash flows from the bond.;13.;A company issued 5-year, 7% bonds with a;par value of \$100,000. The company received \$97,947 for the bonds. Using the;straight-line method, the amount of interest expense for the first semiannual;interest period is;A.;\$3,294.70.;B.;\$3,500.00.;C.;\$3,705.30.;D.;\$7,000.00.;E.;\$7,410.60.;Cash interest paid: \$100,000 x;.07 x ? year = \$3,500;Discount amortization: (\$100,000 - \$97,947)/10 periods = \$205.30;Interest expense = \$3,500 + \$205.30 = \$3,705.30;14.;Financial statement analysis;A.;Is the application of analytical tools to;general-purpose financial statements and related data for making business;decisions.;B.;Involves transforming accounting data into;useful information for decision-making.;C.;Helps users to make better decisions.;D.;Helps to reduce uncertainty in;decision-making.;E.;All of;these.;15.;The building blocks of financial statement;analysis include;A.;Liquidity and efficiency.;B.;Solvency.;C.;Profitability.;D.

Paper#45024 | Written in 18-Jul-2015

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