An advantage of bonds is:Multiple Choice-Bonds execute not affect owner control.-Bonds require payment of par value at maturity.-Bonds have the right to decrease return on equity.-Bond payments can be burdensome as soon as income and cash flow are low.-Bonds require payment of routine interemainder.
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When a bond sells at a premium:Multiple Choice-The contract price is over the sector rate.-The contract price is equal to the market rate.-The contract rate is below the industry rate.-It means that the bond is a zero coupon bond.-The bond pays no interemainder.
A disbenefit of bond financing is:Multiple Choice-Bonds do not affect owners" control.-Interest on bonds is taxation deductible.-Bonds ca rise return on equity.-It allows firms to profession on the equity.-Bonds pay routine interemainder and the repayment of par value at maturity.
The debt-to-equity ratio:Multiple Choice-Is calculated by dividing book worth of secured liabilities by book value of pledged assets.-Is a way of assessing the risk of a company"s financing framework.-Is not relevant to secured creditors.-Can always be calculated from information provided in a company"s income statement.-Must be calculated from the industry values of assets and also liabilities.
A bond sells at a discount as soon as the:Multiple Choice-Contract price is above the sector rate.-Contract rate is equal to the sector rate.-Contract price is listed below the sector rate.-Bond has a short-term life.-Bond pays interemainder only when a year.
On July 1, Shady Creek Retype borrowed $250,000 cash by signing a 10-year, 8% installment note requiring equal payments each June 30 of $37,258. What amount of principal will certainly be included in the first yearly payment?Multiple Choice$20,000$37,258$25,000$232,742$17,258
$17,258Explanation$250,000 principle × 8% = $20,000 interest$37,258 payment − 20,000 interest = $17,258 primary payment
Collateral agreements for a note or bond can:Multiple Choice-Reduce the risk of loss in comparichild through unsecured debt.-Increase the danger of loss in comparikid through unsecured debt.-Have no effect on hazard.-Reduce the issuer"s assets.-Increase complete expense for the borrower.
A bond is issued at par worth when:Multiple Choice-The bond pays no interemainder.-The bond is not in between interemainder payment dates.-Straight line amortization is supplied by the agency.-The market rate of interest is the same as the contract rate of interemainder.-The bond is callable.
A contract pledging title to assets as protection for a note or bond is well-known as a(an):Multiple Choice-Sinking fund.-Mortgage.-Equity.-Lease.-Indenture.
Which of the following statements is true?Multiple Choice-Interemainder on bonds is taxation deductible.-Interest on bonds is not taxes deductible.-Dividends to stockholders are tax deductible.-Bonds perform not need to be repassist.-Bonds always increase rerotate on equity.
A agency received cash proceeds of $206,948 on a bond problem with a par worth of $200,000. The difference in between par value and also worry price for this bond is recorded as a:Multiple Choice-Crmodify to Interemainder Income.-Credit to Premium on Bonds Payable.-Crmodify to Discount on Bonds Payable.-Delittle bit to Premium on Bonds Payable.-Debit to Discount on Bonds Payable.
A bondholder that owns a $1,000, 10%, 10-year bond has:Multiple Choice-Ownership legal rights in the issuing agency.-The appropriate to get $10 semiannually till maturity.-The best to get $1,000 at maturity.-The appropriate to receive $10,000 at maturity.-The best to obtain dividends of $1,000 per year.
Amortizing a bond discount:Multiple Choice-Allocates a section of the full discount to interest cost each interest duration.-Increases the industry value of the Bonds Payable.-Decreases the Bonds Payable account.-Decreases interemainder expense each period.-Increases cash flows from the bond.
On January 1, Parson Freight Company kind of concerns 7%, 10-year bonds through a par worth of $2,000,000. The bonds pay interemainder semiyearly. The market rate of interemainder is 8% and the bond selling price was $1,864,097. The bond issuance must be videotaped as:Multiple Choice-Delittle Cash $2,000,000; crmodify Bonds Payable $2,000,000.-Delittle bit Cash $1,864,097; crmodify Bonds Payable $1,864,097.-Debit Cash $2,000,000; credit Bonds Payable $1,864,097; credit Discount on Bonds Payable $135,903.-Delittle Cash $1,864,097; delittle Discount on Bonds Payable $135,903; credit Bonds Payable $2,000,000.-Delittle bit Cash $1,864,097; delittle bit Interest Expense $135,903; crmodify Bonds Payable $2,000,000.
A discount on bonds payable:Multiple Choice-Occurs as soon as a company worries bonds through a contract rate less than the industry rate.-Occurs once a company problems bonds through a contract price even more than the sector rate.-Increases the Bond Payable account.-Decreases the total bond interemainder cost.-Is not allowed in many kind of says to safeguard creditors.
A bond traded at 102½ indicates that:Multiple Choice-The bond pays 2.5% interest.-The bond traded at 102.5% of its par worth.-The industry rate of interemainder is 2.5%.-The bonds were reexhausted at $1,025 each.-The market rate of interemainder is 2½% over the contract price.
A firm issues bonds through a $100,000 par value, an 8% annual contract price, semiannual interest payments, and also a 5 year life. The bonds sold for $107,850. The entry to record the issuance of the bonds will include:Multiple Choice-A crmodify to Premium on Bonds Payable of $7,850.-A debit to Discount on Bonds Payable of $7,850.-A crmodify to Cash of $100,000.-A crmodify to Bonds Payable of $107,850.-A delittle bit to Interemainder Expense of $7,850.
Promissory notes that require the issuer to make a collection of payments consisting of both interemainder and principal are:Multiple Choice-Debentures.-Discounted notes.-Installment notes.-Indentures.-Investment notes.
Adonis Corporation issued 10-year, 11% bonds with a par worth of $170,000. Interemainder is passist semiyearly. The market rate on the problem day was 10%. Adonis got $180,595 in cash proceeds. Which of the complying with statements is true?Multiple Choice-Adonis have to pay $170,000 at maturity plus 20 interemainder payments of $8,500 each.-Adonis should pay $170,000 at maturity and also no interemainder payments.-Adonis have to pay $180,595 at maturity plus 20 interest payments of $9,350 each.-Adonis must pay $170,000 at maturity plus 20 interemainder payments of $9,350 each.-Adonis have to pay $180,595 at maturity and no interemainder payments.
Adonis should pay $170,000 at maturity plus 20 interest payments of $9,350 each.Explanation$170,000 × 11% × ½ = $9,350 each interemainder payment
Mbody organ Company type of issues 10%, 20-year bonds via a par worth of $720,000 that pay interest semieach year. The amount phelp to the bondholders for each semiannual interest payment is.Multiple Choice$36,000.$360,000.$32,400.$64,800.$72,000.
A firm concerns 10% bonds through a par worth of $160,000 at par on January 1. The market price on the day of issuance was 9%. The bonds pay interest semiannually on January 1 and also July 1. The cash passist on July 1 to the bond holder(s) is:Multiple Choice$16,000.$14,400.$8,000.$7,200.$0.
A company concerns 9%, 8-year bonds through a par worth of $190,000 on January 1 at a price of $201,070, once the industry price of interemainder was 8%. The bonds pay interemainder semievery year. The amount of each semiyearly interemainder payment is:Multiple Choice$17,100.$15,200.$7,600.$8,550.$0.
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On July 1, Shady Creek Retype obtained $310,000 cash by signing a 10-year, 11% installment note requiring equal payments each June 30 of $52,639. What amount of interemainder expense will certainly be consisted of in the initially annual payment?Multiple Choice$18,539$52,639$31,000$291,461$34,100
On January 1, Parson Freight Company type of problems 7.5%, 10-year bonds with a par value of $3,100,000. The bonds pay interest semiannually. The industry rate of interemainder is 8.5% and also the bond offering price was $2,889,352. The bond issuance need to be tape-recorded as:Multiple Choice-Delittle bit Cash $3,100,000; credit Bonds Payable $3,100,000.-Delittle bit Cash $2,889,352; credit Bonds Payable $2,889,352.-Delittle Cash $3,100,000; crmodify Bonds Payable $2,889,352; crmodify Discount on Bonds Payable $210,648.-Delittle Cash $2,889,352; delittle bit Discount on Bonds Payable $210,648; crmodify Bonds Payable $3,100,000.-Delittle Cash $2,889,352; delittle bit Interest Expense $210,648; credit Bonds Payable $3,100,000.
Charger Company"s many recent balance sheet reports total assets of $29,862,000, full liabilities of $17,262,000 and also total equity of $12,600,000. The debt to equity proportion for the period is (rounded to two decimals):Multiple Choice0.581.730.420.731.37
Connect Finance Online Access for Essentials of Investmentsnine EditionAlan J. Marcus, Alex Kane, Zvi Bodie