Acct3312 14-15
The times interest earned is computed by dividing
Net income before interest expense and income taxes by interest expense
I a corporate form of business organization, legal capital is best defined as
The par value or all capital stock issued
The debt to asset ratio is computed by dividing
Total liabilities by total assets
When treasury stock is purchased for more than the par value of the stock and the cost method is used to account for treasury stock, what accounts should be debuted?
Treasury stock for the purchase price
Which of the following represents the total number of shares that a corporation may issue under the terms of its charter
authorized shares
An entry is not made on the
date of record
Treasury shares are shares
issued but not outstanding
Oriole company issued 108000 ten year, 10% bonds that pay interest semiannually. The bonds are sold to yield 8%. One step in calculating the issue price of the bonds is to multiply the face value by the table value for
20 periods and 4% from the present value of 1 table
A corporation borrowed money from a bank to build a building. The long-term note signed by the corporation is secured by a mortgage that pledges title to the building as security for the loan. The corporation is to pay the bank $80,000 each year for 10 years to repay the loan. Which of the following relationships can you expect to apply to the situation? a. The balance of mortgage payable at a given balance sheet date will be reported as a long-term liability. b. The balance of mortgage payable will remain a constant amount over the 10-year period. c. The amount of interest expense will decrease each period the loan is outstanding, while the portion of the annual payment applied to the loan principal will increase each period. d. The amount of interest expense will remain constant over the 10-year period.
A. Interest will decrease while principal will increas
A debt instrument with no ready market is exchanged for property whose fair value is currently indeterminable. When such a transaction takes place a. the present value of the debt instrument must be approximated using an imputed interest rate. b. it should not be recorded on the books of either party until the fair value of the property becomes evident. c. the board of directors of the entity receiving the property should estimate a value for the property that will serve as a basis for the transaction. d. the directors of both entities involved in the transaction should negotiate a value to be assigned to the property.
A. The Pv should be approximated using an imputes interest rate
A project financing arrangement refers to
An arrangement where a company creates a special-purpose entity to perform a special project
The covenants and other terms of the agreement between the issuer of bonds and the lender are set forth in the
Bond indenture
What is the calculation for payout ratio
Cash dividend/ net income - preferred dividends
Sheffield Corp. retires it's $760000 face value bonds at 103 on January 1, following the payment of interest. The carrying value of the bonds at the redemption date is $731500. The entry to record the redemption will include a
Credit of 28500 to discount on bonds payable
The declaration and issuance of a stock dividend larger than 25% of the shares previously outstanding
Decrease retained earnings but does not change total stockholders equity
An example of an item which is not a liability is
Dividends payable in stock
The rate of interest actually earned by bond holders is called the
Effective rate
If bonds are issued initially at a premium and the effective-interest method of amortization is used, interest expense in the earlier years will be
Greater than if the straight-line method were used
A company owns 38000 shares of stock of company b. On December 31 company a distributed shares of company b stock as dividend to stock holders, this is an example of a
Property dividend
The preemptive right enable a stockholder to
Protect proportional interest in the company
The generally accepted method of accounting for gains or losses from the early extinguishment of debt treats any gain or loss as
a difference between the reacquisition price and the net carrying amount of the debt which should be recognized in the period of redemption.
Total stockholders equity represents
a claim against a portion of the total assets of a company
Common stockholders of a business enterprise are said to be residual owners. The term residual owner means that shareholders
bear the ultimate risks and uncertainties and receive the benefits of enterprise ownership
Bonds for which the owners' names are not registered with the issuing corporation are called a. bearer bonds. b. term bonds. c. debenture bonds. d. secured bonds.
bearer bonds
A primary source of stockholders equity is
both income retained by the corporation and contributions by stockholders
book value per share
common stockholders' equity ----------------------------------------------------- outstanding shares
When a note payable is exchanged for property, goods, or services, the stated interest rate is presumed to be fair unless a. no interest rate is stated. b. the stated interest rate is unreasonable. c. the stated face amount of the note is materially different from the current cash sales price for similar items or from current fair value of the note. d. any of these.
d. any of these
When the effective-interest method is used to amortize bond premium or discount, the periodic amortization will a. increase if the bonds were issued at a discount. b. decrease if the bonds were issued at a premium. c. increase if the bonds were issued at a premium. d. increase if the bonds were issued at either a discount or a premium.
d. increase if the bonds were issued at either a discount or a premium.
When the interest payment dates of a bond are May 1 and November 1, and a bond issue is sold on June 1, the amount of cash received by the issuer will be
increased by accrued interest from May 1 to June 1.
Under the effective-interest method of bond discount or premium amortization, the periodic interest expense is equal to a. the stated (nominal) rate of interest multiplied by the face value of the bonds. b. the market rate of interest multiplied by the face value of the bonds. c. the stated rate multiplied by the beginning-of-period carrying amount of the bonds. d. the market rate multiplied by the beginning-of-period carrying amount of the bonds.
d. the market rate multiplied by the beginning-of-period carrying amount of the bonds.
The term used for bonds that are unsecured as to principal is
debenture bonds
Stockholders equity is generally classified into two major categories
earned capital and contributed capital
If bonds are initially sold at a discount and the straight-line method of amortization is used, interest expense in the earlier years will
exceed what it would have been had the effective-interest method of amortization been used.
Bond interest paid is equal to the
face amount of the bonds multiplied by the stated interest rate
