accounting 122

A) $(21,000)

16. The following events occurred last year at Dorder Corporation: Purchase of plant and equipment $45,000 Sale of long-term investment $24,000 Dividends received on long-term investments $9,000 Paid off bonds payable $12,000 Depreciation expense $32,000 Based on the above information, the net cash provided by (used in) investing activities for the year on the statement of cash flows would be: A) $(21,000) B) $(12,000) C) $(32,000) D) $(69,000)

C) $3 Free cash flow = Net cash provided by operating activities − Capital expenditures − Dividends= $34 − $24 − $7 = $3

17. Suggett Corporation's net cash provided by operating activities was $34; its income taxes were $12; its capital expenditures were $24; and its cash dividends were $7. The company's free cash flow was: A) $(19) B) $77 C) $3 D) $15

E.Bonds require cash payments of periodic interest and the repayment of par value at maturity.

5.A disadvantage of bond financing is: A.Bonds do not affect owners' control. B.Interest on bonds is tax deductible. C.Bonds can increase return on equity. D.It allows firms to trade on the equity. E.Bonds require cash payments of periodic interest and the repayment of par value at maturity.

secured bond secured

A ________________ is a type of bond that is ________ by the issuer's pledge of a specific asset, which is a form of collateral on the loan. In the event of a default, the bond issuer passes title of the asset onto the bondholders

B. The bond traded at 102.5% of its par value.

A bond traded at 102½ means that A.The bond pays 2.5% interest. B. The bond traded at 102.5% of its par value. 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 2½% above the contract rate.

E.$3,700 gain Par value $100,000 Plus Unamortized premium 2,700 Carrying value of bonds $102,700 Retirement price 99,000 Gain on retirement $3,700

A company has bonds outstanding with a par value of $100,000. The unamortized premium on these bonds is $2,700. If the company retired these bonds at a call price of 99,the gain or loss on this retirement is: A.$1,000 gain B.$1,000 loss. C.$2,700 loss. D.$2,700 gain. E.$3,700 gain

A. $3,289.50 Cash interest paid: $100,000 * .07 * ½ year = $3,500 Premium amortized: ($102,105 - $100,000)/10 = $210.50 Interest expense: $3,500 - $210.50 = $3,289.

A company issued 5-year, 7% bonds with a par value of $100,000. The market rate when the bonds were issued was 6.5%. The company received $102,105 cash for the bonds. Using the straight-line method, the amount of recorded interest expense for the first semiannual interest period is: A. $3,289.50 B.$3,500.00. C.$3,613.70. D.$6,633.70. E.$7,000.00.

B. the firm is more likely to avoid insolvency in the short run than other firms in the industry. OR E. the firm is more likely to avoid insolvency in the short run than other firms in the industry and the firm may be less profitable than other firms in the industry

A firm has a higher quick (or acid test) ratio than the industry average, which implies A. the firm has a higher P/E ratio than other firms in the industry. B. the firm is more likely to avoid insolvency in the short run than other firms in the industry. C. the firm may be less profitable than other firms in the industry. D. the firm has a higher P/E ratio than other firms in the industry and the firm is more likely to avoid insolvency in the short run than other firms in the industry. E. the firm is more likely to avoid insolvency in the short run than other firms in the industry and the firm may be less profitable than other firms in the industry

C.Adonis must pay $200,000 at maturity plus 20 interest payments of $8,000 each.

Adonis Corporation issued 10-year, 8% bonds with a par value of $200,000. Interest is paid semiannually. The market rate on the issue date was 7.5%. Adonis received $206,948 in cash proceeds. Which of the following statements is true? A. Adonis must pay $200,000 at maturity and no interest payments. B.Adonis must pay $206,948 at maturity and no interest payments. C.Adonis must pay $200,000 at maturity plus 20 interest payments of $8,000 each. D.Adonis must pay $206,948 at maturity plus 20 interest payments of $8,000 each. E.Adonis must pay $200,000 at maturity plus 20 interest payments of $7,500 each

A) an addition to net income of $1,000 in order to arrive at net cash provided by operating activities.

An increase in accrued liabilities of $1,000 during a year would be shown on the company's statement of cash flows prepared under the indirect method as: A) an addition to net income of $1,000 in order to arrive at net cash provided by operating activities. B) a deduction from net income of $1,000 in order to arrive at net cash provided by operating activities. C) a deduction of $1,000 under investing activities. D) an addition of $1,000 under financing activities

Bond issued at discount price < par when contract rate < market rate

Bond issued at discount (price ___ par), when contract rate ____ market rate.

Bond issued at premium (price > par), when contract rate > market rate

Bond issued at premium (price __ par), when contract rate ____ market rate.

C. Callable bond

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

E. 1.25

Charger Company's most recent balance sheet reports total assets of $27,000,000, total liabilities of $15,000,000 and total equity of $12,000,000. The debt to equity ratio for the period is (rounded to two decimals): A. 0.56 B. 1.80 C. 0.44 D. 0.80 E. 1.25

Operating activities Investing activities and Financing activities

Identify the 3 activities of scf

C.decrease the ROE

If the interest rate on debt is higher than ROA, then a firm will __________ by increasing the use of debt in the capital structure. A.increase the ROE B.not change the ROE C.decrease the ROE D.change the ROE in an indeterminable manner E.None of these is correct

Operating activities

Include cash activities related to net income. For example, cash generated from the sale of goods (revenue) and cash paid for merchandise (expense) are operating activities because revenues and expenses are included in net income.

Investing activities

Includes cash activities related to noncurrent assets. Noncurrent assets include (1) long-term investments; (2) property, plant, and equipment; and (3) the principal amount of loans made to other entities. For example, cash generated from the sale of land and cash paid for an investment in another company are included in this category. (Note that interest received from loans is included in operating activities.)

B . Sinking fund bond

Maintains a separate asset account from which bondholders are paid at maturity. A.Convertible bonds B. Sinking fund bonds C.Callable bonds. D.Serial bonds E.Junk bonds

A.$14,000.00. Cash payment of interest = $400,000 * .07 * ½ = $14,000

On January 1, a company issues bonds dated January 1 with a par value of $400,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June30 and December 31. The market rate is 8% and the bonds are sold for $383,793. The amount of the semi-annual cash payments of interest is: A.$14,000.00. B.$28,000.00. C.$32,000.00. D.$16,000.00. E.$15,620.70

% of face value

Price of the bond: quoted as a ________________.

A. $957,355. Interest. = $1,000,000 par * .05 stated interest rate * ½ = 25,000 (this is an annuity) ($1,000,000 * .7441) + (25,000 * 8.5302) = $957,355

Sharmer Company issues 5%, 5 year bonds with a par value of $1,000,000 and semiannual interest payments. On the issue date, the annual market rate for these bonds is 6%. What is the bond's issue (selling) price? Use the present value tables to compute A. $957,355. B. $1,000,000 C.$1,250,000 D.$786,745 E.$1,213,255

C.The present value of all remaining payments, discounted using the market rate of interest at the time of issuance.

The carrying value of a long-term note payable is computed as: A. The future value of all remaining payments, using the market rate of interest. B.The face value of the long-term note less the total of all future interest payments. C.The present value of all remaining payments, discounted using the market rate of interest at the time of issuance. D.The present value of all remaining interest payments, discounted using the note's rate of interest. E.The face value of the long-term note plus the total of all future interest payment

A. The contract rate is above the market rate.

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.

equals ; price = par when contract rate = market rate

When bond is issued at face value (price _____ par) when contract rate __ market rate

D) Repurchasing capital stock from owners.

Which of the following would be classified as a financing activity on the statement of cash flows? A) Paying suppliers for inventory purchases. B) Interest paid to lenders. C) Lending money to another company. D) Repurchasing capital stock from owners.

B) Choice B

Zack Company has a current ratio of 2.5. What will be the effect of a purchase of inventory with cash on the acid-test ratio and on working capital? Acid-Test Ratio I Working Capital A)decrease I decrease B)decrease I no effect C)no effect I decrease D)no effect I no effect A) Choice A B) Choice B C) Choice C D) Choice D

Unsecured bonds unsecured

_______________ or debentures are bonds that are not backed by some type of collateral. ... There are no building, equipment, vehicles, or other assets backing up the bond. If the bond issuer defaults on the ____________ bond, the bond holders could receive nothing from their investment.

vertical analysis

common size statement

Horizontal analysis

dollar and percentage changes on statements

Statement of cash flows

explains the relationship between a companys net income and its cash inflows and outflows.

Financing activities

include cash activities related to noncurrent liabilities and owners' equity. Noncurrent liabilities and owners' equity items include (1) the principal amount of long-term debt, (2) stock sales and repurchases, and (3) dividend payments. (Note that interest paid on long-term debt is included in operating activities.)