exam 3

The balance sheet of Gatekeeper reports total liabilities of $2,000,000. The debt to equity ratio is 2.5. What is Gatekeeper's stockholders' equity?

$800,000

Adding a refrigeration unit to a delivery truck that previously did not have this capability is an example of:

Additions.

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 9% interest. The current market rate of interest is 8%. Which of the following is correct?

Bond Y will sell for more than Bond X.

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

Carrying value and interest expense increase.

If management can estimate the amount of loss that will occur due to litigation against the company, and the likelihood of the loss is reasonably possible, a contingent liability should be

Disclosed, but not reported as a liability.

Research and development costs should be:

Expensed in the period incurred.

The cash interest payment each period is calculated as the:

Face amount times the stated interest rate.

The carrying value, using the effective interest method, would decrease each year:

If the bonds were sold at a premium.

Samson Enterprises issued a ten-year, $20 million bond with a 10% interest rate for $19,500,000. The entry to record the bond issuance would have what effect on the financial stateme

Increase assets and liabilities.

An amortization schedule for a bond issued at a discount:

Is a schedule that reflects the changes in bonds payable over its term to maturity.

For a bond issue that sells for more than the bond face amount, the stated interest rate is:

More than the market rate.

An exclusive 20-year right to manufacture a product or to use a process is a

Patent

The current portion of long-term debt should be

Reported as a current liability on the balance sheet.

A $500,000 bond issue sold for $510,000. Therefore, the bonds:

Sold at a premium because the stated interest rate was higher than the market rate.

Which of the following is true for bonds issued at a discount?

The market interest rate is greater than the stated interest rate.

The price of a bond is equal to:

The present value of the face amount plus the present value of the stated interest payments.