Question :
71. When bonds retired before their maturity date: A. GAAP has been violated.B. The : 1236265
71. When bonds are retired before their maturity date:
A. GAAP has been violated.
B. The issuing company will always report a non-operating gain.
C. The issuing company will always report a non-operating loss.
D. The issuing company will report a non-operating gain or loss.
72. The Viper retires a $40 million bond issue when the carrying value of the bonds is $42 million, but the market value of the bonds is $36 million. The entry to record the retirement will include:
A. A credit of $6 million to a gain account.
B. A debit of $6 million to a loss account.
C. No gain or loss on retirement.
D. A debit to cash for $42 million.
73. The Titan retires a $20 million bond issue when the carrying value of the bonds is $18 million, but the market value of the bonds is $23 million. The entry to record the retirement will include:
A. A debit of $5 million to a loss account.
B. A credit of $5 million to a gain account.
C. No gain or loss on retirement.
D. A debit to cash for $18 million.
74. In each succeeding payment on an installment note:
A. The amount of interest expense increases.
B. The amount of interest expense decreases.
C. The amount of interest expense is unchanged.
D. The amounts paid for both interest and principal increase proportionately.
75. The entry to record a monthly payment on an installment note such as a car loan:
A. Increases expense, decreases liabilities, and decreases assets.
B. Increases expense, increases liabilities, and increases assets.
C. Increases expense, decreases liabilities, and increases assets.
D. Increases expense, increases liabilities, and decreases assets.
76. How does the amortization schedule for an installment note such as a car loan differ from an amortization schedule for bonds?
A. The final carrying value is zero in an amortization schedule for an installment note.
B. The final carrying value is zero in an amortization schedule for bonds.
C. The final carrying value is zero in both amortization schedules.
D. The final carrying value is not zero in either amortization schedule.
77. Which of the following leases is just like a rental?
A. An operating lease.
B. A capital lease.
C. Both an operating and a capital lease.
D. Neither an operating lease nor a capital lease.
78. Which of the following leases is essentially the purchase of an asset with debt financing?
A. an operating lease.
B. a capital lease.
C. both an operating and a capital lease.
D. neither an operating lease nor a capital lease.
79. Which of the following is not a reason why some companies lease rather than buy?
A. Leasing may allow you to borrow with little or no down payment.
B. Leasing can improve the balance sheet by reducing long-term debt.
C. Leasing can lower income taxes.
D. Leasing transfers the title to the lessee at the beginning of the lease.
80. Financial leverage is best measured by which of the following ratios?
A. The debt to equity ratio.
B. The return on equity ratio.
C. The times interest earned ratio.
D. The return on assets ratio.
81. Which of the following is true regarding a company assuming more debt?
A. Assuming more debt is always bad for the company.
B. Assuming more debt is always good for the company.
C. Assuming more debt can be good for the company as long as they earn a return in excess of the rate charged on the borrowed funds.
D. Assuming more debt reduces leverage.
82. Which of the following is not a true statement?
A. The debt to equity ratio measures a company’s risk and is calculated as total liabilities divided by stockholders’ equity.
B. Leverage enables a company to earn a higher return using debt than without debt.
C. Return on assets is calculated as net income divided by the ending balance for total assets.
D. The times interest earned ratio compares interest expense with income available to pay interest charges.
83. The times interest earned ratio is calculated as
A. Interest expense/Net income.
B. Net income/Interest expense.
C. (Net income + interest expense + tax expense)/Interest expense.
D. Interest expense/(Net income + interest expense + tax expense).
84. Selected financial data for Home Depot is provided below:
What is the times interest earned ratio for Home Depot?
A. 6.9 times.
B. 3.9 times.
C. 0.3 times.
D. 97.9 times.
85. Selected financial data for Lowes is provided below:
What is the times interest earned ratio for Lowes?
A. 6.2 times.
B. 10.8 times.
C. 0.2 times.
D. 164.5 times.
