Question :
91.Refer to the information above. How much of the first : 1237427
91.Refer to the information above. How much of the first payment made on December 31, Year 1, represents interest expense?
A.$2,400.
B.$400.
C.$2,304.
D.$2,000.
1% × $200,000 = $2,000
92.Refer to the information above. The total liability related to this mortgage reported in Bradley’s balance sheet at December 31, Year 1, is:
A.$432,100.
B.$199,600.
C.$194,923.
D.$200,000.
200,000 – 400 = 199,600
93.Refer to the information above. Over the 15-year life of the mortgage, the total amount Bradley will pay for interest charges is:
A.$232,000.
B.$360,000.
C.$200,000.
D.$432,060.
$432,000 – $200,000 = $232,000
94.Refer to the information above. The portion of the second monthly payment made on January 31, Year 2, which represents repayment of principal is:
A.$400.
B.$404.
C.$2,400.
D.$1,996.
$2,400 – (1% × $199,600) = $404
95.When a company sells bonds between interest dates they will pay which of the following at the first interest payment date?
A.An amount less than the stated interest rate times the principal.
B.An amount more than the stated interest rate times the principal.
C.An amount equal to the stated interest rate times the principal.
D.The company may skip the first interest payment date since the appropriate time has not passed.
96.If a bond is issued at par and between interest dates:
A.The cash received by the corporation will be less than the face value of the bond.
B.The cash received by the corporation will be greater than the face value of the bond.
C.The cash received by the corporation will be the same as the face value of the bond.
D.Interest receivable will be debited.
97.The term “junk bonds” describes bonds with:
A.Low interest rates.
B.Indefinite maturity dates.
C.Low maturity values.
D.High risk.
98.One advantage of issuing bonds instead of stock is that:
A.Interest is tax deductible, whereas dividends are not.
B.Bonds have a longer maturity date.
C.Interest rates are lower than dividend rates.
D.The issuance of bonds does not affect earnings per share.
99.Choose the statement that correctly summarizes the tax advantage of raising money by issuing bonds instead of common stock:
A.The amount paid by the corporation to redeem bonds at maturity date is deductible in computing income subject to corporate income tax.
B.Interest payments are deductible in determining income subject to corporate income tax; dividends are not deductible.
C.A corporation must pay tax on the sales price of stock issued, but is not taxed on the amount received when bonds are issued.
D.Both interest and dividends paid are deductible in computing taxable income, but since interest must be paid annually, the corporation usually gets a larger tax deduction over the life of the bonds payable.
100.Suppose investors decided to sell their holdings of capital stock in order to purchase outstanding bonds payable and as a result, the prices of bonds payable increased. What would be the likely impact on market interest rates?
A.Market interest rates will be unaffected.
B.Market interest rates will increase.
C.Market interest rates will fall.
D.Although interest rates will change, it is impossible to predict the direction of change.
