71. The carrying value of a long-term note payable:
A. Is computed as the future value of all remaining future payments, using the market rate of interest.
B. Is the face value of the long-term note less the total of all future interest payments.
C. Is computed as the present value of all remaining future payments, discounted using the market rate of interest at the time of issuance.
D. Is computed as the present value of all remaining interest payments, discounted using the note's rate of interest.
E. Decreases each time period the discount on the note is amortized.
72. The carrying value of bonds at maturity is always equal to:
A. the amount of cash originally received in exchange for the bonds.
B. the par value that the issuer pays the holder.
C. the amount of discount or premium.
D. the amount of cash originally received in exchange for the bonds plus any unamortized discount or less any premium.
E. $0.
73. A company must repay the bank a single payment of $10,000 cash in 3 years for a loan it entered into. The loan is at 8% interest compounded annually. The present value factor for 3 years at 8% is 0.7938. The present value of the loan is:
A. $10,000.
B. $12,400.
C. $7,938.
D. $9,200.
E. $7,600.
74. A company borrowed cash from the bank by signing a 5-year, 8% installment note. The present value of an annuity at 8% for 5 years is 3.9927. Each annuity payment equals $75,137.13. The present value of the note is:
A. $75,137.13.
B. $94,013.13.
C. $300,000.00.
D. $375,137.13.
E. $197,810.00.
75. A company borrowed $50,000 cash from the bank and signed a 6-year note at 7%. The present value of an annuity for 6 years at 7% is 4.7665. The annual annuity payments equal:
A. $10,489.88.
B. $11,004.88.
C. $50,000.00.
D. $52,450.00.
E. $238,325.00.
76. A company purchased equipment and signed a 7-year installment loan at 9% annual interest. The annual payments equal $9,000. The present value of an annuity for 7 years at 9% is 5.0330. The present value of the loan is:
A. $9,000.
B. $5,033.
C. $63,000.
D. $57,330.
E. $45,297.
77. A pension plan
A. Is a contractual agreement between an employer and its employees in which the employer provides benefits to employees after they retire.
B. Can be underfunded if the accumulated benefit obligation is more than the plan assets.
C. Can include a plan administrator who receives payments from the employer, invests them in pension assets, and makes benefit payments to pension recipients.
D. Can be a defined benefit plan in which future benefits are set, but the employer's contributions vary depending on assumptions about future pension assets and liabilities.
E. All of these.
78. All of the following statements regarding leases are True except:
A. For a capital lease the lessee records the leased item as its own asset.
B. For a capital lease the lessee depreciates the asset acquired under the lease, but for an operating lease the lessee does not.
C. Capital leases create a long-term liability on the balance sheet, but operating leases do not.
D. Capital leases do not transfer ownership of the asset under the lease, but operating leases often do.
E. For an operating lease the lessee reports the lease payments as rental expense.
79. An advantage 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. All of these.
80. A disadvantage of bonds is:
A. Bonds require payment of periodic interest.
B. Bonds require payment of par value at maturity.
C. Bonds can decrease return on equity.
D. Bond payments can be burdensome when income and cash flow are low.
E. All of these.
