Question : 78.The carrying value of a long-term note payable computed as: A.The : 1258325

 

 

78.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 payments.

 

 

 

 

79.The carrying value of bonds at maturity always equals:   

A.the amount of cash originally received in exchange for the bonds.

 

B.the par value of the bond.

 

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.

 

 

 

 

80.A company must repay the bank a single payment of $20,000 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 (rounded) is:   

A.$15,877.

 

B.$12,400.

 

C.$5,592.

 

D.$9,200.

 

E.$47,630.

$20,000 * 0.7938 = $15,877

 

 

 

81.A company borrowed cash from the bank by signing a 5-year, 8% installment note. The present value of an annuity factor at 8% for 5 years is 3.9927. Each annual payment equals $75,000. The present value of the note is:    

A.$56,352.84.

 

B.$93,921.41.

 

C.$375,000.

 

D.$299,452.50.

 

E.$187,842.81.

$75,000 * 3.9927 = $299,452.50

 

 

 

82.A company borrowed $40,000 cash from the bank and signed a 6-year note at 7% annual interest. The present value of an annuity factor for 6 years at 7% is 4.7665. The annual annuity payments equal:    

A.$10,489.88.

 

B.$8,391.91.

 

C.$40,000.00.

 

D.$52,450.00.

 

E.$190,660.00.

$40,000/4.7665 = $8,391.91

 

 

 

83.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 factor 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.

$9,000 * 5.0330 = $45,297

 

 

 

84.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 plan assets are more than the accumulated benefit obligation.

 

C.Is always funded fully by employers.

 

D.Can be a defined benefit plan or an undefined benefit plan.

 

E.Is the same as Other Postretirement Benefits.

 

 

 

 

85.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.

 

 

 

 

86.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 pay periodic interest and the repayment of par value at maturity.

 

 

 

 

87.An advantage of bonds is:   

A.Bonds do not affect owner control.

 

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.Bonds require payment of periodic interest.