Question :
131. Debtors interested in the times-interest-earned ratio because they want to : 1251406
131. Debtors are interested in the times-interest-earned ratio because they want to
A. know what rate of interest the corporation is paying
B. have adequate protection against a potential drop in earnings jeopardizing their interest payments
C. be sure their debt is backed by collateral
D. know the tax effect of lending to a corporation
132. Any unamortized premium should be reported on the balance sheet of the issuing corporation as
A. a direct deduction from the face amount of the bonds in the liability section
B. as paid-in capital
C. a direct deduction from retained earnings
D. an addition to the face amount of the bonds in the liability section
133. Numbers of times interest charges earned is computed as
A. Income before income taxes plus Interest Expense divided by Interest Expense
B. Income before income taxes less Interest Expense divided by Interest Expense
C. Income before income taxes divided by Interest Expense
D. Income before income taxes plus Interest Expense divided by Interest Revenue
134. Balance sheet and income statement data indicate the following:
A. 5.67
4.33
C. 3.24
D. 3.50
135. Balance sheet and income statement data indicate the following:
5.72
B. 6.83
C. 4.72
D. 4.83
136. When the effective-interest method is used, the amortization of the bond premium
A. increases interest expense each period
decreases interest expense each period
C. increases interest expense in some periods and decreases interest expense in other periods
D. has no effect on the interest expense in any period
137. The Merchant Company issued 10-year bonds on January 1, 2011. The 15% bonds have a face value of $100,000 and pay interest every January 1 and July 1. The bonds were sold for $117,205 based on the market interest rate of 12%. Merchant uses the effective-interest method to amortize bond discounts and premiums. On July 1, 2011, Merchant should record interest expense (round to the nearest dollar) of
$7,032
B. $7,500
C. $8,790
D. $14,065
138. The Designer Company issued 10-year bonds on January 1, 2011. The 6% bonds have a face value of $800,000 and pay interest every January 1 and July 1. The bonds were sold for $690,960 based on the market interest rate of 8%. Designer uses the effective-interest method to amortize bond discounts and premiums. On July 1, 2011, Designer should record interest expense (round to the nearest dollar) of
$27,638
B. $24,000
C. $48,000
D. $55,277
139. If a company borrows money from a bank as an installment note, the interest portion of each annual payment will:
equal the interest rate on the note times the carrying amount of the note at the beginning of the period.
B. remain constant over the term of the note.
C. equal the interest rate on the note times the face amount.
D. increase over the term of the note.
140. On the first day of the fiscal year, Hawthorne Company obtained a $ 88,000, seven-year, 5% installment note from Sea Side Bank. The note requires annual payments of $15,208, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $4,400 and principal repayment of $10,808. The journal entry Hawthorne would record to make the first annual payment due on the note would include:
A. a debit to Cash of $15,208
B. a credit to Notes Payable for $10,808
a debit to Interest Expense for $4,400
D. a debit to Notes Payable for $15,208