Author: Anonymous

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 an annuity factor for 3 years at 8% is 2.5771. The present value of the loan (rounded) is:

A company has bonds outstanding with a par value of $100,000. The unamortized premium on these bonds is $2,700. If the company retired these bonds at a call price of 99, the gain or loss on this retirement is:

When convertible bonds are converted to a company’s stock, the carrying value of the bonds is transferred to equity accounts and no gain or loss is recorded.

Compounded means that interest during a second period is based on the total amount borrowed plus the interest accrued in the first period.

A company’s income before interest expense and income taxes is $350,000 and its interest expense is $100,000. Its times interest earned ratio is:

A company received cash proceeds of $206,948 on a bond issue with a par value of $200,000. The difference between par value and issue price for this bond is recorded as a:

A discount on bonds payable:

The debt-to-equity ratio is calculated by dividing total stockholders’ equity by total liabilities.

Decision makers and other users of financial statements are especially interested in evaluating a company’s ability to use its assets in generating sales.

On January 1, Year 1, Stratton Company borrowed $100,000 on a 10-year, 7% installment note payable. The terms of the note require Stratton to pay 10 equal payments of $14,238 each December 31 for 10 years. The required general journal entry to record the payment on the note on December 31, Year 2 is: