Assuming that assets exceed debt, using cash to pay off debt will do what to the debt to assets ratio? Decrease No Change Increase None of the above. Issuing additional shares of stock in exchange for debt will usually cause the debt to equity ratio to do what? Decrease Increase None of the above. No change If the interest rate on a company's debt is decreased, its times interest earned ratio will usually do what? No Change None of the above. Decrease Increase Entering into a binding contractual commitment will necessarily trigger a journal entry. True False Which type of lease will result in the recognition of interest expense on the books of the lessee? Capital Lease Commitment Lease Purchasing Lcasc Operating Lcase Specifies terms of the bond issue Commitment Indenture Agrecment Debenture Includes claims to specific assets in the event of default Unsecured Increases Asset Secured Increases Liability Portions mature on various dates over time Sinking Bond Convertible Bond Permanent Bond Scrial Bond What is the Technical distinction prohibiting any early repayment of Bond Redecmable Nonredecmable Callable Convertible The mixture of liabilities and stockholders' equity a business uses is called its capital structure. True False Interest expense incurred when borrowing money, as well as dividends paid to stockholders, are tax-deductible: True False Debt financing refers to borrowing money from creditors. True False Equity financing refers to profits generated by operations. True Falsc Three primary sources of long-term debt financing are notes, leases, and bonds. True False Assume that a $10,000, five-year, 8% term note, is issued on October 1,203 : what is the fournal Entry Cash 10,000 Accounts Payable 10,000 Note Payable 10.000 Cash 10.000 Cash 10.000 Bond Payable 10.000 Cash 10.000 Note Payable 10000 Compounding simply means that the investment is growing with accumulated interest and eaming interestion the previously accrued interest. True False Convertible bonds provide a company with the option of buying back the debt at a prearranged price before its scheduled maturity. If interest rates go down, the company may not want to be saddled with the high ef cost obligations and can escape the obligation by calling the debt: True False Bonds that cannot be paid off earlier are sometimes called nonredeemable. Be careful not to confuse tianredemabil with nonrefundable. Nonrefundable bonds can be paid off early. so long as the payoff money is gentrated firom business operations rather than an alternative borrowing arrangement. True Fatse A bond payable is just a promise to pay a series of payments over time (the interest component) and a fixed aimmunt int maturity (the face amount). Thus, it is a blend of an annuity (the interest) and a lump-sum payineritithe tacel True False If ABC Inc, issues 100 of the 8%,5-year bonds when the market rate of interest is only 6%, then the cashimcetvedis $108,530 (Issued Bond at a Discount). True False
