Use the following information about for questions 1& 2 Note: NO PV tables are needed: ollmar & Poore, Inc., purchased a new $60,000 company car on January 1, 2018. Half of the cost was paid in cash and the remainder was financed by signing a 5-year, $30,000 Installment Note with Falcon Bank & Trust Co. Due to the company's favorable credit rating, the loan carried an interest rate of 3% with monthly payments of $539 1. Based on the information provided, how much of the first (Jan) payment would be applied toward the principal balance of the loan (possibly rounded up to $1)? a. $539 b. $464 c. $75 d. $0 e. None of the above is within $10 2. Based on the information provided, how much of the second (Feb) payment would be applied toward interest expense (possibly rounded up to $1)? a. $539 b. $464 c. $173 d. $74 e. None of the above is within $10 3. A "Line of Credit" (i.e. Credit Line) is a short-term financing arrangement often used to maintain an adequate cash balance until inventory is sold or accounts receivable is collected a. TRUE b. FALSE 4. Woodrum & Dunn, Inc. obtained a $160,000 line of credit from the USGB Bank on January 1, 2018. The company agreed to pay a variable interest rate set at 2% above the bank's "prime rate" The bank's prime rate of interest and the amounts borrowed or repaid during the first three months of 2018 are shown below. Assume the company borrows or repays on the first day of each month. Note: Borrowing is a "positive" and repayments are a "negative". 1-Jan $ 1-Feb 1-Mar 4.0% 4.5% 5.0% 40,000 (10,000) 40,000 Based on this information, the amount of interest expense recognized for the month of March would be: A. $167 B. $240 C. $350 D. $408 E. $520 5. After reviewing pages 558/559, the "times-interest-earned" (TIE) ratio is calculated by which of the following? a. Total assets divided by interest expense b. Earnings before interest and taxes (EBIT) divided by interest expense. c. Net income divided by interest expense d. Earnings after interest and taxes (EAIT) divided by total assets 6. Cline, Inc. invested in new equipment by issuing a long-term note payable in the amount of $2,687,500 The annual interest rate was 8%. One way analysts measure the ability ofa company to meet its interest obligations is to calculate the company's "times-interest-earned" (TIE) ratio. Assume the company earned net income of $645,000 for the first year (which included the annual interest expense). Based upon this information, per textbook discussion and ignoring income taxes, the TIE ratio for the first year would be: a. 1.60 times b. 2.00 times c. 3.60 times d. 4.00 times e. 5.25 times 7. If Swistak & Sultan, Inc. issues a long-term bond to an investor at "92", which of following statements regarding the market rate of interest must be true? a. The market rate is lower than the stated rate of interest on the bond. b. The market rate is equal to the stated rate of interest on the bond c. The market rate is higher than the stated rate of interest on the bond d. The market rate of interest should never be considered when pricing a bond