Which of the following is a reason a company would prefer an operating lease over purchasing an asset?

Select one:

a.

The company benefits from the increase in value of the assets.

b.

The risk of loss from obsolescence is reduced.

c.

The company's ability to borrow increases due to larger assets.

d.

The company does not have to depreciate the asset.

Question 2

The times interest earned ratio is calculated by dividing

Select one:

a.

net earnings before interest expense by interest expense.

b.

net earnings before income taxes by interest expense.

c.

net earnings by interest expense.

d.

net earnings before interest expense and income taxes by interest expense.

Question 3

When a company prepares a bond indenture, certain provisions of the bonds are included. Which of the following are not provisions specified in the indenture?

Select one:

a.

Cash to be received at the issue date.

b.

Maturity date.

c.

Rate of interest to be paid.

d.

Dates of interest payments.

Question 4

The carrying value (book value) of a bond payable is equal to the maturity amount of the bond plus any unamortized discount or premium.

Select one:

True

False

Question 5

Notes payable usually require the borrower to pay interest.

Select one:

True

False

Question 6

Interest expense on a note payable is only recorded at maturity.

Select one:

True

False

Question 7

All long-term note payables are secured.

Select one:

True

False

Question 8

Note disclosures for long-term debt generally include all of the following EXCEPT

Select one:

a.

call provisions and conversion privileges.

b.

names of significant debt holders.

c.

restrictions imposed by creditors.

d.

assets pledged as security.

Clear my choice

Question 9

Bonds payable usually are classified on the statement of financial position as which of the following?

Select one:

a.

Current assets.

b.

Current liabilities.

c.

Investments and funds.

d.

Long-term liabilities.

Clear my choice

Question 10

You have been asked to compute the cash equivalent price of a machine assuming the cost (including principal and interest) is to be paid in two equal payments after the acquisition date. What is the interest concept that best describes this application?

Select one:

a.

Future value of an annuity.

b.

Present value of a single amount.

c.

Present value of an annuity.

d.

Future value of a single amount.