ACCT Assignments Chapter 10

ACCT Assignments Chapter 10 - CHAPTER ASSIGNMENTS 518...

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Unformatted text preview: CHAPTER ASSIGNMENTS 518 CHAPTER 10 Long-Term Liabilities Short Exercises LO1 Bond Versus Common Stock Financing SE 1. Indicate whether each of the following is an advantage or a disadvantage of using long-term bond financing rather than issuing common stock. 1. Interest paid on bonds is tax-deductible. 2. Investments are sometimes not as successful as planned. 3. Financial leverage can have a negative effect when investments do not earn as much as the interest payments on the related debt. 4. Bondholders do not have voting rights in a corporation. 5. Positive financial leverage may be achieved. LO1 Types of Long-Term Liabilities SE 2. Place the number of the liability next to the statement to which it applies. 1. Bonds payable a. May result in a capital lease 2. Long-term notes payable b. Differences in income taxes on account- 3. Mortgage payable ing income and taxable income 4. Long-term lease c. The most popular form of long-term 5. Pension liabilities financing 6. Other postretirement d. Often used to purchase land and benefits buildings 7. Deferred income taxe e. Often used interchangeably with bonds payable f. Future health care costs are a major component g. May include 401(k), ESOPs, or profit- sharing LO1 M ortgage Payable SE 3. Karib Corporation purchased a building by signing a $150,000 long-term mortgage with monthly payments of $1,200. The mortgage carries an interest rate of 8 percent. Prepare a monthly payment schedule showing the monthly pay- ment, the interest for the month, the reduction in debt, and the unpaid balance for the first three months. (Round to the nearest dollar.) L04 Valuing Bonds Using Present Value SE 4. Rogers Paints, Inc., is considering the sale of two bond issues. Choice A is a $600,000 bond issue that pays semiannual interest of $32,000 and is due in 20 years. Choice B is a $600,000 bond issue that pays semiannual interest of $30,000 and is due in 15 years. Assume that the market interest rate for each bond is 12 percent. Calculate the amount that Rogers Paints will receive if both bond issues occur. (Calculate the present value of each bond issue and sum.) L 03 L 05 Straight-L ine M ethod I S E 5 . On April 1, 2009, Morimoto Corporation issued $8,000,000 in 8.5 percent, five-year bonds at 98. The semiannual interest payment dates are April 1 and Stop & Review 517 Market interest rate 491 (L02) Mortgage 485 (Lou Off-balance-sheet financing 483 (LOU Operating lease 486 (Lon Other postretirement benefits 489 (Lon Pension fund 488 (LOB) Pension plan 487 (L01) Premium 492 (L02) Registered bonds 493 (toe) Secured bonds 492 (L02) Serial bonds 492 um) Straight-line method 500 (L05) Term bonds 492 (L02) Unsecured bonds 492 (L02) Zero coupon bonds 500 (Los) Key Ratio Interest coverage ratio 484 (tot) Chapter Assignments 519 L03 LOS Effective Interest Method 507 SE6....
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ACCT Assignments Chapter 10 - CHAPTER ASSIGNMENTS 518...

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