Long-term debt would likely be used for which of the following

2.Long-term debt would likely be used for which of the following? acquisition of inventory paying premiums for insurance purchasing machinery paying salaries3.Regardless of the specific type of long-term debt, which of the following is normally required with debt transactions? to repay the debt to pay dividends to pay interest to repay the debt and to pay interest4.On January 1, 2013, the Grove Corporation arranges a $3,000 line of credit with the Commerce Bank. It accepted the bank\'s offer of 1% above the prime rate with interest payments on December 31 of each year. All borrowings and repayments are to take place on January 1 of each year.Grove begins his loan transactions with Commerce Bank by borrowing $1,000 on January 1, 2013. Which of the following answers shows the effect of this event on the financial statements?Assets = Liabilities + Equity Revenue - Expenses = Net Inc. Cash A. 1000 = 1000 + NA NA - NA = NA 1000 IA B. 1000 = NA + 1000 1000 - NA = 1000 1000 IA C. 1000 = 1000 + NA NA - NA = NA 1000 OA D. 1000 = 1000 + NA NA - NA = NA 1000 FA Option A Option B Option C Option D5.What is the name used for the type of secured bond that requires a pledge of a designated piece of real property in case of default? Debenture Bond. Indenture Bond. Mortgage Bond. Registered Bond.6.Bonds payable are usually classified on the balance sheet as: long-term liabilities. current liabilities. investments and funds. other assets.7.Unsecured bonds are called: debenture bonds. coupon bonds. discount bonds. par value bonds.8.Bonds that mature at specified intervals throughout the life of the issuance are called: term bonds. registered bonds. serial bonds. coupon bonds.9.Kline Company issued $400,000 in bonds on January 1, 2013. The bonds were issued at face value and carried a 4-year term to maturity. They had a 6 ½% stated rate of interest that was payable in cash on December 31st. Based on this information alone, the amount of interest expense shown on the 12/31/2013 income statement and the cash flow from operating activities shown on the 12/31/2013 statement of cash flows would be: InterestExpense Cash Outflow A. $26,000 $26,000 B. zero zero C. zero $26,000 D. $26,000 zero Option A Option B Option C Option D10.On January 1, 2013, The Hamilton Corporation issued $35,250 of 8%, 5-year bonds at 97. Hamilton uses the straight-line method of bond discount amortization. The interest payments are due on December 31 each year.Based on the above, how much interest expense will Hamilton report on its income statement on December 31, 2013? (rounded) $212 $1,058 $2,820 $3,03211.The reason bonds are sometimes issued at a discount is: the stated rate of interest is higher than the rate being paid on investments in the securities market with comparable risk. the stated rate of interest is the same as the rate being paid on investments in the securities market with comparable risk. the bonds are being issued between interest payment dates. the stated rate of interest is lower than the rate being paid on investments in the securities market with comparable risk.12.If a bond is sold at 101, its stated rate of interest would be: equal to the market rate. unrelated to the market rate. higher than the market rate. lower than the market rate.13-14Winfield Company issued bonds with a face value of $600,000, a 12% stated rate of interest, and a 10-year term. The bonds were issued on January 1, 2013, and Winfield uses the straight-line method of amortization. Interest is paid annually on December 31.13.Straight-line interest amortization of a premium or discount on bonds payable: assigns variable amounts of interest over the term of the liability. uses compound interest principles. assigns the same amount of interest to each interest period over the term of the liability. is required for U.S. income tax reporting.14.The carrying value of a bond issued at a premium: decreases by equal amounts each year if straight-line amortization is used. decreases by equal amounts each year if effective interest amortization is used. increases by equal amounts each year if straight-line amortization is used. decreases by smaller and smaller amounts each year if straight-line amortization is used15.Which of the following is one of the main advantages of using long-term debt financing instead of equity financing? Not having to pay back the principal. Ability to raise large amounts of capital. Tax-deductibility of interest. Tax-deductibility of dividends.16.Callable bonds may be: called for early retirement at the option of the bondholder. called for early retirement at the option of the issuer. converted to common stock at the option of the bondholder. converted to common stock at the option of the issuer.17.Parsons Company issued at 97 bonds with a face value of $500,000. As a result of the issue: Assets and liabilities would both increase by $500,000. Assets would increase by $485,000 and liabilities would increase by $500,000. Assets and liabilities would both increase by $485,000. Assets would increase by $500,000, and liabilities would increase by $485,000.18-19Joiner Company issued bonds with a $100,000 face value on January 1, 2013. The five-year term bonds were issued at 97 and had a 7 ½ % stated rate of interest that is payable in cash on December 31st of each year. Joiner amortizes the bond discount using the straight-line method. Based on this information:18.The amount of interest expense shown on Joiner\'s December 31, 2013 income statement would be: $6,900. $10,500. $7,500. $8,100. 19.The amount of cash outflow from operating activities shown on Joiner\'s December 31, 2014 statement of cash flows would be: $7,500. $8,100. $6,900. $8,700.20.A discount or premium on bonds payable can be defined by which of the following statements? The difference between the market price of the bond on the issue date and the face value of the bond. The difference between the call price of the bond and the face value of the bond. The market rate of interest on the date of the bond issue. The difference between the interest rate and the market price of the bond.

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