ACCT 201A CH 9 comprehensive
Questions and Answers with Verified
Solutions
Question 1:
the 3 primary sources of long term debt financing notes, leases, and
bonds
Answer:
Question 2:
capital structure
Answer:
liabilities and stockholders' equity
Question 3:
Paying dividends to stockholders reduces taxable income because
dividends are an expense. (true or false)
Answer:
false; dividends are not an expense
Question 4:
In an installment note, a portion of each installment payment goes
towards interest, and the remaining portion represents a reduction of the
outstanding loan balance. (true or false)
Answer:
true
, Question 5:
In the case of installment notes, interest expense is calculated as a
constant percentage of the carrying value. (true or false)
Answer:
true; interest expense is a constant % of the carrying value of a loan. it
decreases over time with the reduction of the carrying value each month.
Question 6:
The entry to record monthly installment payments includes a credit to
Notes Payable. (true or false)
Answer:
false; monthly installment payments are recorded as: Dr Interest Expense
Dr Notes Payable (the difference) Cr Cash (monthly payment/Drs added
up)
Question 7:
bond
Answer:
formal debt instrument issued by a company to borrow money
Question 8:
interest on bonds is traditionally paid _
Answer:
twice a year
Question 9:
private placement
Answer:
Questions and Answers with Verified
Solutions
Question 1:
the 3 primary sources of long term debt financing notes, leases, and
bonds
Answer:
Question 2:
capital structure
Answer:
liabilities and stockholders' equity
Question 3:
Paying dividends to stockholders reduces taxable income because
dividends are an expense. (true or false)
Answer:
false; dividends are not an expense
Question 4:
In an installment note, a portion of each installment payment goes
towards interest, and the remaining portion represents a reduction of the
outstanding loan balance. (true or false)
Answer:
true
, Question 5:
In the case of installment notes, interest expense is calculated as a
constant percentage of the carrying value. (true or false)
Answer:
true; interest expense is a constant % of the carrying value of a loan. it
decreases over time with the reduction of the carrying value each month.
Question 6:
The entry to record monthly installment payments includes a credit to
Notes Payable. (true or false)
Answer:
false; monthly installment payments are recorded as: Dr Interest Expense
Dr Notes Payable (the difference) Cr Cash (monthly payment/Drs added
up)
Question 7:
bond
Answer:
formal debt instrument issued by a company to borrow money
Question 8:
interest on bonds is traditionally paid _
Answer:
twice a year
Question 9:
private placement
Answer:
