Camp Elim obtains a $125,000, 6%, five-year loan for a new camp bus on January 1, 2021. What amount will be recorded for interest expense for the first month's

Camp Elim obtains a $125,000, 6%, five-year loan for a new camp bus on January 1, 2021. What amount will be recorded for interest expense for the first month's payment on January 31, 2021?

A) $625

B) $125

C) $7,500

D) $1,000

Answer: A

Camp Elim obtains a $125,000, 6%, five-year loan for a new camp bus on January 1, 2021. If the monthly payment is $2,416.60, by how much will the carrying value decrease when the first payment is made on January 31, 2021?

A) $1,791.60

B) $625.00

C) $2,416.60

D) $1,000.60

Answer: A

A company issues a $200,000, 5%, six-year note on January 1, 2021. What amount will be recorded for interest expense for the first month's payment on January 31, 2021?

A) $1,000.00

B) $138.89

C) $833.33

D) $694.44

Answer: C

Babble Co. signs a five-year installment note on January 1, 2021. At which of the following dates would the carrying value be the highest?

A) August 1, 2021

B) November 30, 2023

C) April 30, 2024

D) December 31, 2022

Answer: A

Babble Co. signs a five-year installment note on January 1, 2021. At which of the following dates would the carrying value be the lowest?

A) August 1, 2021

B) November 30, 2023

C) April 30, 2024

D) December 31, 2022

Answer: C

The entry to record a monthly payment on an installment note such as a car loan:

A) Increases expenses, decreases liabilities, and decreases assets.

B) Increases expenses, increases liabilities, and increases assets.

C) Increases expenses, decreases liabilities, and increases assets.

D) Increases expenses, increases liabilities, and decreases assets.

Answer: A

How does the amortization schedule for an installment note such as a car loan differ from an amortization schedule for bonds?

A) The final carrying value is not zero in either amortization schedule.

B) The final carrying value is zero in an amortization schedule for bonds.

C) The final carrying value is zero in both amortization schedules.

D) The final carrying value is zero in an amortization schedule for an installment note.

Answer: D

Which of the following describes monthly installment payments of a note payable?

A) The monthly payments equal interest expense plus the reduction of the note's carrying value.

B) The amount of interest expense recorded each month increases over time.

C) The amount of the reduction in the note's carrying value recorded each month decreases over time.

D) All of the other answer choices are correct.

Answer: A

In each succeeding payment on an installment note:

A) The amount that goes to decreasing the carrying value of the note increases.

B) The amount that goes to decreasing the carrying value of the note decreases.

C) The amount that goes to decreasing the carrying value of the note is unchanged.

D) The amounts paid for both interest and principal increase proportionately.

Answer: A

For a ten-year installment note, the portion of the periodic installment payment that represents interest in the third year is:

A) The same as in the fourth year.

B) The same as in the first year.

C) Less than in the fourth year.

D) More than in the fourth year.

Answer: D

In each succeeding payment on an installment note:

A) The amount of interest expense increases.

B) The amount of interest expense decreases.

C) The amount of interest expense is unchanged.

D) The amounts paid for both interest and principal increase proportionately.

Answer: B

Profits generated by the company are a(n):

A) Source of external financing.

B) Source of internal financing.

C) Liability.

D) Asset.

Answer: B

Which of the following would result in an increase in the current ratio, but not necessarily the acid-test ratio?

A) Increase in current assets.

B) Increase in quick assets.

C) Decrease in current liabilities.

D) Decrease in current assets.

Answer: A

The mixture of liabilities and stockholders' equity a business uses is called its:

A) Bond contract.

B) Carrying value.

C) Capital structure.

D) Accounting equation.

Answer: C

Which of the following is not a true statement?

A) Companies that are believed to have high bankruptcy risk generally receive low credit ratings and must pay a higher interest rate for borrowing.

B) As a company's level of debt increases, the risk of bankruptcy increases.

C) Interest expense incurred when borrowing money, as well as dividends paid to stockholders, are both tax-deductible.

D) The mixture of liabilities and stockholders' equity a business uses is called its capital structure.

Answer: C

How many of the following transactions increase a company's liquidity?

• Provide services on account.

• Pay workers' salaries in the current period.

• Purchase office supplies with cash.

• Pay dividends to stockholders.

A) 0.

B) 1.

C) 2.

D) 3.

Answer: B

Which of the following is the primary source of corporate equity financing?

A) Bonds Payable.

B) Common Stock.

C) Leases.

D) Notes Payable.

Answer: B

Which of the following is not a primary source of corporate debt financing?

A) Bonds Payable.

B) Common Stock.

C) Leases.

D) Notes Payable.

Answer: B

Which of the following would not result in an increase in both the current ratio and the acid-test ratio?

A) Increase in cash

B) Increase in inventory

C) Increase in accounts receivable

D) Increase in current investments

Answer: B

Which of the following is not a primary source of corporate debt financing?

A) Bonds Payable.

B) Common Stock.

C) Leases.

D) Notes Payable.

Answer: B

Which of the following is the primary source of corporate equity financing?

A) Bonds Payable.

B) Common Stock.

C) Leases.

D) Notes Payable.

Answer: B