21.If interest expense is less than the contractual interest payment, then
a. the note was issued at a premium.
b. the note was issued at a discount.
c. the note was issued at par.
d. the company should refinance the note to get a better interest rate.
22.If interest expense is equal to the contractual interest payment, then
a. the note was issued at a premium.
b. the note was issued at a discount.
c. the note was issued at par.
d. It cannot be determined from the information given.
23.A debt covenant
a. serves to give assurance to a creditor that the debtor will have the ability to pay interest and principal at maturity.
b. serves to give assurance to the debtor that the interest rate is reasonable.
c. allows the creditor to become an owner of the company if the covenant is violated.
d. allows the debtor to forego any interest on the debt.
24.On January 1, a 6-year, $5,000, non-interest-bearing note payable was issued when the market rate of interest was 8%. The present value of the note is
a. $3,151.
b. $2,080.
c. $865.
d. $5,000.
25.On January 1, a 3-year, $8,000, non-interest-bearing note payable was issued when the market rate of interest was 11%. To determine the amount at which the note will be valued on the balance sheet on the issue date, use the
a. present value of $1 table.
b. future value of an annuity due table.
c. present value of an annuity table.
d. future value of an annuity table.
26.On January 1, a 7-year, $8,000, non-interest-bearing note payable was issued when the market rate of interest was 7%. What amount should be recorded for the note on the balance sheet at the issue date?
a. $3,570
b. $4,982
c. $11,241
d. $37,725
27.
Companies generate assets in three different ways. They are
a.equity contributed by owners, borrowings, and receivables from affiliates.
b.equity issuances, borrowings, and interest rates.
c.borrowings, profitable operations, and equity issuances.
d.equity issuances, debt issuances, and financial instruments.
28.Which one of the following is not one of the possible kinds of notes?
a.Non-interest-bearing note
b.Interest-bearing notes
c.Installment notes
d.Bank notes
29.Which type of note consists of periodic payments covering both interest and principal?
a.Interest-bearing bond
b.Receivable note
c.Non-interest-bearing note
d.Installment note
30.A provision of a contractual obligation that is designed to protect the interest of lenders is called
a.a lenders’ security provision
b.a restrictive covenant.
c.a non-interest-bearing obligation.
d.collateral.