NCSU ACC 200 - Ch 9 problem session exercise (8 pages)

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Ch 9 problem session exercise



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Ch 9 problem session exercise

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Pages:
8
School:
North Carolina State University
Course:
Acc 200 - Introduction to Managerial Accounting

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Ch 9 Problem Session Exercise Note The factor tables are at the back of your textbook Copies of the same tables are also available in the App C Moodle block In addition have your calculator set to 5 decimal places Problem I Indicate whether each of the following statements is true T or false F a t An advantage for a company to finance its operations through the issuance of debt rather than through the issuance of stock is the deductibility of interest expense for income tax purposes b t An advantage for a company to finance its operations through the issuance of stock rather than through the issuance of debt is the deductibility of dividend payments for income tax purposes c f Secured bonds have specific assets of the issuer the borrowing company pledged as collateral on the bonds d t A bond which can be converted into common stock at the option of the bondholder is referred to as a callable bond e t A company s times interest earned ratio being higher this year than it was last year is an indication that the company s ability to meet its interest payments as they become due has worsened over time f When the market interest rate exceeds the face interest rate on a bond the bond will be issued at a premium f g t When a bond is redeemed early and the amount paid to retire the bond exceeds the bond s carrying value a loss will result h t The account called Discount on Bond Payable is an example of a contra asset account i f The dollar difference between the Bond Payable account balance and the Discount on Bond Payable account balance is referred to as the bond s carrying value j f An increase in a company s debt to equity ratio over time is an indication of increased risk to the company s creditors and investors k t An investment fund a company uses to set aside money to pay future debts as they become due is called a sinking fund 1 Problem II On 1 1 X1 Wolfpack Inc issues 3 year bonds with a face value of 50 000 and a face stated rate of 4 compounded semi annually The



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