Which of the following is not an example of a negative covenant provision? Multiple Choice Limits the use of the loan to an agreed-upon purpose. Limits on capital expenditures. • Restricts the payment of cash dividends. Limits on the borrower's total indebtedness. Island Corporation owes Mutual Bank a 10% note payable for $100,000 plus $8,000 accrued interest. On October 1, 20X1. Island and Mutual Bank execute an agreement whereby Island will pay Mutual $128,000 on the due date of the note on October 1, 20X3. What effective interest rate will Island use for the restructured note? Multiple Choice 8.7% 10.0% • 13.1% • 8.9%

Which of the following is not an example of a negative covenant provision? Multiple Choice Limits the use of the loan to an agreed-upon purpose. Limits on capital expenditures. • Restricts the payment of cash dividends. Limits on the borrower's total indebtedness. Island Corporation owes Mutual Bank a 10% note payable for $100,000 plus $8,000 accrued interest. On October 1, 20X1. Island and Mutual Bank execute an agreement whereby Island will pay Mutual $128,000 on the due date of the note on October 1, 20X3. What effective interest rate will Island use for the restructured note? Multiple Choice 8.7% 10.0% • 13.1% • 8.9%

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter9: Long-term Liabilities

Section: Chapter Questions

Problem 101.1C: Debtholders receive note contracts, one for each note, that describe the payments promised by the...

See similar textbooks

Similar questions

Debtholders receive note contracts, one for each note, that describe the payments promised by the issuer of the debt. In addition, the issuing corporation frequently enters a supplementary agreement, callcd a note indenture, with a trustee who represents the debtholders. The provisions or covenants of the indenture may place restrictions on the issuer for the benefit of the debtholders. For example, an indenture may require that the issuers debt to equity ratio never rise above a specified level or that periodic payments be made to the trustee who administers a sinking fund to provide for the retirement of debt. Consider Roswell Manufacturings debt indenture, which requires that Roswells debt to equity ratio never exceed 2:1. If Roswell violates this requirement, the debt indenture specifies very costly penalties, and if the violation continues, the entire debt issue must be retired at a disadvantageous price and refinanced. In recent years, Roswells ratio has averaged about 1.5:1 ($15 million in total liabilities and $10 million in total stockholders equity). However, Roswell has an opportunity to purchase one of its major competitors, Ashland Products. The acquisition will require $4.5 million in additional liabilities, but it will double Roswells net income. Roswell does not believe that a stock issue is feasible in the current environment. The Financial Accounting Standards Board issued a new standard concerning accounting for post employment benefits, which is strongly supported by the Securities and Exchange Commission. Implementation of the new standard will add about S2 million to Roswells long-term liabilities. Roswells CEO. Martha Cooper, has written a strong letter of objection to the FASB. The FASB received similar letters from over 300 companies. Required; 1. Write a paragraph presenting an analysis of the impact of the new standard on Roswell Manufacturing.
Debtholders receive note contracts, one for each note, that describe the payments promised by the issuer of the debt. In addition, the issuing corporation frequently enters a supplementary agreement, called a note indenture, with a trustee who represents the debtholders. The provisions or covenants of the indenture may place restrictions on the issuer for the benefit of the debtholders. For example, an indenture may require that the issuers debt to equity ratio never rise above a specified level or that periodic payments be made to the trustee who administers a sinking fund to provide for the retirement of debt. Consider Roswell Manufacturings debt indenture, which requires that Roswells debt to equity ratio never exceed 2:1. If Roswell violates this requirement, the debt indenture specifies very costly penalties, and if the violation continues, the entire debt issue must be retired at a disadvantageous price and refinanced. In recent years, Roswells ratio has averaged about 1.5:1 ($15 million in total liabilities and $10 million in total stockholders equity). However, Roswell has an opportunity to purchase one of its major competitors, Ashland Products. The acquisition will require $4.5 million in additional liabilities, but it will double Roswells net income. Roswell does not believe that a stock issue is feasible in the current environment. The Financial Accounting Standards Board issued a new standard concerning accounting for post employment benefits, which is strongly supported by the Securities and Exchange Commission. Implementation of the new standard will add about S2 million to Roswells long-term liabilities. Roswells CEO. Martha Cooper, has written a strong letter of objection to the FASB. The FASB received similar letters from over 300 companies. Required; 2. If you were a member of the FASB and met Martha Cooper at a professional meeting, how would you respond to her objection?
12, please read the question carefully and follow the instructions. thanks
1. Journalize all entries for Symphony Bank related to the note for 2018 and 2019. 2. Which party has a a. note receivable? b. note payable? c. interest revenue? d. interest expense? 3. Suppose that Kara Perry defaulted on the note. What entry would Symphony record for the dishonored note?
Grayson Bank agrees to lend the Trust Company $109,296 on January 1. Trust Company signs a $109,296, 10%, 9-month, interest-bearing note. The entry made by Trust Company on January 1 to record the proceeds and issuance of the note is: Select the correct answer. Interest Expense$8,197 Cash$101,099 Notes Payable$109,296 Cash$121,592 Interest Expense$8,197 Notes Payable$109,296 Interest Payable$4,099 Cash$117,493 Interest Expense$8,197 Notes Payable$109,296 Cash$109,296 Notes Payable$109,296
8. On January 1, 20x1, ABC Bank extended a P1,000,000 loan to XYZ. Principal is due on December 31, 20x5 but 10% interest is due annually starting December 31, 20x1. On December 31, 20x3, XYZ was delinquent and it was ascertained that the loan is credit-impaired. ABC assessed those interests accruing on the loan will not be collected however the principal is expected to be collected in two equal annual installments starting December 31, 20x4. The current rate on December 31, 20x3 is 14%. The carrying amount of the loan receivable on December 31, 20x4 will approximately be (use 6-decimal present value factor) The correct answer is: 454,545 REQUIRED: Provide a step-by-step solution.
Consider the following accounts and determine if the account is a current liability, a noncurrent liability, or neither. A. cash B. federal income tax payable this year C. long-term note payable D. current portion of a long-term note payable E. note payable due in four years F. interest expense G. state income tax
25 )
Solve and explain the reason why it is the answer.
Good night
Question. Jamaica Corporation carried out the following transactions involving note payable. During the fiscal year ended December 31, 2020. Aug 6 Borrowed $ 15,200 from Tony Stark, issuing to him a 45 da, 14% note payable. Sept. 16 Purchased office equipment from Ikea Company. The invoice amount was $18,800 and Ikea Company agreed to accept as full payment a 3-month, 15% note for the invoice amount. Sept. 20 Paid Tony Stark note plus accrued interest. Nov.1 Borrowed $ 2,35,000 from Nation Commercial Bank at an interest rate of 12% per annum; signed a 90-days note payable for $ 2,42,256, which included a $7,056 interest charge in the face amount. Dec.1 Purchased merchandise in the amount of $13,000 from Stephens & Co. Gave in settlement a 60-day note nearing interest at 15% (Perpetual inventory system is deployed). Dec. 16 The $18,800 note payable to Ikea Company matured today. Paid the interest accrued and issued new 30-days, 12% note to replace the maturing…
Ghugho