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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
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...
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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%
Transcribed Image Text: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%
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