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Revising an estimate of the useful life or salvage value of a plant asset is referred to as a change in accounting estimate and is reflected in the current, and future financial statements.

Payments on an installment note normally include the accrued interest expense plus a portion of the amount borrowed.

A company’s debt-to-equity ratio was 1.0 at the end of Year 1. By the end of Year 2, it had increased to 1.7. Since the ratio increased from Year 1 to Year 2, the degree of risk in the firm’s financing structure decreased during Year 2.

Unearned revenues are current liabilities.

A company issued 8%, 15-year bonds with a par value of $550,000 that pay interest semiannually. The market rate on the date of issuance was 8%. The journal entry to record each semiannual interest payment is:

A disadvantage of bond financing is:

Payments on an installment note normally include the accrued interest expense plus a portion of the amount borrowed.

Unearned revenues are current liabilities.

Indenture refers to a bond’s legal contract; debenture refers to an unsecured bond.

The use of debt financing ensures an increase in return on equity.