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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.

Phoenix Agency leases office space for $7,000 per month. On January 3, Phoenix incurs $65,000 to improve the leased office space. These improvements are expected to yield benefits for 8 years. Phoenix has 5 years remaining on its lease. Compute the amount of expense that should be recorded the first year related to the improvements.

A patent is an exclusive right granted to its owner to manufacture and sell a patented device or to use a process for 20 years.