Exam 10: Reporting and Analyzing Liabilities

Perez Co. receives $2,200,000 when it issues a $2,200,000, 8%, mortgage note payable to finance the construction of a building at December 31, 2014. The terms provide for semiannual installment payments of $140,820 on June 30 and December 31. Instructions Prepare the journal entries to record the mortgage loan and the first two installment payments.

A retail store credited the Sales Revenue account for the sales price and the amount of sales tax on sales. If the sales tax rate is 5% and the balance in the Sales Revenue account amounted to $252,000, what is the amount of the sales taxes owed to the taxing agency?

If the market rate of interest is greater than the contractual rate of interest, bonds will sell

Notes payable usually require the borrower to pay interest.

The interest charged on a $250,000 note payable, at the rate of 6%, on a 90-day note would be

If $500,000 par value bonds with a carrying value of $476,000 are redeemed at 97, a loss on redemption will be recorded.

Larson Company issued $750,000 of 8%, 5-year bonds at 106. Assuming straight-line amortization and annual interest payments, what is the amount of the amortization at each interest payment point?

The statement "Bond prices vary inversely with changes in the market rate of interest" means that if the

Corporations are granted the power to issue bonds through

If bonds are originally sold at a discount using the straight-line amortization method

The journal entry to record the issuance of bonds at a discount will include a

Selected data from 2014 financial statements of Xi Corporation include the following (amount in millions): Current assets ¥ 759 Current assets ¥759 Total assets 1,200 Current liabilities 400 Total liabilities 750 Cash 80 Interest expense 50 income taxes 100 Net income 160 The debt to assets ratio is

The following totals for the month of March were taken from the payroll records of Kern Company. Salaries $54,000 FICA taxes withheld 4,131 Income taxes withheld 11,880 Medical insurance deductions 783 Federal unemployment taxes 432 State unemployment taxes 2,700 The entry to record the payment of net payroll would include a

The following totals for the month of April were taken from the payroll records of Noll Company. Salaries $60,000 FICA taxes withheld 4,590 Income taxes withheld 12,500 Medical insurance deductions 2,250 Federal unemployment taxes 160 State unemployment taxes 1,080 The entry to record the accrual of federal unemployment tax would include a

The times interest earned is computed by dividing net income by interest expense.

A $20,000, 8%, 9-month note payable requires an interest payment of $1,200 at maturity.

Notes payable are often used instead of accounts payable.

Fornelli Corporation borrowed $480,000 from Central Bank on May 31, 2013. The three-year, 7% note required annual payments of $182,904 beginning May 31, 2014. Interest expense for the year ended December 31, 2013 was

All of the following are true regarding financial statement analysis ratios associated with liabilities except

Regardless of whether the straight-line method or the effective-interest method is used, the carrying value of a bond issued at a discount will decrease continually over the bond's life.