Exam 10: Reporting and Analyzing Liabilities

Grand Company issued $800,000, 10%, 20-year bonds on January 1, 2014, at 104. Interest is payable annually on January 1. Grand uses the straight-line method of amortization and has a calendar year end. Instructions Prepare all journal entries made in 2014 related to the bond issue.

Which of the following statements concerning bonds is not a true statement?

A corporation issues $200,000, 10%, 5-year bonds on January 1, 2014, for $191,600. Interest is paid annually on January 1. If the corporation uses the straight-line method of amortization of bond discount, the amount of bond interest expense to be recognized in December 31, 2014's adjusting entry is

If the straight-line method of amortization is used, the amount of yearly interest expense will increase as the bonds approach maturity.

Chang Company retired bonds with a face amount of ¥60,000,000 at 98 when the carrying value of the bond was ¥59,780,000. The entry to record the retirement would include a

The interest charged on a $70,000 note payable, at the rate of 6%, on a 90-day note would be

When a business sells an item and collects a state sales tax on it, a current liability arises.

A retailer that collects sales taxes is acting as an agent for the

In providing accounting services to small business, you encounter the following situations pertaining to cash sales. (1) Kushner Company rings up sales and sales taxes separately on its cash register. On April 10 the register totals are sales $40,000 and sales taxes $2,800. (2) Grant Company does not segregate sales and sales taxes. Its register total for April 15 is $22,260, which includes a 6% sales tax. Instructions Prepare the entries to record the sales transactions and related taxes for (a) Kushner Company and (b) Grant Company.

If bonds have been issued at a discount, then over the life of the bonds the

The amount of sales tax collected by a retail store when making sales is

When the straight-line method of amortization is used for a bond premium, the amount of interest expense for an interest period is calculated by

If bonds are issued at a discount, it means that the

Secured bonds are bonds that

A corporation issues $200,000, 8%, 5-year bonds on January 1, 2014, for $208,400. Interest is paid annually on January 1. If the corporation uses the straight-line method of amortization of bond premium, the amount of bond interest expense to be recognized in December 31, 2014's adjusting entry is

If a retailer sells goods for a total price of $200, which includes a 5% sales tax, the amount of the sales tax is $9.52.

Current liabilities are due

The interest expense recorded on an interest payment date is increased

The sale of bonds above face value

The board of directors may authorize more bonds than are issued.