Exam 10: Reporting and Analyzing Liabilities

Wittebury Corporation retires its £3,000,000 face value bonds at 105 on January 1, following the payment of annual interest. The carrying value of the bonds at the redemption date is $3,112,350. The entry to record the redemption will include

Liabilities are classified on the balance sheet as being _______________ liabilities or ______________ liabilities.

With an interest-bearing note, the amount of cash received upon issuance of the note generally exceeds the note's face value.

Obligations in written form are called ______________ and usually require the borrower to pay interest.

If the market rate of interest is 10%, a $10,000, 12%, 10-year bond that pays interest annually would sell at an amount

Neither corporate bond interest nor dividends are deductible for tax purposes.

On June 1, Huntley Company borrows $50,000 from the bank by signing a 60-day, 6%, interest-bearing note. Instructions Prepare the necessary entries below associated with the note payable on the books of Huntley Company. (a) Prepare the entry on June 1 when the note was issued. (b) Prepare any adjusting entries necessary on June 30 in order to prepare the monthly financial statements. Assume no other interest accrual entries have been made. (c) Prepare the entry to record payment of the note at maturity.

Current liabilities are expected to be paid within one year or the operating cycle, whichever is longer.

A current liability is a debt that can reasonably be expected to be paid

The following totals for the month of April were taken from the payroll records of Metz Company. Salaries $30,000 FICA taxes withheld 2,295 Income taxes withheld 6,600 Medical insurance deductions 1,200 Federal unemployment taxes 240 State unemployment taxes 1,500 The entry to record the accrual of federal unemployment tax would include a

Don's Pharmacy has collected $600 in sales taxes during March. If sales taxes must be remitted to the state government monthly, what entry will Don's Pharmacy make to show the March remittance?

Liabilities are classified on the balance sheet as current or

When a monthly mortgage payment is made and recorded, the debit to Mortgage Payable represents the reduction in the principal balance.

Winrow Company received proceeds of $565,500 on 10-year, 8% bonds issued on January 1, 2013. The bonds had a face value of $600,000, pay interest annually on December 31st, and have a call price of 101. Winrow uses the straight-line method of amortization. What is the amount of interest expense Winrow will show with relation to these bonds for the year ended December 31, 2014?

McDonald's financial statements contain the following selected data (in millions). Instructions (a) Compute the following values and provide a brief interpretation of each. (1) Working capital. (3) Debt to assets ratio. (2) Current ratio. (4) Times interest earned. (b) The notes to McDonald's financial statements show that subsequent to this year the company will have future minimum lease payments under operating leases of $10,513.8 million. If these assets had been purchased with debt, assets and liabilities would rise by approximately $9,400 million. Recompute the debt to assets ratio after adjusting for this. Discuss your result.

In a recent year Hart Corporation had net income of $125,000, interest expense of $30,000, and tax expense of $40,000. What was Hart Corporation's times interest earned for the year?

Whitmore Corporation Issues a £1,800,000, 10%, 10-year mortgage on December 31, 2014. The terms call for semi-annual installment payments of £144,435.The entry to record the first installment payment will include

If $180,000, 6%, bonds are issued on January 1, and pay interest annually, the amount of interest paid will be $10,800.

Brewer Company has the following selected accounts after posting adjusting entries: Accounts Payable \ 55,000 Notes Payable, 3-month 90,000 Accumulated Depreciation-Equipment 14,000 Notes Payable, 5-year, 8\% 75,000 Payroll Taxes Expense 6,000 Interest Payable 5,000 Mortgage Payable 180,000 Sales Taxes Payable 23,000 Instructions (a) Prepare the current liability section of Brewer Company's balance sheet, assuming $12,000 of the mortgage is payable next year. (b) Comment on Brewer's liquidity, assuming total current assets are $450,000.

Failure to record a liability will probably