Exam 10: Reporting and Analyzing Liabilities

Warner Company issued $4,000,000 of 6%, 10-year bonds on one of its interest dates for $3,454,800 to yield an effective annual rate of 8%. The effective-interest method of amortization is to be used. The journal entry on the first interest payment date, to record the payment of interest and amortization of discount will include a

The higher the sales tax rate, the more profit a retailer can earn.

The market rate of interest is often called the

Discount on bonds payable may be amortized by the straight-line method if the results obtained by its use do not materially differ from the results obtained by use of the effective-interest method.

A note payable must always be paid before an account payable.

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

Mantle Publications publishes a golf magazine for women. The magazine sells for $4.00 a copy on the newsstand. Yearly subscriptions to the magazine cost $36 per year (12 issues). During December 2013, Expert Publications sells 4,000 copies of the golf magazine at newsstands and receives payment for 6,000 subscriptions for 2014. Financial statements are prepared monthly. Instructions (a) Prepare the December 2013 journal entries to record the newsstand sales and subscriptions received. (b) Prepare the necessary adjusting entry on January 31, 2014. The January 2014 issue has been mailed to subscribers.

Material gains or losses on bond redemption are reported as an extraordinary item on the income statement.

The contractual interest rate is always equal to the market rate of interest on the date that bonds are issued.

The current market value of a bond is equal to the present value of all future cash payments promised by the bond.

Which of the following statements best describes the behavior over time of the components of equal mortgage payments?

Moss County Bank agrees to lend the Sadowski Brick Company $300,000 on January 1. Sadowski Brick Company signs a $300,000, 6%, 9-month note. What is the adjusting entry required if Sadowski Brick Company prepares financial statements on June 30?

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.

The following partial amortization schedule is available for Courtney Company who sold $500,000, five-year, 10% bonds on January 1, 2014 for $520,000 and uses annual straight-line amortization. Which of the following amounts should be shown in cell (i)?

The contractual rate of interest is usually stated as a(n)

Secured bonds are bonds that

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

Interest expense on a note payable is only recorded at maturity.

Tina's Boutique has total receipts for the month of $24,255 including sales taxes. If the sales tax rate is 5%, what are Tina's sales for the month?

An installment note calling for equal total payments each period will result in an interest portion that decreases in each successive period.