Exam 9: Current Liabilities and Long-Term Debt

What is a major difference between an account payable and a note payable?

If a $6,000, 10% , 10-year bond was issued at 104 on October 1, 2011, how much interest will accrue on December 31 if interest payments are made annually?

Based on the below information for December 31st, calculate the current ratio and debit ratio for each year. Indicate whether or not the company's ability to meet its current obligations and pay its overall debt has improved or deteriorated.

Identify whether the following December 31, 2012 information from Jessica Industries would be a known, estimated, or contingent liability: 1. Salary expense for the last payroll for the year was $52,000. It is expected to be paid out January 2, 2013. 2. The company's December taxable sales were $253,000. Jessica Industries is required to collect HST (13%) on its sales which is to be remitted January 5, 2013. 3. Jessica Industries extends its customers a one-year warranty on its product sold. The rate of warranty repairs is 2% of sales. 4. The company had waste which polluted a nearby lake. The clean-up is likely to cost $325,000-$350,000. 5. Issued $100,000, 8%, five-year bond when the market rate of interest was 10%.

Journalize the following transactions for Southport Company: April 1, 2012 Bought an $11,000 machine on a 12-month, 9% note. The machine has a useful life of five years and is depreciated on a straight-line basis. Dec 31, 2012 Recorded accrued interest on the note and depreciation on the machine. April 1, 2013 Paid note from April 1, 2011.

There are times when contingent liabilities are never recorded.

Are estimated liabilities generally classified as current or long-term liabilities?

Debenture bonds are the same as __________ bonds.

Even liabilities of unknown amounts are required to be placed on the balance sheet.

Which of the following would be considered a contingent liability?

The largest portion of accounts payable for most merchandising companies is related to the purchase of inventory on account.

A past transaction or event must have occurred for a __________ to exist.

A company receives a note payable for $5,000 at 10% for 50 days. How much interest (to the nearest cent) will the customer owe?

Bonds that can be exchanged for stock are called __________ bonds.

Leases that are treated as financed purchases are called:

Record the following sales transactions for Meranda Company: Oct 3 Had sales of $3,500 in cash and $6,000 in credit. The harmonized sales tax (HST) is 13%. Oct 8 Had cash sales of $12,000 plus 13% HST. Nov 15 Paid HST for Oct. 3 and Oct. 8 sales. Nov 30 Received customer payment for Oct. 3 outstanding accounts receivable.

Bonds payable are supported by a promissory note.

If the market rate of interest is greater than the bond's stated rate of interest, the bond will be issued at __________.

Which of the following would be considered a contingent liability?

A mortgage is a secured note because the building serves as collateral.