Exam 10: Reporting and Interpreting Liabilities

Gross earnings for the pay period are $100,000.Required payroll deductions are: Social Security $6,700; Medicare $1,450; Federal Income tax $18,000 and State income tax $3,850.The journal entry to record wages paid includes a:

Debentures are:

Choose the appropriate letter to match the term and the definition.Not all definitions will be used. Term 1._____ Accrued liability 2._____ Loan covenant 3._____ Issue price 4._____ Face value 5._____ Line of credit 6._____ Public debt offering 7._____ Security 8._____ Contingent liability 9._____ Debt-to-assets ratio Definition A.Bond features that allow the issuer to repay the loan early. B.A prearranged agreement that allows a company to borrow at will up to a limit. C.This item is reported as a contra asset account. D.The amount that the lender actually pays for a bond. E.The cost of issuing a bond. F.Debt features that,if violated,allow the lender to revise loan terms. G.The total amount of money that a company owes in debt. H.The amount a company must repay creditors when a bond matures. I.These are liabilities that have been incurred during the period but not yet paid. J.When a company borrows money by issuing bonds in the financial markets. K.A bond feature that allows a creditor to seize assets if debt is not properly repaid. L.This type of liability is uncertain; it exists only if some other condition occurs. M.Total liabilities divided by total assets.

The following information was obtained from Quayle Company's income statement: What is the times interest earned ratio?

Acme Enterprises began the year owing its suppliers $3,000 for merchandise purchased last year.Acme then sold half of this merchandise for $5,000 on account.Two weeks later,Acme paid its suppliers $1,000 and bought another $4,000 of merchandise on account.Acme now has an Accounts Payable balance of:

Leanley Co.issues $100,000 of 10-year,10% bonds on January 1,2016. Required: Determine the amounts (bonds payable,unamortized premium or discount,and bonds payable,net)that will be reported on a balance sheet prepared as of the date of issuance of January 1,2016 under each of the following assumptions: Part a.The bonds are sold at 100. Part b.The bonds are sold at 104. Part c.The bonds are sold at 98.

Current liabilities could include all of the following except:

Some bonds allow the issuing company to retire the bond with cash at any time.These bonds are known as:

Which of the following statements about payroll is correct?

Brief Respite,Inc.sold underwear made from a fabric that gave many of its customers a serious rash.The customers are suing the company in a class action suit.Although the verdict is not yet in,Brief Respite's attorneys think it is probable that the case will cost the company $2 million.The company should:

The net amount of a bond liability that appears on the balance sheet is equal to the face value of the bond plus any related discount or minus any related premium.

Use the information above to answer the following question.What is the issue price of these bonds?

The Discounts on Bonds Payable account is classified as a(n):

On January 1,2016,a company issues 3-year bonds with a face value of $200,000 and a stated interest rate of 8%.Because the market interest rate is higher than the stated interest rate,the company receives $194,000 for the bond. Required: Fill in the table assuming the company uses the straight-line bond amortization.

For the employee,net pay is equal to gross earnings minus:

Current liabilities are due:

Because interest rates have fallen,a company retires bonds which had been issued at their face value of $200,000.The company bought the bonds back at 97.The journal entry to record this retirement includes a debit of:

Some bonds mature in installments.If a bond issue contains this feature,the bonds are known as:

Your company sells $50,000 of one-year,10% bonds for an issue price of $52,000.The journal entry to record this transaction will include a credit to Bonds Payable in the amount of:

On December 1,2015,Newco borrowed $200,000 from First National Bank,and signed a 9% note payable due in one year.Interest on the note is due at maturity. Required: Part a.Prepare the journal entry to record the borrowing transaction. Part b.Prepare the required adjusting entry on December 31,2015. Part c.Prepare the journal entry to record the payment of the interest on December 1,2016. Part d.Prepare the journal entry to record the payment of the note on December 1,2016.