Exam 10: Reporting and Interpreting Liabilities

Choose the appropriate letter to match the term and the definition.Not all definitions will be used. Term: 1._____ Current liabilities 2._____ Effective interest method of amortization 3._____ Straight-line method of amortization 4._____ Times interest earned ratio 5._____ Long-term liabilities 6._____ Present value Definition: A.A bond feature that puts a creditor ahead of other creditors in order of payment. B.Current liabilities divided by current assets. C.These are liabilities that have to be paid in one year or less. D.Net income before taxes and interest expense divided by interest expense. E.Spreads a bond discount or premium evenly over the lifetime of the bond. F.The amount of all the liabilities currently on the balance sheet at the close of the period. G.Where interest expense is the market interest rate times the bond's carrying value. H.Net income after taxes and interest expense divided by interest expense. I.These are liabilities that do not have to be paid within the upcoming year. J.The ability to pay current obligations. K.Liquid assets divided by current liabilities. L.A calculation that determines what some future payments are worth today.

A company pays $18,000 in interest on notes,consisting of $12,000 interest that was accrued during the last accounting period and $6,000 of interest that accumulated during the current accounting period but has not yet been accrued on the books.The journal entry for the interest payment should:

Bonds that are not backed by collateral are referred to as "debentures."

A contingent liability is:

The entry to record the issuance of a note for cash was recorded with a debit to Cash and a credit to Notes Receivable.The effect of recording this entry causes:

The Discount on Bonds Payable account is reported in the financial statements as:

What kind of account is Unearned Revenue?

Many lending agreements require the borrowing company to maintain certain financial standards as demonstrated by its financial statements.This feature is known as a:

Which of the following must be paid by both the employee and the employer?

Employer payroll taxes:

When the amount of a contingent liability cannot be reasonably estimated but its likelihood is probable,the company should:

Hubbard Street Dance Company sells subscriptions for its monthly dance performances.The company received annual subscription payments on November 15,2015 for performances that will take place during 2016 in the amount of $120,000.The subscription payments will be earned equally throughout each month. Required: Part a.Describe how the subscription payments should be reported in the balance sheet and income statement on December 31,2015 Part b.Describe how the subscription payments should be reported in the balance sheet and income statement on January 31,2016. Part c.Prepare the journal entry for the receipt of annual subscription payments on November 15,2015. Part d.Prepare the required adjusting entry for the subscription payments on January 31,2016.

Use the information above to answer the following question.What journal entry would be made to record this bond issuance?

Bondholders are willing to pay a premium to acquire a bond because the:

Your company sells $50,000 of bonds for an issue price of $48,000.Which of the following statements is correct?

Which of the following statements about bonds and notes is not correct?

Zorn Inc.makes a sale for $300.The company is required to collect sales taxes amounting to 9%.What is the amount that will be credited to the Sales Tax Payable account?

Operating cycles are generally longer than a year.

Payroll deductions:

Bonds allow a company to borrow large sums of money from many different investors.