Exam 7: Accounting for and Presentation of Liabilities

On September 30, 2017, David's Co.'s treasurer signed a note promising to pay $260,000 on December 31, 2017. Proceeds of the note were $250,900.(a.) Calculate the discount rate used by the lender.(b.) Calculate the effective interest rate on the loan.(c.) Write the journal entry to show the effect of recording interest expense for the month of October. (Round to the nearest whole dollar)

Many airlines have frequent flyer programs that permit travelers to accumulate credits that can be applied to the cost of tickets for future flights. Most airlines recognize the cost of their frequent flyer programs when the credits are used to purchase tickets. This practice, which seems to ignore the matching concept, results in:

The payment of a current liability will:

A magazine publisher has an account called "Unearned Subscription Revenue." The transaction that causes the balance of this account to decrease is:

Ariel, Inc., issued $60 million face amount of 9% bonds when market interest rates were 9.30% for bonds of similar risk and other characteristics.(a.) How much interest will be paid annually on these bonds? (b.) Will the bonds be issued at a premium or discount? Explain your answer.(c.) Will the annual interest expense on these bonds be more than, equal to, or less than, the amount of interest paid each year? Explain your answer.

The liability for product warranty claims is an example of a liability that:

Southern Company's accountant failed to accrue as of 12/31/16 some employee fringe benefit program expenses that were incurred in 2016 and that will be paid in 2017. The result of this omission is to:

At December 31, 2016, the end of the first year of operations at Xavion Inc., the firm's accountant neglected to accrue payroll taxes of $55,400 that were applicable to payrolls for the year then ended.(a.) Write the journal entry or use the horizontal model to show the effect of the accrual that should have been made as of December 31, 2016.(b.) Determine the income statement and balance sheet effects of not accruing 2016 payroll taxes at December 31, 2016 (assuming that the payroll taxes were not accrued, as originally stated).(c.) Assume that when the payroll taxes were paid in January 2017, the payroll tax expense account was charged. Assume that at December 31, 2017, the accountant again neglected to accrue the payroll tax liability, which was $40,800 at that date. Determine the income statement and balance sheet effects of not accruing 2017 payroll taxes at December 31, 2017.

Many current liabilities are affected by accrual accounting entries. This happens because:

The noncurrent liability, Noncontrolling Interest, arises if:

Financial leverage refers to which of the following?

Current maturities of long-term debt:

Computing a borrower's effective interest rate is another application of which of the following concepts?

The financial leverage characteristic of long-term debt results in:

When borrowing money, the most important objective of the borrower should be to:

The current liability for Wages Payable (or Accrued Payroll) represents the:

Cassady, Inc. borrowed $25,000 for 3 months at an APR of 10%. The amount of interest paid on this loan was:

On March 15, 2017, Birkshire Energy obtained a nine-month working capital loan from the First National Bank of Oglesby. The face amount of the note signed by the treasurer was $900,000. The interest rate charged by the bank was 10 percent. The bank made the loan on a discount basis. (Round your final answers to the nearest dollar).(a.) Calculate the loan proceeds made available to Birkshire.(b.) Calculate the amount of interest expense related to this loan during the six months ended June 30, 2017.(c.) What is the amount of the current liability related to this loan to be shown in the June 30, 2017, balance sheet?

Claudette, Inc., provides warranties for many of its products. The January 1, 2017, balance of the Estimated Warranty Liability account was $77,000. Based on an analysis of warranty claims during the past several years, this year's warranty provision was estimated to be 0.8 percent of sales. During 2017, the actual costs of servicing products under warranty were $102,000, and sales were $10,600,000.(a.) What amount of Warranty Expense will appear on the income statement for 2017? (b.) What amount will be reported in the Estimated Warranty Liability account on the December 31, 2017, balance sheet?

For the payroll period ended on October 19, 2016, gross pay was $22,300, net pay was $17,000, FICA tax withholdings were $1,500, income tax withholdings were $3,000, and medical insurance contributions were $800.Required: Use the horizontal model (or write the journal entry) to show the effects of the payroll accrual on October 19, 2016.