Exam 10: Liabilities

Aire Corporation retires its bonds at 106 on January 1, following the payment of annual interest. The face value of the bonds is $800,000. The carrying value of the bonds at the redemption date is $842,000. The entry to record the redemption will include a

Notes payable usually require the borrower to pay interest.

The times interest earned is computed by dividing

On January 1, 2018, Sunrise Corporation issued $4,000,000, 8%, 5-year bonds dated January 1, 2018, at 95. The bonds pay annual interest on January 1. The company uses the straight-line method of amortization and has a calendar year end. Instructions Prepare all the journal entries that Sunrise Corporation would make related to this bond issue through January 1, 2019. Be sure to indicate the date on which the entries would be made.

Bonds that are subject to retirement at a stated dollar amount prior to maturity at the option of the issuer are called

If $150,000 face value bonds are issued at 103, the proceeds received will be $103,000.

Each payment on a mortgage note payable consists of interest on the original balance of the loan and a reduction of the loan principal.

Adams Corporation issues a $9,000,000, 5%, 20-year mortgage note payable on December 31, 2018, to obtain needed financing for the construction of a building addition. The terms provide for annual installment payments of $722,183 on December 31. Instructions (a) Prepare the journal entries to record the mortgage loan on December 31, 2018, and the first installment payment. (b) Will the amount of principal reduction in the second installment payment be more or less than with the first installment payment?

Most companies pay current liabilities

Under IFRS, liabilities

When an interest-bearing note matures, the balance in the Notes Payable account is

Sophia Company is considering two alternatives to finance its purchase of a new $4,000,000 office building. (a) Issue 400,000 shares of common stock at $10 per share. (b) Issue 7%, 10-year bonds at par ($4,000,000). Income before interest and taxes is expected to be $3,500,000. The company has a 30% tax rate and has 600,000 shares of common stock outstanding prior to the new financing. Instructions Calculate each of the following for each alternative: (1) Net income. (2) Earnings per share.

200. Presented here is a partial amortization schedule for Roseland Company who sold $300,000, five year 10% bonds on January 1, 2017 for $312,000 and uses annual straight-line amortization. Which of the following amounts should be shown in cell (v)?

Crawford Company has total proceeds (before segregation of sales taxes) from sales of $7,155. If the sales tax is 6%, the amount to be credited to the account Sales Revenue is:

209. A corporation issues $500,000, 8%, 10-year bonds on January 1, 2018 for $479,000. Interest is paid annually on January 1. If the corporation uses the straight- line method of amortization of bond discount, the amount of bond interest expense to be recognized on December 31, 2018 is

Which one of the following payroll taxes does not result in a payroll tax expense for the employer?

BE 251 On January 1, 2018, Frog Corporation issued $800,000, 8%, 10-year bonds at face value. Interest is payable annually on January 1. Frog Corporation has a calendar year end. Instructions Prepare all entries related to the bond issue for 2018.

Admire County Bank agrees to lend Givens Brick Company $600,000 on January 1. Givens Brick Company signs a $600,000, 8%, 9-month note. What is the adjusting entry required if Givens Brick Company prepares financial statements on June 30?

The current portion of long-term debt should

Slotkin Health is considering two alternatives for the financing of some high technology medical equipment. These two alternatives are: 1. Issue 60,000 shares of $10 par value common stock at $50 per share. 2. Issue $3,000,000, 8%, 10-year bonds at par. It is estimated that the company will earn $900,000 before interest and taxes as a result of acquiring the medical equipment. The company has an estimated tax rate of 40% and has 80,000 shares of common stock outstanding prior to the new financing. Instructions Determine the effect on net income and earnings per share for these two methods of financing.