Exam 10: Liabilities

On January 1, 2018, Howard Company, a calendar-year company, issued $900,000 of notes payable, of which $225,000 is due on January 1 for each of the next four years. The proper balance sheet presentation on December 31, 2018, is

Megan Stone is discussing the advantages of the effective-interest method of bond amortization with her accounting staff. What do you think Megan is saying?

Current liabilities generally appear

Presented below are three independent situations: (a) Strike Corporation purchased $380,000 of its bonds on June 30, 2018, at 102 and immediately retired them. The carrying value of the bonds on the retirement date was $371,500. The bonds pay annual interest and the interest payment due on June 30, 2018, has been made and recorded. (b) Worton, Inc. purchased $400,000 of its bonds at 96 on June 30, 2018, and immediately retired them. The carrying value of the bonds on the retirement date was $395,000. The bonds pay annual interest and the interest payment due on June 30, 2018, has been made and recorded. (c) Mountain Company has $80,000, 10%, 12-year convertible bonds outstanding. These bonds were sold at face value and pay annual interest on June 30 and December 31 of each year. The bonds are convertible into 40 shares of Mountain $4 par value common stock for each $1,000 par value bond. On December 31, 2018, after the bond interest has been paid, $30,000 par value of bonds were converted. The market value of Mountain's common stock was $38 per share on December 31, 2016. Instructions For each of the independent situations, prepare the journal entry to record the retirement or conversion of the bonds.

Notes payable usually are issued to meet long-term financing needs.

Notes payable are often used instead of accounts payable.

213. Hooke Company received proceeds of $377,000 on 10-year, 8% bonds issued on January 1, 2017. The bonds had a face value of $400,000, pay interest annually on June 30 and December 31, and have a call price of 101. Hooke uses the straight-line method of amortization. What is the amount of interest expense Hooke will show with relation to these bonds for the year ended December 31, 2018?

Which one of the following amounts increases each period when accounting for long-term notes payable?

Reliable Insurance Company collected a premium of $36,000 for a 1-year insurance policy on May 1. What amount should Reliable report as a current liability for Unearned Insurance Revene at December 31?

Which of the following is not an advantage of issuing bonds instead of common stock?

BE 250 On January 1, 2018, Bose Company issued bonds with a face value of $600,000. The bonds carry a stated interest of 7% payable each January 1. Instructions a. Prepare the journal entry for the issuance assuming the bonds are issued at 95. b. Prepare the journal entry for the issuance assuming the bonds are issued at 105. ,

193. Either the straight-line method or the effective-interest method of amortization will always result in

The following section is taken from Blue Corp's balance sheet at December 31, 2017. Interest is payable annually on January 1. The bonds are callable on any interest date. Instructions (a) Journalize the payment of the bond interest on January 1, 2018. (b) Assume that on January 1, 2018, after paying interest, Blue calls bonds having a face value of $600,000. The call price is 106. Record the redemption of the bonds. (c) Prepare the entry to record the accrual of interest on December 31, 2018, assuming no previous accrual of interest on the remaining bonds.

Secured bonds are bonds that

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. The entry made by Givens Brick Company on January 1 to record the proceeds and issuance of the note is

224. On January 1, Jorge Inc. issued $3,000,000, 8% bonds for $2,817,000. The market rate of interest for these bonds is 9%. Interest is payable annually on December 31. Jorge uses the effective-interest method of amortizing bond discount. At the end of the first year, Jorge should report unamortized bond discount of:

221. Silk Company issued $500,000 of 7%, 10-year bonds on its interest date for $431,850 to yield an effective annual rate of 9%. The effective-interest method of amortization is to be used. How much bond interest expense (to the nearest dollar) should be reported on the income statement for the end of the first year?

Under IFRS, the proceeds from the issuance of convertible debt are reported as

A debt that is expected to be paid within one year through the creation of long-term debt is a current liability.

Sales taxes collected by the retailer are recorded as a(n)