Exam 10: Liabilities

If $500,000 par value bonds with a carrying value of $476,000 are redeemed at 97, a loss on redemption will be recorded.

Kelly Rice has a large consulting practice. New clients are required to pay one-half of the consulting fees up front. The balance is paid at the conclusion of the consultation. How does Rice account for the cash received at the end of the engagement?

Which one of the following is shown first under current liabilities by many companies as a matter of custom?

A company whose current liabilities exceed its current assets may have a liquidity problem.

Magic Company issued $500,000, 8%, 10-year bonds on December 31, 2017, for $470,000. Interest is payable annually on December 31. Magic uses the straight-line method of amortization and has a calendar year end. Instructions Prepare the appropriate journal entries on (a) December 31, 2017. (b) December 31, 2018.

Flores Company publishes a monthly sports magazine, Hunting Preview. Subscriptions to the magazine cost $25 per year. During October 2017, Flores sells 30,000 subscriptions beginning with the November issue. Flores prepares financial statements quarterly and recognizes subscription revenue earned at the end of the quarter. The company uses the accounts Unearned Subscription Revenue and Subscription Revenue. Instructions (a) Prepare the entry in October for the receipt of the subscriptions. (b) Prepare the adjusting entry at December 31, 2017, to record subscription revenue earned in December 2017. (c) Prepare the adjusting entry at March 31, 2018, to record subscription revenue earned in the first quarter of 2018.

On January 1, 2018, Lost Corporation issued $900,000, 8%, 10-year bonds at face value. Interest is payable annually on January 1. Lost Corporation has a calendar year end. Instructions Prepare all entries related to the bond issue for 2018 and January 1, 2019.

If sixty $1,000 convertible bonds with a carrying value of $70,000 are converted into 9,000 shares of $5 par value common stock, the journal entry to record the conversion is

Layton Inc. is considering two alternatives to finance its construction of a new $5 million plant. (a) Issuance of 500,000 shares of common stock at the market price of $10 per share. (b) Issuance of $5 million, 9% bonds at par. Instructions

The carrying value of bonds is calculated by adding the balance of the Discount on Bonds Payable account to the balance in the Bonds Payable account.

The relationship between current liabilities and current assets is important in evaluating a company's ability to pay off its long-term debt.

Each of the following is correct regarding bonds except they are

Companies with good credit ratings use _________________ bonds extensively.

Pickett Company typically sells subscriptions on an annual basis, and publishes six times a year. The magazine sells 90,000 subscriptions in January at $15 each. What entry is made in January to record the sale of the subscriptions?

Bonds issued against the general credit of the borrower are called

Sales taxes collected by a retailer are expenses

Advances from customers are classified as a(n)

BE 258 On January 1, 2018, Tape Enterprises issued 9%, 10-year bonds with a face amount of $700,000 at 96. Interest is payable annually on January 1. The bonds were issued for an effective interest rate of 10%. Instructions Prepare the entries to record the issuance of the bonds and the first annual interest accrual and amortization assuming that the company uses effective-interest amortization.

The sale of bonds above face value

Douglas Company issued a $4,500,000, 10%, 10-year mortgage note payable to finance the construction of a building at December 31, 2018. The terms provide for annual installment payments of $732,354. Instructions Prepare the entry to record: (a) the mortgage loan on December 31, 2018. (b) the first installment payment.