Exam 10: Liabilities

Brief Respite,Inc.sold underwear made from a fabric that gave many of its customers a serious rash.The customers are suing the company in a class action suit.Although the verdict is not yet in,Brief Respite's attorneys think it is probable that the case will cost the company $2 million.The company should:

Which of the following statements about payroll is correct?

Match each term with the appropriate definition.Not all definitions will be used. -Times interest earned ratio

Some bonds mature in installments.If a bond issue contains this feature,the bonds are known as:

On January 1,Melrose Manufacturing issues a 5-year bond with a face value of $15,000 and a stated interest rate of 7%.The market interest rate is 5%.The issue price of the bond was $16,299.Using the effective-interest method of amortization and rounding to the nearest dollar,the interest expense for the first year ended December 31 would be:

Employer payroll taxes:

On September 1,2019,Rowen Manufacturing issued a $90,000,6-month,9% note payable to purchase equipment.At December 31,2019,the company records an adjusting entry to accrue interest incurred by not paid.The company pays the note with interest at the maturity date. What is the adjusting journal entry at December 31 to record the accrued interest on the note payable?

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:

When the times interest earned ratio decreases,the likelihood of default on liabilities increases.

Travis County Bank agrees to lend Brickyard Corporation $200,000 on January 1.Brickyard signs a $200,000,4%,9-month note.Interest is due at maturity on September 30.The company's fiscal year ends June 30 and adjusting entries are recorded at that time only. What adjusting entry should Brickyard make on June 30 before preparing its annual financial statements?

Contingent liabilities must be recorded if the:

When a company issues bonds that include no periodic interest payments,the bonds are referred to as "zero-coupon" bonds.

Because interest rates have fallen,a company retires bonds which had been issued at their face value of $200,000.The company bought the bonds back at 97.The journal entry to record this retirement includes a debit of:

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

Bonds that are backed by collateral are referred to as:

On October 1,Pinnacle Co.signs a note for $360,000 to provide the funds needed to build a new facility.The note is due in 10 years,includes an annual interest rate at 7%,and requires semiannual interest payments each April and October.The journal entry to record the issuance of the promissory note should debit:

Which of the following statements about the issuance of bonds at a premium is not correct?

Sierra Blanca Co.is required to match $82,620 for its portion of FICA and $8,460 for federal and state unemployment taxes.The entry to record Sierra Blanca's payroll taxes includes:

On October 1,2018,Saddleback,Inc.negotiates with its bank to borrow $18,000 cash on a one-year note.The bank charges 5% interest.Interest payments are to be made in two installments,on March 31 and September 30.The principal is to be repaid on September 30,2019,the maturity date.What adjusting entry needs to be recorded of December 31,2018?

The annual interest payment on bonds: