Exam 10: Liabilities

On January 1,2018,a company issues 3-year bonds with a face value of $50,000 and a stated interest rate of 7%.Because the market interest rate is 9%,the company receives $47,469 for the bond. Required: Fill in the table assuming the company uses effective-interest bond amortization. Period Ended Cash Paid Interest Expense Amortized Discount Bonds Payable Discount on Bonds Payable Carrying Value 01/01/18 12/31/18 12/31/19 12/31/20

Accruing a liability always involves ________ expenses and ________ liabilities.

A corporate bond with a face value of $1,000 is issued at 107.This means that the bond actually sold for:

In October,the CEO of Saguaro,Inc.signs a note for $90,000 in order to buy new equipment.The note is due in five years,at 8% annual interest.Semiannual interest payments are due each April and October.Assuming no other long-term debt,what is the initial balance in the related long-term debt account?

When a company has a contingent liability that is remote in likelihood,the company should:

On December 31,2018,a company had assets of $16 billion and stockholders' equity of $8 billion.That same company had assets of $20 billion and stockholders' equity of $9 billion as of December 31,2019.During 2019,the company reported total sales revenue of $9 billion and total expenses of $7 billion.What is the company's debt-to-assets ratio on December 31,2019?

Amortizing a bond discount will ________ the discount balance and ________ the carrying value of the bond so that when the bond matures the carrying value will ________ the face value.

Match each term with the appropriate definition.Not all definitions will be used. -Loan covenant

The account entitled Premium on Bonds Payable:

On November 1,2018,Sky Mountain Co.borrowed $200,000 cash on a 1-year note payable with a 6% annual rate that requires Sky Mountain to pay all the interest as well as the principal on October 31,2019.Assuming the November 1 transaction was properly recorded,how would the December 31,2018,year-end adjusting entry affect the accounting equation?

ABC Company is in the process of issuing bonds.The bonds have a stated interest rate of 6%,which is 2% above the current market rate.What effect will the two interest rates have on the bond issue price?

On September 1,Sky Mountain Co.borrowed $200,000 on a 6%,9-month note payable to Coast National Bank.Given no previous adjusting entries have been recorded,Sky Mountain's adjusting entry four months later at December 31 would include a:

Teton Tax Service collects $440 for preparation of a tax return.The tax return will not be complete until the next accounting period.How does Teton record the $440 collected in advance?

A company issued 10-year,8% bonds with a face value of $200,000.Interest is paid annually.The market rate on the issue date was 7.5% and the company received $206,948 in cash proceeds.Which of the following statements is correct?

A company would record an entry with a debit to Bonds Payable and a credit to Cash on a bond's:

Which of the following statements about bond terminology is correct?

Match each term with the appropriate definition.Not all definitions will be used. -Current liabilities

A typical classified balance sheet provides no information about which of the following items?

The threshold for recording contingent liabilities under IFRS is higher than that under GAAP.

Match each term with the appropriate definition.Not all definitions will be used. -Issue price