Exam 7: Accounting for Liabilities

Team Shirts has current assets of $162,348; total assets of $210,837; current liabilities of $86,941; total liabilities of $101,745; and shareholders' equity of $109,092.Calculate the debt-to-equity ratio.

Team Shirts issued 10-year bonds with a face value of $100,000.The bonds carry a 7% stated interest rate and pay interest once a year.They were issued when the market interest rate was 6%. a.Calculate the present value of the bond issue. b.Were these bonds issued at a premium or at a discount? c.What is the amount of the premium or discount on the bond issue? d.Calculate the amount of the amortization of the bond premium or discount for the first year,using the effective interest method.

Tim's Wear issued 15-year bonds with a face value of $50,000.The bonds carry a 7% stated interest rate and pay interest once a year.They were issued when the market interest rate was 6%. a.Calculate the present value of the bond issue. b.Were these bonds issued at a premium or at a discount? c.What is the amount of the premium or discount on the bond issue? d.Calculate the amount of the amortization of the bond premium or discount for the first year,using the effective interest method.

Another term used for the stated rate is the ________ rate.

Tracy's Wear issued 10-year bonds with a face value of $60,000.The bonds carry a 7% stated interest rate and pay interest once a year.They were issued when the market interest rate was 8%. a.Calculate the present value of the bond issue. b.Were these bonds issued at a premium or at a discount? c.What is the amount of the premium or discount on the bond issue? d.Calculate the amount of the amortization of the bond premium or discount for the first year,using the effective interest method.

In December 2011,Homer Simpson worked for Springfield Power and earned $5,000.Federal income tax withholding is 15%.The FICA rate is 6.2% and the Medicare tax is 1.45%.How much payroll tax expense will Springfield Power record when it pays these taxes?

What are definitely determinable liabilities and estimated liabilities?

In December 2011,B.Rich worked for Payless,Inc.and earned $10,000.Federal income tax withholding is 20%.The FICA rate is 6.2% and the Medicare tax is 1.45%.How much of B.Rich's December salary will be included in Salary expense on Payless' income statement for the year ended December 31,2011?

Indicate with an "X" whether each description results in the reporting of a definitely determinable liability,an estimated liability or neither on the company's balance sheet.Assume a December 31,2011 yearend.

In December 2011,B.Rich worked for Payless,Inc.and earned $10,000.Federal income tax withholding is 20%.The FICA rate is 6.2% and the Medicare tax is 1.45%.What is B.Rich's net pay?

On January 1,2011,Ace Electronics borrowed $40,000 on a five-year,7% note.The loan will be repaid in 5 equal installments of $9,756 each year,beginning on December 31,2011.Interest expense for the year ended December 31,2012 will be ________ interest expense for 2011.

Marcy wants to expand her catering business.However,she was raised to avoid debt at all costs and prefers to have cash in hand before buying anything.She has $15,000 in cash available for expansion,but the total estimated cost of the expansion is $100,000.Explain to Marcy the advantages and disadvantages using a long-term note payable to finance the expansion.

Present value is the amount a future sum of money is worth today.

On NOVEMBER 30,2011,Just in Thyme,Inc.issued $10,000 of 20-year,9% bonds at 100.The bonds pay interest SEMIANNUALLY on May 31 and November 30.How much cash did Just in Thyme receive when the bonds were issued?

In December 2010,Bob Cratchit worked for Scrooge & Marley and earned $1,000.Federal income tax withholding is 10%.The FICA rate is 6.2% and the Medicare tax is 1.45%.How much cash will Scrooge & Marley pay the government for Medicare tax because of Bob's December earnings?

On January 1,2011,Dew Drop Inn borrowed $80,000 at 8% interest.The loan will be repaid with equal annual installment payments of $8,900 made on the last day of each year,which is the companys yearend.Compared to the prior year's interest expense on this note,interest expense for the year ended December 31,2012 (2^{nd year)} is ________.

On SEPTEMBER 30,2011,Ace Electronics issued $100,000 of 10-year,8% bonds at 100.The bonds pay interest semiannually on September 30 and March 31.How much cash will the company pay for interest on March 31,2012,the first interest payment date?

Use the following information taken from a financial website to answer the following question(s): -Refer to the information above.Is IBM's coupon rate higher or lower than the market rate of interest for bonds with an A rating?

On July 1,2011,Ace Electronics issued $10 million dollars of 8%,20-year bonds at 102.The bonds pay interest semiannually on December 31 and June 30.The bonds sold at 102 because ________.