Exam 7: Accounting for Liabilities

On January 1,2012,Ace Electronics borrowed $40,000 on a five-year,7% note.Ace will pay $\bold{\text{only the interest}}$ on the loan on December 31 each year.The entire principal will be repaid on December 31,2016,the last interest payment date.Notes payable at December 31,2013 will be ________ notes payable at December 31,2012.

What methods do analysts use to determine the impact of debt on a company's financial situation?

On December 31,IOU Corporation issued $100,000 of 10-year,8% bonds at 98.The bonds pay interest annually on December 31.How much cash will bondholders receive on the first interest payment date?

On October 31,2011,Bondable,Inc.issued $20,000 of 10-year,6% bonds at 100.The bonds pay interest annually on October 31.Which of the following will appear on Bondable's balance sheet at December 31,2011?

When a bond sells for 97,the bond is selling at ________.

Liabilities are recorded once the amount is definitely determinable.

Explain the difference between short-term notes payable and long-term installment notes payable.

Part A: Show the effect on the accounting equation of each of the events listed below: Part B: For each item listed below,fill in the correct dollar amount,even if it is $0,in the column that represents the financial statement where the item will appear:

Which of the following is NOT a definitely determinable liability?

On January 1,2011,Alpha Company issued $1,000,000 of 5%,20-year bonds to buy a new computerized accounting system.The market rate of interest was 6%.The bonds pay interest annually on December 31.How much cash did Alpha receive when the bonds were sold?

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 gross pay?

On January 1,2011,the company borrowed $200,000 from Suwannee Local Bank for 10 years at 6%.The company will make equal annual payments of $27,173.58 on December 31 of each year,beginning December 31,2011. Part B: Select the column that represents the financial statement where the line item will appear.Then fill in the correct dollar amount.

At the option of the issuer,callable bonds may be retired prior to maturity for a specified amount of money.

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%.What is Homer's gross pay?

On January 1,2011,Alpha Company issued $1,000,000 of 5%,20-year bonds to buy a new computerized accounting system.The market rate of interest was 6%.The bonds pay interest annually on December 31.How much cash will bondholders receive on December 31,2011,the first interest payment date?

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.Which of the following will appear on Ace's balance sheet at December 31,2011?

Calculate the cash received by the issuing company:

Borrowing cash is ________ activity.

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 cash will Springfield Power pay the government for FICA because of Homer's December earnings?