Exam 7: Accounting for Liabilities

Which financial statement(s)do you need to use to calculate the debt-to-equity ratio?

When a bond sells at its face amount,the market rate of interest is ________.

Team instructions: Provide students with copies of the financial statements for Team Shirts for June and July.Divide the class into teams of three or four people.Give the students time in class to answer the following questions.Each team should turn in only one copy of the answers for grading.All team members will receive the same grade.

The debt-to-equity ratio is calculated by dividing shareholders' equity by total liabilities.

Amortizing a bond discount will ________.

The present value of $100,000 at 6% to be received at the end of ten years will be greater than the present value of $100,000 at 6% to be received at the end of five years.

On November 30,2011,Just in Thyme,Inc.issued $100,000 of 20-year,9% bonds at 100.The bonds pay interest semiannually on May 30 and November 30.How much cash will Just in Thyme pay when the bonds mature?

Identify each of the items below as a(n): ∙ definitely determinable liability ∙ estimated liability a.amount of warranty obligations b.amount owed on outstanding loans c.amount owed to employees for work performed d.amount owed to suppliers for inventory purchases e.amount owed for employee payroll taxes

On January 1,Micha's Jewelers issued thirty $1,000,ten-year,6% bonds for $29,400.Using straight-line amortization,the interest expense for the first year is ________.

In November,Mayberry Repair Shop spent $395 on parts to fix appliances under warranty.The $395 will be a reduction to ________.

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 when the bonds mature?

Positive financial leverage occurs when a company ________.

B. Row, Inc. needed some long-term financing and arranged for a 10-year, $100,000, 7% mortgage loan on January 1, 2010. Annual payments of $14,238 will be made on December 31 each year. Round to the nearest dollar. Part A: Show the effect on the accounting equation: Part B: For each item, write in the amount (even if $0) as of or for the Year Ended December 31, 2010 and 2011 in the column of one financial statement where each amount is found

Principal = rate multiplied by time multiplied by interest.

When companies borrow money for longer than one year,that obligation is called ________.

Team Shirts borrowed $15,000 at 6% for two years,to be repaid in equal monthly installments over the life of the loan.Calculate the amount of the monthly payments.

Discount on bonds payable is a contra-________ account.

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 of Bob's December salary will be included in Salary expense on Scrooge & Marley's income statement for the year ended December 31,2010?

If a company earns more with the money it borrows than it has to pay to borrow that money,it is called ________.

On December 31,2011,Dew Drop Inn issued $10,000 worth of 10% bonds at 113 because the market rate of interest at the time of issue had fallen to 8%.Interest on these 10-year bonds is paid annually at December 31.The company uses the effective-interest method to amortize the premium.For each item listed below,fill in the correct dollar amount in the column that represents the financial statement where the item will appear: