Exam 10: Liabilities

The LBB Company recently took a mortgage on a property for $100,000. The interest is 12% and the monthly payment is $1,020. Prepare the first four months of the amortization table.

What is the total liability related to this mortgage to be reported in Fisher's balance sheet at December 31, 2009? (Do not separate into current and long-term portions.)$________

The adjusting entry (if any) required on December 31, Year 1, related to this bond issue involves:

U. S. GAAP requires that convertible bonds be classified on the balance sheet as:

Estimated liabilities, contingencies, and commitments are usually reported in the long-term liability section of the financial statements.

Notes payable On September 1, 2009, Charles Associates borrowed $600,000 from Diana Credit Union and signed a 9%, one-year note payable, all due at maturity.

Loss contingencies should be recorded in the accounting records whenever it is probable that a loss has been incurred and the amount of loss might be material in amount.

If a bond is selling at 103, it is selling at:

Amortizing a premium on bonds payable:

Bond prices after issuance Several years ago, Clear-Air Systems issued $100 million of 30-year, 8% bonds payable at a small premium. Since the bonds were issued, Clear-Air's financial strength and credit rating have actually improved, but today the bonds are trading among investors at a price of 98. (a) Explain the most probable reason why the market price of these bonds has declined, even though Clear-Air's credit rating has improved. (b) How will the drop in the market value of these bonds be reported (if at all) in Clear-Air's income statements and balance sheets? Explain.

The December 31, 2010, adjusting entry for this note includes:

Rose Company's total payroll-related expense for the year is:

If a lease transfers ownership of the property to the lessee at the end of the lease term, it should be regarded as an operating lease.

Sanford Corporation borrowed $90,000 by issuing a 12%, six-month note payable, all due at the maturity date. After one month, the company's total liability for this loan amounts to:

Junk bonds are attractive to investors because they carry a high rate of interest and are usually convertible into a specified number of shares of capital stock.

Trego's entry at June 30, 2012, to record the first semiannual payment of interest and amortization of discount/premium on the bonds includes a:

A call provision on a bond:

The adjusting entry at December 31, 2009, with respect to this note included:

Bonds secured by a pledge of specific assets are called debenture bonds.

Liabilities that fall due within one year or within the operating cycle are classified as current liabilities.