Exam 10: Liabilities

On November 1 of the current year,Garcia Company borrowed $50,000 by issuing a 9%,six-month note payable,all due at maturity date.Interest expense on this note to be recognized during the current year amounts to:

Gross pay less withholding tax and less worker's compensation is considered net pay.

Which of the following is an example of a loss contingency that should be disclosed in a footnote to a company's financial statements?

Bonds payable issued between interest dates - early retirement Deegan Imports received authorization on December 31,Year 1,to issue $4,500,000 face value of 8%,20-year bonds.The interest payment dates are June 30 and December 31.All the bonds were issued at par,plus accrued interest on February 1,Year 2.The bonds are callable by Deegan at any time at 105. (a)Prepare the journal entry to record the issuance of the bonds on February 1,Year 2. (b)Prepare the journal to record the first interest payment on the bonds at June 30,Year 2 (c)What is the amount of bond interest expense reported in Deegan Imports' Year 2 income statement relating to these bonds? $____________ (d)What is the amount of bond interest payable appearing in Deegan Imports' balance sheet at December 31,Year 2,with respect to these bonds? $_____________ (e)Deegan exercises the call provision and retires one-third of the bond issue on July 1,Year 3. Prepare the journal entry to record this transaction on July 1,Year 3.

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.

The most common types of payroll deductions are taxes,insurance premiums,employee savings,and union dues.

The term "junk bonds" describes bonds with:

Convertible bonds can be exchanged for common stock at the option of the company.

A liability that is known to exist but the precise dollar amount is not known is called a possible liability.

Since payment is due within one year,the current portion of long-term debt should be reported separately in the long-term liabilities section of the balance sheet.

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.

Which of the following ratios and rates that measure debt-paying ability focuses on the long-term position of a company?

Bonds issued at par - basic concepts On April 1,Year 1,Olsen Products,Inc.issued at par $25 million of 10%,10-year bonds payable.Interest is payable semiannually each April 1 and October 1. (a)What is the amount of cash paid to bondholders for interest during Year 1? $________________ (b)Give the adjusting entry necessary at December 31,Year 1 (if any),regarding this bond issue. (c)Interest expense on this bond issue reported in Olsen Products' Year 1 income statement is: $________________ (d)With respect to this bond issue,Olsen Products' balance sheet at December 31,Year 1,includes bonds payable of $___________________ and interest payable of $________________ (indicate $0 or "none" if the item is not reported. (e)Give the journal entry made by Olsen Products on April 1,Year 2,to record the semiannual payment of interest to bondholders.

Deferred income taxes At the end of its first year of operations,Harding Construction,Inc.,included in its balance sheet a long-term liability entitled "Deferred Income Taxes." (a)Briefly explain what deferred income taxes represents,including how this liability came into existence and whether such an item is generally perceived as favorable or unfavorable from company management's point of view. (b)If Harding Construction,Inc.,is a successful,growing business,would you expect the liability for deferred income taxes to increase or decrease over the next few years? Explain.

The amount of FICA tax and Medicare tax withheld from an employee is used to pay the employer's percentage of the tax and is mailed to the government quarterly.

Which of the following is not a characteristic of an estimated liability?

Off balance sheet financing may involve:

All of the following are examples of current liabilities except:

Employers are required to pay all of the following on the wages paid to each employee except:

Effects of transactions upon financial measurements Five events relating to liabilities are described below: (a)Recorded a bi-weekly payroll,including the issuance of paychecks to employees.Amounts withheld from employees' pay and payroll taxes will be forwarded to appropriate agencies in the near future.(Ignore post-retirement costs.) (b)Made a monthly payment on a 12-month installment note payable,including interest and a partial repayment of the principal amount. (c)Shortly before the maturity date of a six-month bank loan,made arrangements with the bank to refinance the loan on a long-term basis. (d)Made an adjusting entry to record accrued interest payable on a 2-year bank loan (interest is paid quarterly.) (e)Made a year-end adjusting entry to amortize a portion of the discount on long-term bonds payable. Indicate the immediate effects of each transaction or adjusting entry upon the financial measurements in the five column headings listed below.Use the code letters,I for increase,D for decrease,and NE for no effect.