Exam 7: Accounting for Liabilities

Rush Corporation borrowed $50,000 on January 1,2012.The loan is for a five-year period and has an annual interest rate of 8%.At the end of each year,Rush will make a payment of $12,522.82,which includes both principal and interest.The amount of the payment for 2010 that is reduction of principal is $8,502.82.

Payment of previously-accrued interest on a note payable is a/an

Paul's Valley Company issued bonds with a $10,000 face value on January 1,2012.The bonds were issued at face value and carried 5-year term to maturity.They had a 5% stated rate of interest that was payable in cash on January 1 of each year beginning January 1,2013.Based on this information alone,the amount of total liabilities appearing on the December 31,2012 balance sheet would be:

When a bond's issue price is greater than its face value,the bond must be reported on the balance sheet at its

If a company offers a warranty on the merchandise it sells,how should it account for the warranty?

Which choice reflects the financial statement effects of Fleming Company's cash payment on December 31,2012?

Using the effective interest rate method to amortize bond premium will

What is the going concern assumption?

On December 31,2012,Sweetwater Co.paid cash for interest on bonds it had issued on January 1,2012.Indicate the effects of the payment of interest.

Chicago Company sold merchandise to a customer for $600 cash in a state with a 6% sales tax rate.The total amount of cash collected from the customer was

Roskos Corporation issued to Ewold Bank a two-year,$200,000,6% interest-bearing note on August 1,2012.Interest is paid annually on July 31.Principal and the final interest payments are to be made on July 31,2014. Using the financial statements model provided,indicate the effect on Roskos' financial statements of: a)the issuance of the note payable. b)Roskos' adjusting entry on 12/31/12 c)the first interest payment on 7/31/13. Include dollar amounts of increases and decreases.Also,indicate whether cash flows are operating activities,investing activities,or financing activities.

Long-term debt would likely be used for which of the following?

Knowles Company issued $100,000 of bonds at face value on January 1.The bonds carry an 8% annual stated rate of interest.Interest is payable in cash on December 31 of each year.Which of the following reflects the financial statement effects of the first interest payment?

What is the effect of the recognition of warranty expense on the statement of cash flows?

The Candy Junction operates two candy stores.Sales at the two stores in 2012 were $320,000 and $201,000; these amounts do not include sales tax.Both stores are in a state with a 5% sales tax rate. Required: a)What is the total amount of sales tax that the stores collected in 2012? b)What kind of transaction is the collection of the sales tax? (asset source,asset use,asset exchange,claims exchange). c)At the end of the year,the company remitted the sales tax to the state.What kind of transaction is the remission (payment)of the sales tax?

On March 17,Ransom Company paid the interest that was due on a note payable.Part of the interest had been accrued at the end of the previous accounting period.

Hays began its loan transactions with Barnett Bank by borrowing $1,000 on January 1,2012.Which of the following answers shows the effect of this event on the financial statements?

Which financial statements are affected by the entry to record the payment of bond interest? Indicate how each statement is affected.

In accounting for contingent liabilities,Terrace Company determined that for one of the liabilities,the likelihood of a future obligation was remote.

How does the amortization of the principal balance affect the amount of interest expense recorded each succeeding year?