Exam 10: Liabilities

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.

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Question 1

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(c)$330,000 interest expense
Since the bonds were issued at par,interest expense is equal to the contractual interest for the period that the bonds were outstanding.
($4,500,000 × 0.08 × 11 ÷ 12 = $330,000)
(d)$-0- accrued bond interest payable
The interest payment date is December 31;therefore,interest for the last six months of a year is paid and does not appear as a liability in the balance sheet at December 31.

Payroll-related expenses Shown below is a summary of the annual payroll data of Revere Ironworks: (d)How were the costs of postretirement benefits determined? Which of these amounts results in a liability to Revere Ironworks,and when will this liability be paid? Will the amount of the payments be more or less than the amount now shown as a liability? Explain.

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(d)The costs of postretirement benefits were determined by estimating the present value of the future costs of retirement benefits earned during the year by today's workforce.
Only the unfunded portion of these costs represents a liability to Revere Ironworks.This liability will be paid either when it funds the plan or pays for the promised benefits after today's workers have retired.
The liability reflects only the present value of unfunded benefits to be made in the distant future.The actual payments will be substantially larger than their present value at this time.

Premium on bonds payable:

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Question 3

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On November 1,Metro Corporation borrowed $55,000 from a bank and signed a 12%,90-day note payable in the amount of $55,000.The November 30 adjusting entry will be (assume 360 days in year):

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Question 4

The Music House issues a contract to a new recording artist to produce a number of albums over the next five years at $1 million per album.This situation is an example of:

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Question 5

[The following information applies to the questions displayed below.] On November 1,Year 1,Noble Co.borrowed $80,000 from South Bank and signed a 12%,six-month note payable,all due at maturity.The interest on this loan is stated separately. -How much must Noble pay South Bank on May 1,Year 2,when the note matures?

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Question 6

The amortization of a bond premium:

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Question 7

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

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Question 8

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

(True/False)

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Question 9

[The following information applies to the questions displayed below.] On April 1,Year 1,Greenway Corporation issues $20 million of 10%,20-year bonds payable at par.Interest on the bonds is payable semiannually each April 1 and October 1. -The journal entry to record the first cash payment to bondholders on October 1,year 1,will include:

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Question 10

If a bond is issued at par between interest dates:

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Question 11

[The following information applies to the questions displayed below.] Austin Corporation issues $6,000,000 of 10%,10-year bonds,dated December 31,Year 1.The bonds are issued on April 30,Year 2,at 100 plus accrued interest.Interest on the bonds is payable semiannually each June 30 and December 31. -The amount of Austin's interest expense on this bond issue during Year 2 amounts to:

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Question 12

The interest coverage ratio:

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Question 13

The pension expense of the current period is equal to:

(Multiple Choice)

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Question 14

At the end of 2018 it is discovered that the accountant for Gower Company failed to record $60,000 of interest payable that had accrued since the last interest payment date.The current ratio,quick ratio,and debt ratio,as well as the financial statements,had already been computed using the erroneous data.Correction of the accounting records will have which of the following effects?

(Multiple Choice)

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Question 15

The debt ratio measures how quickly a company pays off the long-term liabilities it has incurred.

(True/False)

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Question 16

On October 1,2018,Master's Co.borrows $500,000 from its bank for five years at an annual interest rate of 10%.According to the terms of the loan,the principal amount will not be due for five years.Interest accrues monthly on the first day of each month,beginning November 1,2018.With respect to this borrowing,Master's December 31,2018,balance sheet included only a long-term note payable of $500,000.As a result:

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Question 17

Which of the following is not true about post-retirement benefits?

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Question 18

The interest coverage ratio is computed by dividing:

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Question 19

The amount of bond interest expense recognized by Trego Company in 2019 with respect to these bonds is:

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Question 20

Showing 1 - 20 of 197

Exam 10: Liabilities

Premium on bonds payable:

On November 1,Metro Corporation borrowed $55,000 from a bank and signed a 12%,90-day note payable in the amount of $55,000.The November 30 adjusting entry will be (assume 360 days in year):

The Music House issues a contract to a new recording artist to produce a number of albums over the next five years at $1 million per album.This situation is an example of:

The amortization of a bond premium:

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

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

If a bond is issued at par between interest dates:

The interest coverage ratio:

The pension expense of the current period is equal to:

The debt ratio measures how quickly a company pays off the long-term liabilities it has incurred.

Which of the following is not true about post-retirement benefits?

The interest coverage ratio is computed by dividing:

The amount of bond interest expense recognized by Trego Company in 2019 with respect to these bonds is:

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