Question 1

Install,Inc.borrowed $80,000 by signing an 8% mortgage note on December 31,2009.The annual interest rate is 8%,with semiannual payments of $4,042 made on June 30 and December 31 every 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 31,2009,2010,and 2011 in the column of the one financial statement where each amount is found.

Accepted Answer

The answer of Install,Inc.borrowed $80,000 by signing an 8% mortgage...

Question 2

On November 30,2011,Just in Thyme,Inc.issued $10,000 of 20-year,9% bonds at 100.The bonds pay interest semiannually on May 31 and November 30.Which of the following will appear on Just in Thyme's balance sheet at December 31,2011?

Accepted Answer

A) Bonds payable $10,900 
B) Bonds payable $10,000 
C) Bonds payable $9,100 
D) Interest expense $900

Question 3

Z Biz sold a 5-year,$1,000,zero-interest bond for $497.18 when the market rate of interest was 15%.The annual interest payment is ________.

Accepted Answer

A) $0 
B) $150 
C) $74.58 
D) $502.82

Question 4

On June 1,2011,Par for the Course,Inc.purchased building and land for $1,000,000 by issuing $1,000,000 of 10-year,6% bonds.Interest is to be paid annually on May 31.Fill in the correct dollar amount in the appropriate box to indicate the financial statement where the amount will be found.

Accepted Answer

The answer of On June 1,2011,Par for the Course,Inc.purchased building...

Question 5

Calculate the payment required for each of the loans listed below.Assume that all loan payments are made at the end of the period described.

Accepted Answer

The answer of Calculate the payment required for each of...

Question 6

The debt-to-equity ratio compares the amount of creditors' claims to the assets of a firm with owners' claims to the assets of the same firm.

Accepted Answer

A) True 
 B)False

Question 7

GuGa's Shirt Company has current assets of $48,790; total assets of $536,780; current liabilities of $43,000; total liabilities of $323,786; and shareholders' equity of $212,994.Calculate the debt-to-equity ratio.

Accepted Answer

A) 113% 
B) 60% 
C) 152% 
D) 66%

Question 8

Premium on bonds payable is an adjunct ________ account.

Accepted Answer

A) asset 
B) equity 
C) liability 
D) income

Question 9

What is an annuity?

Accepted Answer

The answer of What is an annuity?...

Question 10

How are liabilities classified on the balance sheet?

Accepted Answer

A) paid and unpaid 
B) current and long-term 
C) current and unfunded 
D) definitely determinable and estimated

Question 11

Companies should always maximize its debt-to-equity ratio.

Accepted Answer

A) True 
 B)False

Question 12

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.To calculate the amount of cash that Alpha received,you must use a discount rate of ________.

Accepted Answer

A) 20% 
B) 6% 
C) 5% 
D) The answer cannot be determined from the information given.

Question 13

When a bond sells for 102,the bond is selling at ________.

Accepted Answer

A) a discount 
B) a premium 
C) par 
D) face value

Question 14

Tina's Wear issued 10-year bonds with a face value of $50,000.The bonds carry a 7% stated interest rate and pay interest once a year.They were issued when the market interest rate was 8% and sold for $46,644.78.
Required:
a.Complete the amortization schedule for the first two years of the bond issue using the effective interest method.
  b.Put an X in the appropriate box to describe how each of these items will behave with each additional interest payment:
  c.Fill in the correct dollar amounts:
At maturity,after the last interest payment has been made,the unamortized discount on the bonds will be $________ and the carrying value of the bonds will be $________.

Accepted Answer

The answer of Tina's Wear issued 10-year bonds with a...

Question 15

When a bond sells for 103,the bond is selling at ________.

Accepted Answer

A) a discount 
B) a premium 
C) par 
D) face value

Question 16

Zero-interest (zero-coupon)bonds do not provide bondholders with interest payments.Instead,the face value of the bond is paid to the owner at the bond's maturity date.

Accepted Answer

A) True 
 B)False

Question 17

In December 2011,Homer Simpson worked for Springfield Power and earned $5,000.Federal income tax withholding is 15%.The FICA rate is 6.2% and the Medicare tax is 1.45%.What is Homer's net pay?

Accepted Answer

A) $5,000 
B) $4,250 
C) $3,940 
D) $3,867.50

Question 18

On January 1,2011,Dew Drop Inn borrowed $80,000 at 8% interest.The loan will be repaid with equal annual installment payments of $8,900 made on the last day of each year,which is the companys yearend.Notes payable at December 31,2011 equals ________.

Accepted Answer

A) $80,000 on the income statement 
B) $80,000 on the balance sheet 
C) $75,958 on the balance sheet 
D) $77,500 on the balance sheet

Question 19

Match between columns
                        Premises: occurs when the stated rate of interest is less than the market rate of interest
occurs when the stated rate of interest is greater than the market rate of interest
occurs when the stated rate of interest is the same as the market rate of interest

Accepted Answer

The Answer of bond discount and bond premium and par is...

Question 20

Show the effect on the accounting equation of each of the events listed below:

Accepted Answer

The answer of Show the effect on the accounting equation...

Exam 7: Accounting for Liabilities

On November 30,2011,Just in Thyme,Inc.issued $10,000 of 20-year,9% bonds at 100.The bonds pay interest semiannually on May 31 and November 30.Which of the following will appear on Just in Thyme's balance sheet at December 31,2011?

Z Biz sold a 5-year,$1,000,zero-interest bond for $497.18 when the market rate of interest was 15%.The annual interest payment is ________.

On June 1,2011,Par for the Course,Inc.purchased building and land for $1,000,000 by issuing $1,000,000 of 10-year,6% bonds.Interest is to be paid annually on May 31.Fill in the correct dollar amount in the appropriate box to indicate the financial statement where the amount will be found.

Calculate the payment required for each of the loans listed below.Assume that all loan payments are made at the end of the period described.

The debt-to-equity ratio compares the amount of creditors' claims to the assets of a firm with owners' claims to the assets of the same firm.

GuGa's Shirt Company has current assets of $48,790; total assets of $536,780; current liabilities of $43,000; total liabilities of $323,786; and shareholders' equity of $212,994.Calculate the debt-to-equity ratio.

Premium on bonds payable is an adjunct ________ account.

What is an annuity?

How are liabilities classified on the balance sheet?

Companies should always maximize its debt-to-equity ratio.

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.To calculate the amount of cash that Alpha received,you must use a discount rate of ________.

When a bond sells for 102,the bond is selling at ________.

When a bond sells for 103,the bond is selling at ________.

Zero-interest (zero-coupon)bonds do not provide bondholders with interest payments.Instead,the face value of the bond is paid to the owner at the bond's maturity date.

In December 2011,Homer Simpson worked for Springfield Power and earned $5,000.Federal income tax withholding is 15%.The FICA rate is 6.2% and the Medicare tax is 1.45%.What is Homer's net pay?

On January 1,2011,Dew Drop Inn borrowed $80,000 at 8% interest.The loan will be repaid with equal annual installment payments of $8,900 made on the last day of each year,which is the companys yearend.Notes payable at December 31,2011 equals ________.

Match each of the following items with the appropriate consequence.

Show the effect on the accounting equation of each of the events listed below: