Acct 100 // Ch 10
Discount on Bonds Payable
is a contra account.
Bryce Company has $500,000 of bonds outstanding. The unamortized premium is $7,200. If the company redeemed the bonds at 101, what would be the gain or loss on the redemption?
$2200 gain /// The carrying value of the bonds is $500,000 + $7,200 = $507,200. The cash used to retire the bonds is $505,000. Therefore the gain is $507,200 - $505,000 = $2,200.
Maggie Sharrer Company borrows $88,500 on September 1, 2014, from Sandwich State Bank by signing an $88,500, 12%, one-year note. What is the accrued interest at December 31, 2014?
$3,540 /// Accrued interest at 12/31/14 is computed as follows: $88,500 X 12% X (4/12) = $3,540. The computation is the face value ($88,500) times the interest rate (12%) times the portion of the year the debt was outstanding (4 months out of 12).
Sensible Insurance Company collected a premium of $18,000 for a 1-year insurance policy on April 1. What amount should Sensible report as a current liability for Unearned Service Revenue at December 31?
$4500 /// The monthly premium is $1,500 or $18,000 divided by 12. Sensible has recognized 9 months of insurance revenue (Apr 1-Dec 31), thus 3 months insurance premium (12-9) is still unearned. The amount that Sensible should be report as Unearned Service Revenue is $4,500 (3 months X $1500).
A retail store did not ring up sales tax separately. If the sales tax rate is 5% and the total receipts amounted to $126,000, what is the amount of the sales taxes owed to the taxing agency?
$6000 /// The $126,000 includes both the sales and the sales tax. $126,000/1.05 = $120,000 of sales. Therefore, the sales tax = $126,000 - $120,000 = $6,000.
The amount of sales tax collected by a retailer is recorded in the
Sales Taxes Payable account.
All of the following are current liabilities except -sales taxes payable. -unearned rental revenue. -current maturities of long-term debt. -all of these answer choices are current liabilities.
all of these answer choices are current liabilities.
RS Company borrowed $70,000 on December 1 on a 6-month, 12% note. At December 31
both the notes payable and interest payable are current liabilities.
If the company issues a $100,000, 12%, 10-year bond, that pays interest semiannually when market interest rate is 10%, the bond would sell at an amount
greater than face value. /// If the market rate of interest is lower than the contractual rate of interest, investor's will have to pay more than face value for the bonds. In these cases, bonds will sell at a premium.
