ch 10 acct

dividents in arrears are reported as current liabilities on the balance sheet

false

If the likelihood of a loss is reasonably possible, a contingent liability is recorded by making an appropriate journal entry.

false,

the par value of stock indicates what stock is worth

false; par value insiginicant value per share of capital stock

market rates of interest _______ due to the changes in _________ __________

fluctuate due to changes in economic events

us corporations pay federal taxes on ____

income, payroll

a bond that was issued at a discount will have a carrying value that _______ with each interest payment

increases

when are installment notes payable commonly used

credit card loans home mortgages student loans

on jan 1. oodles of noodles purchased a vehicle in exchange for a $10,000 3-year, 5% installment note. the note requires annual payments of $3672 on Dec. 31 of each year. the amount of interest expense = _______ in the 1st payment and _________ in the 2nd payment (rounded)

$500; 341 payment 1: 10,000*.05=500 payment 2: 10,000-3672 (-500 INTEREST)= 6828*.05 = $341

bond carrying value = bonds payable ______

- discount on bonds payable + premium on bonds payable

the issue price of 1,000, 5%, $1,000 bonds issued at 100.00 equals

1,000,000

coverall inc. had the following amounts for the year ended: interest expense of $1000 , interest income of $2000, net income of $10,000, income taxes of $3,000 and earnings per share of $3. the times interest earned ratio equals the best

14

number of preferred outstanding

700 treasury , take issued shares minus treasury 4800-700

callable bonds can be converted to stock

false

contributed capital:

Reports the amount of capital the company received from investors' contributions, in exchange for the company's common stock and preferred stock. (APIC + COMMON STOCK)

_________ ___________ is a current liability that represents the amount owed for goods or services purchased on credit and is generally interest free

accounts payable

the debt to asset ratio is calculated by dividing total liabilities by total

assets

term

bond issue that matures on a single date

convertible bonds

bonds that can be exchanged for shares of stock in the issuing company

serial bonds

bonds that mature in installments

issued 100,000 shares of the common stock at $50 cash per share.

cash credit common stock, APIC

Reissued 7,500 shares from treasury for $46 per share.

cash credit

a. issued 5k shares of common stock for 22 per share, par value $5

cash (asset) +110,000 common stock increase 25000 (SE) APIC- common stock $85,000

record borrowing of 6million

cash 6mil credit notes payable short (6mil)

b. issue of 3000 shares for 25 per share

cash 75000 (asset) common stock 15000 APIC-com 60,000

debit to the notes payable t-account are reported as

cash outflows under financing activities

stockholders equity states :

contributed capital retained earnings

under us GAAP, if a company violates loan covenants on long-term debt but renegotiates the loan before releasing its financial statements, the debt remains classified as long-term. under IFRS the company must reclassify that long-term debt as a(n) ___ liability

current

________ __________ on a classified balance sheet report the obligations that will be paid or met within the company's operating cycle or within 1 year, whichever is longer

current liabilities

accrued liabilities are

current liabilities resulting from adjusting entries that record amounts incurred but not paid yet

Prepare the journal entries to record the bond issue, the interest payments on December 31, 2018 and 2019, the interest and face value payment on December 31, 2020 and the bond retirement. Assume the bonds are retired on January 1, 2020, at a price of 101.

debit cash 583,000 credit bonds payable , 584000

john smith works 40 hrs for abc corp. for $15 per hour. required deductions are: social security $37.20; medicare $8.70; Federal income tax $58 ; and state tax $10. assuming deductions are paid in the following month, John's pay would have a journal entry of.........

debit sal wages expense $600 credit: fica, social security cash

the entry to record the issuance of 100, $1000 bonds for 98.000 includes a _______and ________

debit to DISCOUNT on bonds payable $2000 CASH for 98,000 credit to bonds payable $100,000

the entry to record the payment of previous purchases made on account includes a

debit to accounts payable credit to cash

acb co. issues a bond w face value of 100,000 at par on jan 1. the bond carries a stated annual interest rate of 6% payable in cash on dec 31 of each year. if they issue monthly financial statements, it must make an adjusting entry on jan 31 that includes a _________

debit to interest expense of $500 credit to interest payable of $500

abc purchased $500 of merchandise on account. abc's journal entry to record this transaction includes a ______

debit to inventory of $500 credit to acc. payable $500

the entry to record the early retirement of bonds when cash paid is more than the bonds' carrying value will include a

debit to loss on early retirement

texable, inc. is required to match $45,900 for its portion of FICA and to pay $4700 for federal and state unemployment taxes. The entry to record texable's payroll includes

debit to payroll tax $50,600 credit FICA PAYABLE and UNEMPLOYMENT TAX PAYABLE

Reacquired 20,000 shares at $45 cash per share

debit: treasury stock (full amount, 900,000) credit cash 900000

us corporations do NOT pay federal taxes on

expenses and assets

a compnay that pays no dividends is alawys a poor investment

false

a stock dividend increases the market price of the company's stock

false

a stock split increases total stockholders' equity

false

a(n) ___ note requires the borrower to pay equal payments over the notes life to maturity with each payment consisting of interest and principal

installment

the discount on bonds payable account ____

is a contra account to bonds payable

why is accrual based income statement supperior

it reports the expenses incurred in genrating revenues regardless of when cash was paid better reflects the operating activities of the business it reports the revenues generated regardless of when the cash was collected

when the times interest earned ratio is less than 1.0, a company is ___

not generating enough to cover its interest expense

_______ _________ is a liability that represents the amount the company owes to others as a result of issuing a promissory note

notes payable

change in acc receivable will be reported in the ________ activities section of the statement of cash flows

operating

classifications to categorize inflows and outflows on statement of cash flows includes _________ __________ ________ activities

operating, financing, investing

face value

stated rate = market rate mk rate 10%, stated rate 10%

premium

stated rate is GREATER than the market rate of interest mk rate 8%, stated rate 10%

discount

stated rate is LESS than the market rate of interest mk rate 12%, stated rate 10%

net pay is calculated by

subtracting payroll deductions from gross pay

FUTA and SUTA are paid by only

the employers

abc co. is in the process of issuing bonds. the bonds have a stated interest rate of 6% which is 2% above the current market rate. what effect will the two interest rates have on the bond issue price

the issue price will be above the bond's face value

callable bonds

the issuing company can pay off the bonds at any time

number of shares in preferred stock

total preffered stock $ / par = stock issued; 4800

The debt-to-assets ratio indicates financing risk by computing the proportion of total assets financed by debt.

true

a liability for dividends is recorded on the declaration date

true

all others things being equal, the higher the return on equity ratio, the better the financial performance of the company

true

an entertainment company received 6 million cash for advance season ticket sales, prior to the beggining of the season, these sales should be recorded as a liability

true

stated rate exceeds market rate, bond sells at a premium

true

the effective interest method of amortization is considered a conceptually superior method of accounting for bonds

true

the price-earnings ratio reveals info about the stock market's expectations for a company's future growth in earnings

true

the principal of loan does not include any interest charges

true

treasury stock is a corporation's own stock that has been issued and subsequently repurchased by the corp

true

a major advantage of debt financing is that interest expense is tax deducatable

true, DIVIDENDS ON STOCK R NOT

true or false: under US GAAP, contingent liabilities are recorded if the estimated loss is probable. Under IFRS contingent liabilities are recorded if the estimated loss is "more likely than not"

true, iFRS threshold for recording liabilities is lower than GAAP

debentures

unsecured bonds