ch. 7 HW accounting
True or false: The determination of a contingent liability depends on one or more future events.
True
When bonds are called, the _____ (bondholder/issuer) usually has to pay a call _______(discount/premium).
Blank 1: issuer Blank 2: premium
Identify the correct statements about a registered bond.
For a registered bond, interest payments are mailed to the bondholder on the basis as called for in the indenture. For a registered bond, the name and address of the owner of the bond are known to the issuer.
The following summary data for the payroll period ended on April 10, 2018, are available for Brac Construction Ltd.: Gross pay ____ FICA tax withholdings ___ Income tax withholdings $24,207 Medical insurance contributions $1,366 Union dues $530 Total deductions $35,456 Net pay $86,804 Record the journal entry to show the effects of the payroll accrual.
Gross pay/wages expense = (Net Pay + Total Deductions) Gross pay = $86,804 - $35,456 FICA Tax Withholdings = Tax deductions - income tax witholdings - medical insurance contributions - union dues $35,456 - $24,207 - $1366 - $530 = $9,353 wages payable = subtract all from gross pay
Which of the following effects would occur when the accrual of income taxes requires an increase in the Deferred Income Tax Liability account?
Income Tax Expense will be debited. Deferred Tax Liabilities will be credited.
Which of the following conditions must be met before a contingent liability is recorded on a firm's balance sheet?
It must be probable that the loss will be confirmed by a future transaction or event.
Identify an item that is commonly included with noncurrent liabilities.
Product warranties
Identify a correct mode of repayment of term bonds and serial bonds at the time of maturity.
Term bonds require a lump-sum repayment of the face amount, but serial bonds are repaid in installments.
Deferred tax liabilities arise because of the _____.
accounting process of matching revenues and expenses difference between a company's book income and taxable income
Potential claims on a company's resources arising from such things as pending litigation, environmental hazards, casualty losses to property, and product warranties are referred to as (callable/contingent/convertible) liabilities.
contingent
The journal entry that would normally be made by an issuing company upon the early retirement of bonds (with unamortized bond discount remaining) would be:
Dr. Bonds Payable Dr. Loss on Retirement of Bonds Cr. Cash Cr. Discount on Bonds Payable
On November 1, 2019, Gordon Co. collected $10,620 in cash from its tenant as an advance rent payment on its store location. The six-month lease period ends on April 30, 2020, at which time the contract may be renewed. Record the journal entry to show the effect of the six months of rent collected in advance on November 1, 2019 for Gordon Co.
Dr. Cash $10,620 ________________Cr. Unearned Rent Revenue $10,620
The entry to record the accrual of income taxes when an increase in the Deferred Income Tax Liability account is required is:
Dr. Income Tax Expense Cr. Income Taxes Payable Cr. Deferred Tax Liabilities
On January 1, 2019, Learned Inc, issued $9 million face amount of 20-year, 18% stated rate bonds when market interest rates were 20%. The bonds pay interest semiannually each June 30 and December 31 and mature on December 31, 2038. Assume instead that the proceeds were $9,416,000. Record the journal entry to show the payment of semiannual interest and the related premium amortization on June 30, 2019, assuming that the premium of $416,000 is amortized on a straight-line basis. (Enter your answers in dollars, rather than in millions of dollars. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Dr. Interest Expense = Cash- Premium // $ 799,600 = $810,000 - $10,400 Dr. Premium on Bonds Payable: $416,000 / 40 yr (the yr it gives you, 20, multiplied by 2) = $10,400 Cr. Cash Dr: $9,000,000 x .18 x 6/12 = $810,000
On November 1, 2019, Gordon Co. collected $10,620 in cash from its tenant as an advance rent payment on its store location. The six-month lease period ends on April 30, 2020, at which time the contract may be renewed. Record the journal entry to show the effect of the adjustment that will be made at the end of each month to show the amount of rent "earned" during the month for Gordon Co.
Dr. Unearned Rent Revenue $1,770 ___________________________Cr. Rent Revenue $1,770
Identify the frequently listed other noncurrent liabilities.
Estimated liabilities under lawsuits Obligations to pension plans
With respect to callable bonds, which of the following statements are true?
The issuer usually is required to pay a call premium to the bondholders if the bonds are called. The issuer has the option of calling the bonds before the scheduled maturity date, but is not obligated to do so.
On November 1, 2019, Gordon Co. collected $10,620 in cash from its tenant as an advance rent payment on its store location. The six-month lease period ends on April 30, 2020, at which time the contract may be renewed. b. Calculate the amount of unearned rent that should be shown on the December 31, 2019, balance sheet with respect to this lease.
Unearned Rent = 4/6 months because 2 months have already been paid up to December and 4 months are left for pay out of 6 months. 4/6 x $10,620 = $7,080
Deferred tax liabilities:
are one of the most significant liabilities shown on the balance sheet for many firms. are normally long term in nature. are provided for temporary differences between income tax and financial statement recognition of revenues and expenses.
A debenture is secured only by the issuer's promise to repay the debt.
only by the general credit of the issuer
The financial statement effects of an early retirement of bonds usually include:
retirement of any unamortized premium or discount associated with the retired bonds. a decrease to assets.
Identify the bond that is secured by a pledge of securities or other intangible property.
A collateral trust bond