AC Chapter 10

are financial instruments, traded on established exchanges, that specify future payments a company promises to make in exchange for receiving a sum of money now. (Enter one word per blank.)

Bonds

As of December 31, $110 of interest had been accrued on a 12%, 1-year, $1,000 note payable. On January 31, the entry to record the payment of the note's principal and interest requires a ______. (Select all that apply.)

$10 debit to Interest Expense $110 debit to Interest Payable $1,120 credit to Cash $1,000 debit to Notes Payable

On the maturity date, the bondholders of $100,000 of bonds that were issued at a $90,000 will receive ______.

$100,000 in cash plus the interest owed

The entry to record the cash sale of a $100 pair of jeans in a state that requires charging a 5% sales tax will include a ______. (Select all that apply.)

$5 credit to Sales Tax Payable $100 credit to Sales Revenue $105 debit to Cash

If an entry is recorded that debits Interest Payable and Interest Expense and credits Cash, what must be the case?

Interest incurred from the current and prior period is being paid.

John Smith works 40 hours for ABC Corp. for $15 per hour. Required payroll deductions are: Social Security $37.20; Medicare $8.70; Federal income tax $58; and State income tax $10. Assuming that John gets paid in cash and payroll deductions will be paid the following month, how would ABC record the payroll deductions?

Current liabilities increase $113.90.

What are the key events with notes payable? (Check all that apply.)

Establishing the note Recording principal paid Recording interest paid Accruing interest incurred but not paid

The adjusting entry to record interest accrued on a note payable is debit ______.

Interest Expense and credit Interest Payable

Which of these payroll taxes are paid only by the employer? (Check all that apply.)

SUTA FUTA

Sales taxes are recorded by the retailer as ______.

Sales Tax Payable

The discount on a bonds payable becomes ______.

additional interest expense over the life of the bonds

A bond's stated interest rate is ______. (Check all that apply.)

always expressed as an annual interest rate used to calculate interest payments

If an adjusting entry is required for interest owed, then the ______ will report ______. (Check all that apply.)

balance sheet; Notes Payable income statement; Interest Expense balance sheet; Interest Payable

The entry to record the issuance of bonds at face value includes a debit to Cash and a credit to

bonds payable

The entry to record the payment of 6-months of interest on a note in which 2 months of interest was recorded as an adjusting entry in the prior accounting period includes ______. (Select all that apply.)

debit Interest Payable for 2 months of interest credit Cash for 6 month's of interest debit Interest Expense for 4 months of interest

On November 1, ABC Corp. borrowed $100,000 cash on an 1-year, 6% note payable that requires ABC to pay both principal and interest on October 31 in the following year. The last adjusting journal entry was made on December 31, ABC's year end. The entry to record the payment on October 31 would include a ______. (Check all that apply.)

debit to Interest Expense of $5,000 credit to Cash of $106,000 debit to Interest Payable of $1,000 debit to Note Payable of $100,000

If a bond's stated rate is 4% and the market rate is 6%, this bond will sell at ______.

discount

is the payment made when a bond matures.

face value

The entry to record the initial borrowing of cash by issuing a promissory note causes a(n) ______. (Select all that apply.)

increase in liabilities increase in assets

The stated rate is the rate used to determine the ______.

interest payment

The journal entry to record employer payroll taxes affects ______.

liabilities and stockholders' equity

When a company records a debit to Bonds Payable and a credit to Cash, it is the bonds' ______.

maturity date

A bond's maturity date is ______.

the date on which the face value of the bond will be repaid in full