Ch 10

long term debt

borrows money with a promise to repay it in two years

Gross Earnings how are they computed?

by multiplying the time worked by the pay rate promised by the employer

Bonds

financial instruments that outline future payments a company promises to make in exchange for receiving a sum of money now; long term liability

Net Pay equals

gross earnings minus payroll deductions

Four Key Events established with any note payable

1) Establishing the note 2) accruing interest earned but not paid 3) recording interest paid 4) recording principal paid

3 key elements of a bond

1) maturity date 2) face value 3) the stated interest rate

What 5 states don't charge sales tax

Alaska, Delaware, Montana, New Hampshire, and Oregon

Discount

The amount by which a bond's issue price is less than its face value

Maturity Date

The date on which the bonds are due to be paid in full

Face Value

The payment made when the bond matures

Present Value

a mathematical calculation that determines the amount that one or more payments made in the future are worth today

Payroll Deductions examples

income tax, FICA tax, charitable donations

Accruing a liability always involves _______ expenses and ________ liabilities

increasing; increasing

Accounts Payable is interest free unless

it is overdue

Assets are financed with ______ and _____

liabilities and stockholders equity

Accrued Liabilities

liabilities for expenses that have been incurred but not paid at the end of the accounting period

bond amortization

makes interest expense smaller than the actual interest payment and causes the balance in Premium on Bonds Payable to decline each period

current liabilities

short-term obligations that will be paid or fulfilled within the current operating cycle or one year, whichever is longer

Premium

the amount by which a bond's issue price exceeds its face value

Issue Price

the amount of money that a lender pays (and the company receives) when a bond is issued

Stated Interest Rate

the rate stated on the face of the bond that is used to compute interest payments