Stuff you got wrong accounting ch. 10

Maggie Sharrer Company borrows $88,500 on September 1, 2017, from Sandwich State Bank by signing an $88,500, 12%, one-year note. What is the accrued interest at December 31, 2017?

$3,540

Becky Sherrick Company has total proceeds from sales of $4,515. If the proceeds include sales taxes of 5%, the amount to be credited to Sales Revenue is

4,300 The amount of sales can be computed by dividing total cash received by one plus the sales tax rate of 5%.

RS Company borrowed $70,000 on December 1 on a 6-month, 12% note. Which statement is true at December 31?

A current liability is a debt the company reasonably expects to pay (1) from existing current assets or through the creation of other current liabilities, and (2) within the next year or the operating cycle, whichever is longer.

The cash register tape indicates cash sales are $2,000 and sales taxes are $155. What journal entry is needed to record this information?

Cash 2,155 Sales 2,000 Sales Taxes Payable 155

A corporation issued a $50,000, 9%, 4-month note on July 1. The corporation's year-end is September 30. Which one of the following is the adjusting entry for interest on September 30?

Interest Expense 1,125 Interest Payable 1,125

By computing the present value of the principal paid at maturity and all interest payments to be made over the term of the bond, you can obtain the ________ of bonds.

Market price

When recording payroll,

Payroll deductions are issued as a liability

Cuso Inc. issues 10-year bonds with a maturity value of $200,000. If the bonds are issued at a premium, what does this indicate?

The contractual interest rate exceeds the market interest rate. If the contractual interest rate is lower than the market interest rate, the bonds will sell at a discount.

What is the difference between the contractual interest rate and the market interest rate

The contractual interest rate is the interest rate used to determine the present value of the bond, whereas the market interest rate is the rate used to determine the actual amount of cash interest the issuer pays and the investor receives.

Federal unemployment taxes are paid by both the employer and the employee.

This statement is false. Federal unemployment taxes are paid only by the employer, not both the employer and the employee.

If the contractual rate of interest is lower than the market rate of interest, bonds will sell at a premium.

This statement is false. If the contractual rate of interest is lower than the market rate of interest, bonds will sell at a discount.

When a bond premium is amortized over time, the carrying value of the bonds decreases over time.

This statement is true. The carrying value is equal to bond premium plus face value. Since the premium balance decreases over time and the face value remains constant, the carrying value decreases over time

When a bond is sold at a premium, at what amount is it reported on the balance sheet?

carrying value The face value is presented on the balance sheet with the amount of the unamortized premium added to it. When combined, these two values represent the carrying value of the bonds.

When a bond is issued for more than its face value, the market rate of interest is ________ the interest rate stated on the bond.

less than

When will the carrying value of bonds equal the market price?

on the date of issuance