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