AC 210- chapter 10
the times interest earned ratio equals
net income plus interest expense and income tax expense, divided by interest expense
the stated rate __________
remains the same throughout the life of the bonds
bond amortization is :
the process that causes the balance in premium on bonds payable to decline each period
Ace Electronics signed a 10-year, $100,000, 4% note payable on January 1. When the note is signed, Ace should record a liability of _________
- $100,000 - a liability is first recorded at 100,000, representing the amount of cash a creditor would accept to immediately settle the liability, which includes interest charges. Interest arises only when time passes.
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 ____.
- $105 debit to cash - $5 credit to sales tax payable - $100 credit to sales revenue
the issue price of 1,000, 5%, $1,000 bonds issued at 92.10 equals ______
- $921,000 - the bonds are selling at 92.10 which means the issuance price is 92.1% of face value or $1,000,000 (=1,000 x $1,000 x 92.1 %)
payroll taxes that are paid ONLY by the employer
- SUTA - FUTA
term
bond issue that matures on a single date
On November 1, 2015, ABC Corp. borrowed $100,000 cash on a 1-year, 6% note payable that requires ABC to pay all the interest as well as the principal on October 31, 2016. The journal entry on November 1, 2015 would include which of the following?
- credit to Note Payable for $100,000 - Debit to Cash for $100,000
US corporations pay federal taxes on
- income - payroll
Bond carrying value equals Bonds Payable
-minus discount on bonds payable -plus premium on bonds payable
bonds sell at:
1.) a premium if the stated rate is greater than the market rate of interest 2.) a discount if the stated rate is less than the market rate 3.) par if the stated and market rate equal
accounts payable is ...
a current liability that represents the amount owed for goods or services purchased on credit and is generally interest free
on september 1, ABC company borrowed $50,000 on a 6%, 9-month note payable to XYZ national bank. given no previous adjusting entries have been recorded, ABC's adjusting entry at December 31 would include :
a debit to interest expense of $1,000
serial bonds
bonds that mature in installments
note payable is...
a liability that represents the amount the company owes to others as a result of issuing a promissory note
The discount on a bond payable becomes
additional interest expense over the life of the bonds
convertible bonds
bonds that can be exchanged for shares of common stock
the normal balance for discount on bonds payable is a
debit
on the maturity date, the journal entry to record the payment of $1,000,000 of bonds payable that were issued at $70,000 discount includes a ______
debit to bonds payable of $1,000,000
a company recorded the issuance of its bonds with a debit to cash for $98,260 and a credit to bonds payable for $100,000, and a....
debit to discount on bonds payable for the difference
a company's debt-to-assets ratio is 0.7 or 70%. If the company issues common stock for cash, then the debt-to-assets ratio will _______
decrease
the debt-to-assets ratio is calculated by ______
dividing total liabilities by total assets
bonds are ...
financial instruments that outline the future payments a company promises to make in exchange for receiving a sum of money now
a bond's issuing price is determined by the ______
investors
par
investors will pay face value
discount
investors will pay less than face value
premium
investors will pay more than face value
when a company records a debit to Bonds Payable and a credit to Cash, _____________
it is the bond's maturity date
debentures
unsecured bonds
employees' gross earnings differ from their net pay because of ___________
- FICA taxes - payroll deductions - federal and state income taxes
the entry to record the issuance of bonds at face value includes:
- a debit to cash - a credit to bonds payable
for an investor, bonds are attractive investments because ________
- interest is higher than bank savings accounts - they can be traded on established bond exchanges
if a company forgets to record the journal entry to accrue interest expense, then...
- its net income is too high - its liabilities are too low
Which are long-term liabilities?
- notes payable due in 3 years - bonds payable due in 20 years
assuming no previous accrual interest has been recorded, on December 31 year-end, the adjusting entry to record the interest owed on its $100,000, 6% bonds issued at face value on January 31 with interest paid annually includes _________
- the entry includes a debit to interest expense and credit to interest payable - (=$100,000 x 6%/year x 11/12 year)
As of December 31, 2018, $110 of interest had been accrued on a 12%, $1,000 note payable. On January 31, 2019, the entry to record the payment of the note's principal and interest requires a ____.
-$1,120 credit to cash -$10 debit to Interest expense -$1,000 debit to notes payable -$110 debit to interest payable
The following 12%, $1,000 notes have varying periods to maturity but all were issued on December 1. Which of the following are the correct calculations of interest for these notes on December 31 of this same year?
-A 3-month note's interest equals $1,000 x 12% x 1/12 -A 4-month note's interest equals $1,000 x 12% x 1/12 -A 2-year note's interest equals $1,000 x 12% x 1/12
The journal entry to record the payment of salaries and wages for work performed in the current accounting period causes _____.
-assets to decrease -liabilities to increase -stockholders' equity to decrease
The journal entry to record the payment of salaries and wages to employees includes a _____.
-credit to Withheld Income Tax Payable -Debit to salaries and wages expense -credit to FICA Payable -credit to cash
If ABC Company issues 100 of its $1,000 bonds at a price of 110.00, i.e. $1,100 each, the journal entry to record the transaction includes a _____.
-debit to cash of $110,00 -credit to bonds payable $100,000 -credit to Premium on Bonds Payable of $10,000
Contingent Liabilities are
liabilities that arise as a result of past transactions or events and are reported on the balance sheet if the loss will probably occur and can be reasonably estimated
Current Liabilities on a classified balance sheet.....
report the obligations that will be paid or met within the company's operating cycle or within 1 year, whichever is longer
the stated rate is the rate used to determine...
the interest payment
callable bonds
the issuing company can pay off the bonds at any time
