ac 211 chapter 10 learnsmarts
coverall, inc. had the following amounts for the year ended: interest expense of $1,000, interest income of $2,000, net income of $10,000, income taxes of $3,000 and earnings per share of $3. the times interest earned ratio equals...
14
under the u.s. GAAP, if a company violates loan covenants on long-term debt but renegotiates the loan before releasing its financial statements, the debt remains classified as long-term. under IFRS, the company must reclassify that long-term debt as a _____ liability
current
from the issuing company's perspective, a bond is a liability. from a bondholder's perspective, the bond is a...
investment
the entry to record the issuance of bonds at face value includes a debit to cash and a credit to...
bonds payable
when the interest earned ratio is less than 1.0, a company is...
not generating enough income to cover its interest expense
_____ _____ is a liability that represents the amount the company owes to others as a result of issuing a promissory note
notes payable
long-term liabilities are accounted for in the same way as short-term liabilities, except the long-term liabilities are on the books for more than one...
year
_______ liabilities are potential 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 estimates
contingent
bonds that can be exchanged for stock are called _____ bonds
convertible
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. what is john's net pay?
$486.10
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...
- $110 debit to interest payable - $10 debit to interest expense - $1,000 debit to notes payable - $1,120 credit to cash
match the interest rates with the related bond prices
- 6% stated interest rate and 4% market interest rate = premium - 6% stated interest rate and 6% market interest rate = face value - 6% stated interest rate and 8% market interest rate = discount
premium on bonds payable will be ____ with each interest payment causing the premium on bonds payable balance to ____ when bonds mature
- amortized - decrease to a $0 balance
abc company issues a bond with a face value of $100,000 at par on january 1. the bond carries a stated annual interest rate of 6% payable in cash on december 31 of each year. if abc issues monthly financial statements, it must make an adjusting entry on january 31 that includes a...
- credit to interest payable of $500 - debit to interest expense of $500
the entry to record the issuance of 100, $1,000 bonds for 98.00 includes a...
- debit to cash for $98,000 - debit to discount on bonds payable for $2,000 - credit to bonds payable for $100,000
_____ ______ is a current liability that represents the amount owed for goods and services purchased on credit and is generally interest free
accounts payable
the debt-to-asset ratio is calculated by dividing total liabilities by total _____
assets
accounts (or trade) payable is a _____ and increases when ____ and decreases when _____
current liability, purchases are made on credit, bills are paid
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
accruing a liability always involves recording both a ____ and a liability
expense
whether a bond is issued at par, premium, or discount, when the bond matures the amount paid equals the ____ value
face
if a $1,000 bond is issued at 100, then the bond is sold at...
face value
assets are financed with _____ and stockholders' equity
liabilities
current portion of long-term debt reports the amount of ______ and is reported on the _____
long-term debt that is reclassified because it is due within the year; balance sheet
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 his gross pay?
salaries and wages expense increases $600
which of the following statements is true?
sea the world cruises' bonds sold at a discount rate because the stated rate is less than the market rate of interest
which of the following statements is true about sea the world cruises' $1,000 bond price?
they sold for $931.40 each
the discount on a bond is _____ and _____ the discount each period
- amortized - decreases
payroll deductions...
- are amounts subtracted from the employees' gross earnings to determine their net pay - decrease the amount of cash an employee receives
the entry to record the issuance of a not for cash was recorded with a debit to cash and a credit to notes receivable instead of notes payable. the effect of recording this entry causes...
- assets to be understated - liabilities to be understated
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 issue price of a bond is...
- based on a present value calculation - based on what the market is willing to pay
assuming no previous accrual of interest has been recorded, on december 31 year-end, the adjusting entry to record the interest owed on it's $100,000, 6% bonds issued at face value on january 31 with interest paid annually includes a...
- credit to interest payable of $5,500 - debit to interest expense of $5,500
if an adjusting entry is required for interest owed, then the _____ will report _____
- income statement, interest expense - balance sheet, interest payable - balance sheet, notes payable
the entry to record the initial borrowing of cash by issuing a promissory note causes a _____
- increase in liabilities - increase in assets
xyz warehouse operates in a state with a 6% sales tax. for convenience, xyz warehouse credits sales revenue for the total amount (selling price plus tax) collected from each customer. what will be the effect if xyz warehouse falls to make an adjustment for sales tax?
- net income will be overstated - liabilities will be understated
match when bonds sell at face value, a premium, or a discount
- premium= stated rate is greater than market rate - discount= stated rate is less than market rate - face value= stated rate equals market rate
a bond's stated interest rate is...
- used to calculate interest payments - always expressed as an annual interest rate
true or false: the bond issue price is determined by the company issuing the bonds
false
the following 12%, $1,000 notes have varying period 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 the same year?
- a 4-month note's interest equals $1,000 * 12% * 1/12 - a 2-year note's interest equals $1,000 * 12% * 1/12 - a 3-month note's interest equals $1,000 * 12% * 1/12
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 the payroll deductions are paid in the following month, abc would record john's pay with a journal entry that includes...
- debit to salaries and wages expense of $600 - credit to FICA (social security and medicare) payable of $45.90 - credit to cash of $486.10 - credit to state and federal income tax payable of $68
the debt-to-assets ratio best answers which financial question?
what is the percentage of assets financed by debt?
liabilities are classified as current if they...
will be paid within the company's operating cycle or within 1 year, whichever is longer
on november 1, abc corp. borrowed $100,000 cash on a 1-year, 6% note payable that requires abc to pay both principal and interest on october 31 in the following year. the last adjusting entry was made on december 31, abc's year end. the entry to record the payment on october 31 would include a...
- debit to notes payable of $100,000 - debit to interest payable of $1,000 - credit to cash of $106,000 - debit to interest expense of $5,000
when a company records a debit to bonds payable and a credit to cash, it is the bonds' _____
maturity date