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Horngrens Financial And Managerial Accounting The Financial Chapters Global Edition 6th Edition Brenda L. Mattison, Ella Mae Matsumura, Tracie Miller Nobles - Solutions
How does authorized stock differ from outstanding stock?
List three characteristics of a corporation.
What is a corporation?
P12AB-38A Determining the present value of bonds payable and journalizing using the effective-interest amortization method Soothing, Inc. is authorized to issue 7%, 10-year bonds payable. On January 1, 2018, when the market interest rate is 8%, the company issues $100,000 of the bonds. The bonds
P12AB-37A Determining the present value of bonds payable and journalizing using the effective-interest amortization method Brad Nelson, Inc. issued $600,000 of 7%, six-year bonds payable on January 1, 2018.The market interest rate at the date of issuance was 6%, and the bonds pay interest
Reporting liabilities on the balance sheet and computing debt to equity ratio The accounting records of Router Wireless include the following as of December 31, 2018:Accounts Payable $ 68,000 Salaries Payable $ 8,000 Mortgages Payable (long-term) 75,000 Bonds Payable (current portion) 35,000
Analyzing and journalizing bond transactions On January 1, 2018, Educators Credit Union (ECU) issued 8%, 20-year bonds payable with face value of $1,000,000. These bonds pay interest on June 30 and December 31.The issue price of the bonds is 109.Journalize the following bond transactions:a.
Analyzing and journalizing bond transactions On January 1, 2018, Neighborhood Credit Union (NCU) issued 6%, 20-year bonds payable with face value of $100,000. The bonds pay interest on June 30 and December 31.Requirements 1. If the market interest rate is 5% when NCU issues its bonds, will the
Analyzing, journalizing, and reporting bond transactions Danny’s Hamburgers issued 6%, 10-year bonds payable at 90 on December 31, 2018.At December 31, 2020, Danny reported the bonds payable as follows:Long-term Liabilities:Bonds Payable $ 600,000 Less: Discount on Bonds Payable (48,000) $
Journalizing liability transactions and reporting them on the balance sheet The following transactions of Emergency Pharmacies occurred during 2018 and 2019:2018 Mar. 1 Borrowed $300,000 from Milton Bank. The 15-year, 9% note requires payments due annually, on March 1. Each payment consists of
E12B-31 Journalizing bond transactions using the effective-interest amortization method Journalize issuance of the bond and the first semiannual interest payment under each of the following three assumptions. The company amortizes bond premium and discount by the effective-interest amortization
E12A-30 Determining the present value of bonds payable Interest rates determine the present value of future amounts. (Round to the nearest dollar.)Requirements 1. Determine the present value of seven-year bonds payable with face value of$91,000 and stated interest rate of 12%, paid semiannually.
Computing the debt to equity ratio Ludwig Corporation has the following data as of December 31, 2018:Total Current Liabilities $ 36,210 Total Stockholders’ Equity $ ?Total Current Assets 58,200 Other Assets 36,800 Long-term Liabilities 139,630 Property, Plant, and Equipment, Net 206,440 Compute
Reporting liabilities At December 31, MediStat Precision Instruments owes $52,000 on Accounts Payable, Salaries Payable of $12,000, and Income Tax Payable of $10,000. MediStat also has $300,000 of Bonds Payable that were issued at face value that require payment of a $35,000 installment next year
Reporting current and long-term liabilities Pediatric Dispensary borrowed $390,000 on January 2, 2018, by issuing a 15% serial bond payable that must be paid in three equal annual installments plus interest for the year. The first payment of principal and interest comes due January 2, 2019.
Retiring bonds payable before maturity Parkview Magazine issued $630,000 of 15-year, 6% callable bonds payable on July 31, 2018, at 99. On July 31, 2021, Parkview called the bonds at 104. Assume annual interest payments.Requirements 1. Without making journal entries, compute the carrying amount of
Journalizing bond issuance and interest payments On January 1, 2018, Roberts Unlimited issues 8%, 20-year bonds payable with a face value of $240,000. The bonds are issued at 104 and pay interest on June 30 and December 31.Requirements 1. Journalize the issuance of the bonds on January 1, 2018.2.
Journalizing bond transactions Jefferson Company issued $110,000 of 10-year, 8% bonds payable on January 1, 2018.Jefferson Company pays interest each January 1 and July 1 and amortizes discount or premium by the straight-line amortization method. The company can issue its bonds payable under
Journalizing bond issuance and interest payments On June 30, Daughtry Limited issues 8%, 20-year bonds payable with a face value of$130,000. The bonds are issued at 86 and pay interest on June 30 and December 31.Requirements 1. Journalize the issuance of the bonds on June 30.2. Journalize the
Journalizing bond issuance and interest payments On June 30, Price Company issues 4%, five-year bonds payable with a face value of $50,000. The bonds are issued at face value and pay interest on June 30 and December 31.Requirements 1. Journalize the issuance of the bonds on June 30.2. Journalize
Determining bond prices and interest expense Jones Company is planning to issue $490,000 of 9%, five-year bonds payable to borrow for a major expansion. The owner, Shane Jones, asks your advice on some related matters.Requirements 1. Answer the following questions:a. At what type of bond price will
Analyzing alternative plans to raise money SB Electronics is considering two plans for raising $4,000,000 to expand operations.Plan A is to issue 9% bonds payable, and plan B is to issue 500,000 shares of common stock. Before any new financing, SB Electronics has net income of $350,000 and 300,000
Preparing an amortization schedule and recording mortgages payable entries Kanta Company purchased a building and land with a fair market value of $550,000(building, $450,000, and land, $100,000) on January 1, 2018. Kanta signed a 20-year, 6% mortgage payable. Kanta will make monthly payments of
Accounting for long-term notes payable transactions Consider the following note payable transactions of Caleb Video Productions.2018 Oct. 1 Purchased equipment costing $80,000 by issuing a five-year, 8% note payable. The note requires annual principal payments of $16,000 plus interest each October
S12B-17 Using the effective-interest amortization method On December 31, 2018, when the market interest rate is 6%, Benson Realty issues $700,000 of 6.25%, 10-year bonds payable. The bonds pay interest semiannually. Benson Realty received $713,234 in cash at issuance.Requirements 1. Prepare an
S12B-16 Using the effective-interest amortization method On December 31, 2018, when the market interest rate is 10%, McCann Realty issues $450,000 of 7.25%, 10-year bonds payable. The bonds pay interest semiannually. The present value of the bonds at issuance is $372,936.Requirements 1. Prepare an
S12A-15 Determining future value David is entering high school and is determined to save money for college. David feels he can save $5,000 each year for the next four years from his part-time job. If David is able to invest at 6%, how much will he have when he starts college?
S12A-14 Determining the present value of bond at issuance On December 31, 2018, when the market interest rate is 10%, Randall Realty issues $300,000 of 7.25%, 10-year bonds payable. The bonds pay interest semiannually.Determine the present value of the bonds at issuance.
Computing the debt to equity ratio Roland Corporation has the following amounts as of December 31, 2018.Total assets $ 38,480 Total liabilities 17,680 Total equity 20,800 Compute the debt to equity ratio at December 31, 2018. (Round the debt to equity ratio to two decimal places, X.XX.)S12A-13
Preparing the liabilities section of the balance sheet Luxury Suites Hotels includes the following selected accounts in its general ledger at December 31, 2018:Notes Payable (long-term) $ 200,000 Accounts Payable $ 33,000 Bonds Payable (due 2022) 450,000 Discount on Bonds Payable 13,500 Interest
Retiring bonds payable before maturity On January 1, 2018, Patterson Company issued $100,000 of 10%, five-year bonds payable at 107. Patterson Company has extra cash and wishes to retire the bonds payable on January 1, 2019, immediately after making the second semiannual interest payment.To retire
Journalizing bond transactions including retirement at maturity McQueen Company issued a $100,000, 7.5%, 10-year bond payable. Journalize the following transactions for McQueen Company, and include an explanation for each entry:a. Issuance of the bond payable at face value on January 1, 2018.b.
Journalizing bond transactions Wilkes Mutual Insurance Company issued a $100,000, 5%, 10-year bond payable at 111 on January 1, 2018. Interest is paid semiannually on January 1 and July 1.Requirements 1. Journalize the issuance of the bond payable on January 1, 2018.2. Journalize the payment of
Journalizing bond transactions Omar Company issued a $90,000, 10%, 10-year bond payable at 87 on January 1, 2018. Interest is paid semiannually on January 1 and July 1.Requirements 1. Journalize the issuance of the bond payable on January 1, 2018.2. Journalize the payment of semiannual interest and
Journalizing bond transactions Power Company issued a $1,000,000, 5%, 5-year bond payable at face value on January 1, 2018. Interest is paid semiannually on January 1 and July 1.Requirements 1. Journalize the issuance of the bond payable on January 1, 2018.2. Journalize the payment of semiannual
Determining bond amounts Starlight Drive-Ins borrowed money by issuing $5,500,000 of 11% bonds payable at 92.5. Interest is paid semiannually.Requirements 1. How much cash did Starlight receive when it issued the bonds payable?2. How much must Starlight pay back at maturity?3. How much cash
Pricing bonds Bond prices depend on the market rate of interest, stated rate of interest, and time.Requirements 1. Compute the price of the following 7% bonds of Partner Telecom.a. $300,000 issued at 75.50b. $300,000 issued at 104.25c. $300,000 issued at 95.50d. $300,000 issued at 103.75 2. Which
Determining bond prices Durham Clinics issued a $200,000 face value, 7%, 10-year bond when the market interest rate was 8%. The bonds pay interest semiannually.Requirements 1. Determine the interest payment for each period. Will this amount fluctuate from year to year with the change in market
Accounting for mortgages payable Ember Company purchased a building with a market value of $280,000 and land with a market value of $55,000 on January 1, 2018. Ember Company paid $15,000 cash and signed a 25-year, 12% mortgage payable for the balance.Requirements 1. Journalize the January 1, 2018,
Accounting for a long-term note payable On January 1, 2018, Lynd–Flint signed a $840,000, 12-year, 6% note. The loan required Lynd–Flint to make annual payments on December 31 of $70,000 principal plus interest.Requirements 1. Journalize the issuance of the note on January 1, 2018.2. Journalize
In regard to a bond discount or premium, what is the effective-interest amortization method?
How does compound interest differ from simple interest?
What is an annuity?
Explain each of the key factors that the time value of money depends on.
What does the debt to equity ratio show, and how is it calculated?
What are the two categories of liabilities reported on the balance sheet? Provide examples of each.
What does it mean when a company calls a bond?
What is the journal entry to retire bonds at maturity?
What type of account is Premium on Bonds Payable? What is its normal balance? Is it added to or subtracted from the Bonds Payable account to determine the carrying amount?
What type of account is Discount on Bonds Payable? What is its normal balance?Is it added to or subtracted from the Bonds Payable account to determine the carrying amount?
In regard to a bond discount or premium, what is the straight-line amortization method?
What is the carrying amount of a bond?
Why would a company choose to issue bonds instead of issuing stock?
When a bond is issued, what is its present value?
When does a premium on bonds payable occur?
When does a discount on bonds payable occur?
What is the difference between the stated interest rate and the market interest rate?
What is a bond payable?
What is a mortgage payable?
What is an amortization schedule?
Where is the current portion of notes payable reported on the balance sheet?
Hicks Corporation issued $500,000 of 5%, 10-year bonds payable at a price of 92.The market interest rate at the date of issuance was 6%, and the bonds pay interest semiannually. The journal entry to record the first semiannual interest payment using the effective-interest amortization method is
Josh Robinson wishes to have $90,000 in six years. If he can earn annual interest of 6%, how much must he invest today?a. $84,780b. $63,450c. $127,710d. $10,450
The debt to equity ratio is calculated asa. Total assets / Total equity.b. Current liabilities / Total equity.c. Total liabilities / Total assets.d. Total liabilities / Total equity.
Dynasystem’s trial balance shows $300,000 face value of bonds with a discount balance of $2,500. The bonds mature in 10 years. How will the bonds be presented on the balance sheet?a. Bonds payable $300,000 will be listed as a long-term liability. A $2,500 discount on bonds payable will be listed
Vasquez issued a $400,000 face value, 8%, 20-year bond at 95. Which of the following is the correct journal entry to record the retirement of the bond at maturity? Date Accounts and Explanation Debit Credit a. Bonds Payable 380,000 Cash 380,000 b. Cash 400,000 Bonds Payable 400,000 c. Bonds Payable
Sarah Jackson Fitness Gym has $400,000 of 10-year bonds payable outstanding.These bonds had a discount of $24,000 at issuance, which was 5 years ago. The company uses the straight-line amortization method. The current carrying amount of these bonds payable isa. $400,000.b. $412,000.c. $376,000.d.
Nick Spanos Antiques issued its 7%, 20-year bonds payable at a price of $168,520(face value is $200,000). The company uses the straight-line amortization method for the bond discount or premium. Interest expense for each year isa. $11,796.b. $14,000.c. $12,426.d. $15,574.
A bond that matures in installments at regular intervals is aa. term bond.b. serial bond.c. periodic bond.d. terminal bond.
Daniels’s bonds payable carry a stated interest rate of 5%, and the market rate of interest is 7%. The issue price of the Daniels’s bonds will be ata. par value.b. a premium.c. face value.d. a discount.
Transco signed a 7-year note payable on January 1, 2018, of $665,000. The note requires annual principal payments each December 31 of $95,000 plus interest at 15%. The entry to record the annual payment on December 31, 2022, includesa. a credit to Cash of $194,750.b. a credit to Notes Payable for
Accounting treatment for contingencies Analyze the following independent situations.a. Weaver, Inc. is being sued by a former employee. Weaver believes that there is a remote chance that the employee will win. The employee is suing Weaver for damages of $40,000.b. Gulf Oil Refinery had a gas
Accounting for warranties, vacation, and bonuses McDonald Industries completed the following transactions during 2018:Nov. 1 Made sales of $7,000. McDonald estimates that warranty expense is 3% of sales. (Record only the warranty expense.)20 Paid $200 to satisfy warranty claims.Dec. 31 Estimated
Accounting for warranty expense and warranty payable The accounting records of Earthtone Ceramics included the following at January 1, 2018:In the past, Earthtone’s warranty expense has been 9% of sales. During 2018, Earthtone made sales of $102,000 and paid $6,000 to satisfy warranty
Recording employee and employer payroll taxes Town Company had the following partially completed payroll register:Requirements 1. Complete the payroll register. Round to two decimals.2. Journalize Town Company’s salaries and wages expense accrual for the current pay period.3. Journalize Town
Recording employer payroll taxes and employee benefits Felipe’s Mexican Restaurant incurred salaries expense of $69,000 for 2018. The payroll expense includes employer FICA tax, in addition to state unemployment tax and federal unemployment tax. Of the total salaries, $19,000 is subject to
Computing and recording gross and net pay Harold Striker manages a Frosty Boy drive-in. His straight-time pay is $13 per hour, with time-and-a-half for hours in excess of 40 per week. Striker’s payroll deductions include withheld income tax of 30%, FICA tax, and a weekly deduction of $6 for a
Journalizing current liabilities Ed O’Connor Associates reported short-term notes payable and salaries payable as follows:2018 2017 Current Liabilities—partial:Short-term Notes Payable $ 16,600 $ 15,800 Salaries Payable 4,100 3,700 During 2018, O’Connor paid off both current liabilities that
Recording and reporting current liabilities Trevor Publishing completed the following transactions during 2018:Oct. 1 Sold a six-month subscription (starting on November 1), collecting cash of$390, plus sales tax of 7%.Nov. 15 Remitted (paid) the sales tax to the state of Tennessee.Dec. 31 Made the
Recording note payable transactions Consider the following note payable transactions of Creative Video Productions.2017 Aug. 1 Purchased equipment costing $16,000 by issuing a one-year, 9% note payable.Dec. 31 Accrued interest on the note payable.2018 Aug. 1 Paid the note payable plus interest at
Recording sales tax Consider the following transactions of Oyster Software:Mar. 31 Recorded cash sales of $190,000, plus sales tax of 6% collected for the state of New Jersey.Apr. 6 Sent March sales tax to the state.Journalize the transactions for the company. Ignore cost of goods sold.
Computing times-interest-earned ratio Orchard Electronics reported the following amounts on its 2018 income statement:Year Ended December 31, 2018 Net income $ 43,500 Income tax expense 6,525 Interest expense 3,450 What is Orchard’s times-interest-earned ratio for 2018? (Round to two decimals.)
Accounting treatment for contingencies Freeman Motors, a motorcycle manufacturer, had the following contingencies.a. Freeman estimates that it is reasonably possible but not likely that it will lose a current lawsuit. Freeman’s attorneys estimate the potential loss will be $4,500,000.b. Freeman
Accounting for warranty expense and warranty payable Sierra guarantees its snowmobiles for three years. Company experience indicates that warranty costs will be approximately 3% of sales.Assume that the Sierra dealer in Colorado Springs made sales totaling $575,000 during 2018. The company received
Journalizing vacation benefits Finn Industries has eight employees. Each employee earns two vacation days a month.Finn pays each employee a weekly salary of $3,000 for a five-day workweek.Requirements 1. Determine the amount of vacation expense for one month.2. Journalize the entry to accrue the
Computing bonus payable On December 31, Weston Company estimates that it will pay its employees a 5%bonus on net income after deducting the bonus. The company reports net income of$64,000 before the calculation of the bonus. The bonus will be paid on January 15 of the next year.Requirements 1.
Computing and journalizing the payroll expense and payments Brentwood Company has monthly salaries of $36,000. Assume Brentwood pays all the standard payroll taxes, no employees have reached the payroll tax limits, total income tax withheld is $2,000, and the only payroll deductions are payroll
Computing payroll amounts considering FICA tax limits Lori Bailey works for ABC all year and earns a monthly salary of $12,300. There is no overtime pay. Lori’s income tax withholding rate is 10% of gross pay. In addition to payroll taxes, Lori elects to contribute 1% monthly to United Way. ABC
Computing and journalizing an employee’s total pay Lucy Rose works at College of Fort Worth and is paid $12 per hour for a 40-hour workweek and time-and-a-half for hours above 40.Requirements 1. Compute Rose’s gross pay for working 60 hours during the first week of February.2. Rose is single,
Determining current portion of long-term note payable On January 1, Kelly Company purchased equipment of $100,000 with a long-term note payable. The debt is payable in annual installments of $20,000 due on December 31 of each year. At the date of purchase, how will Kelly Company report the note
Accounting for a note payable On December 31, 2017, Franklin purchased $13,000 of merchandise inventory on a one-year, 9% note payable. Franklin uses a perpetual inventory system.Requirements 1. Journalize the company’s purchase of merchandise inventory on December 31, 2017.2. Journalize the
Recording unearned revenue On September 1, Baby Raising Magazine collected cash of $63,000 on future annual subscriptions starting on October 1.Requirements 1. Journalize the transaction to record the collection of cash on September 1.2. Journalize the transaction required at December 31, the
Recording sales tax On July 5, Bramley Company recorded sales of merchandise inventory on account,$25,000. The sales were subject to sales tax of 10%. On August 15, Bramley Company paid the sales tax owed to the state from the July 5 transaction.Requirements 1. Journalize the transaction to record
Determining current versus long-term liabilities Rios Raft Company had the following liabilities.a. Accounts Payableb. Note Payable due in 3 yearsc. Salaries Payabled. Note Payable due in 6 monthse. Sales Tax Payablef. Unearned Revenue due in 8 months g. Income Tax Payable Determine whether each
How is the times-interest-earned ratio calculated, and what does it evaluate?
Curtis Company is facing a potential lawsuit. Curtis’s lawyers think that it is reasonably possible that it will lose the lawsuit. How should Curtis report this lawsuit?
What is a contingent liability? Provide some examples of contingencies.
When do businesses record warranty expense, and why?
What are the two main controls for payroll? Provide an example of each.
What payroll taxes is the employer responsible for paying?
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