LO1. How are long-term notes payable and mortgages payable accounted for? In your own words, what is
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LO1. How are long-term notes payable and mortgages payable accounted for?
- In your own words, what is a long-term liability? Long term-liabilities are liabilities that do not need to be paid within one year or within the entity’s operating cycle, whichever is longer. Both long-term notes payable and mortgages payable are common long-term liabilities.
- To record the purchase of a building for $150,000, paying $100,000 in cash and signing a 30-year mortgage at 6% for the balance, the journal entry would be:
Date | Accounts and Explanation | Debit | Credit |
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LO2. What are bonds?
- In your own words, what is a bonds payable?
- ___Debentures__________ are unsecured bonds backed only by the credit worthiness of the bond issuer.
- _____Secure Bonds________ are bonds that give bondholders the right to take specified assets of the issuer if the issuer fails to pay principal or interest.
- ___Serial Bonds__________ are bonds that mature in installments at regular intervals.
- ____Term Bonds_________ are bonds that mature all at the same time.
LO3. How are bonds payable accounted for using the straight-line amortization method?
- Journalize the following:
- A bond that has a face value of $100,000 but is issued for $95,000.
- A bond that has a face value of $100,000 but is issued for $106,000.
Date | Accounts and Explanation | Debit | Credit |
1) | | | |
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2) | | | |
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LO4. How is the retirement of bonds payable accounted for?
- When a bonds payable is retired at maturity, the journal entry is a debit to ________________ and a credit to ________________.
LO5. How are liabilities reported on the balance sheet?- Identify if the liability would be classified as a current liability (CL) or a long-term liability (LTL) on the balance sheet.
- Bonds Payable _________
- Accounts Payable ________
- Mortgage Payable _________
- Accounts Payable ________
- FICA taxes ________
LO6. How do we use the debt to equity ratio to evaluate performance?
- What is the formula for debt to equity ratio?
- If total current liabilities are $10,000, long-term liabilities are $20,000, and total equity in the business is $40,000, what is the debt to equity ratio?
Related Book For
Introductory Financial Accounting for Business
ISBN: 978-1260299441
1st edition
Authors: Thomas Edmonds, Christopher Edmonds
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