ACCT 301 Lecture 10: Accounting Study Guide Ch 10

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blushbutterfly372

31 Oct 2016

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Study objectives: explain a current liability and identify the major types of current liabilities, describe the accounting for notes payable, explain the accounting for other current liabilities, explain why bonds are issued and identify the types of bonds. Prepare the entries for the issuance of bonds and interest expense: describe the entries when bonds are redeemed, identify the requirements for the financial statement presentation and analysis of liabilities. Notes payable (to record issuance of 12%, 4-month note to first national bank) Assume cole williams co. is borrowing ,000 from the first national bank on september 1, 2004. The note earns interest at a rate of 12% and matures in four months. On september 1 cole williams co. receives ,000 and makes the following journal entry: The interest, which accrues over the life of the note, must be recorded when financial statements are prepared at december 31.

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Listed below are several terms and phrases associated with current liabilities. Mach each List A to B

List A

1, Cash, current investments, and A/R all divided by current liabilities.

2, Payment is probable and can be reasonably estimated.

3, Gift cards

4, Long-term debt maturing within one year

5, Social Security and Medicare

6, Interest expense is recorded in the period interest is incurred rather than in the period interest is paid.

7, payment is reasonably possible and can be reasonably estimated.

8, Incurred on a notes payable.

9, Unsecured notes sold in minimum denominations of $25,000 with up to 270 days.

10, Classifying liabilities as either current or long-term helps inverstors and creditors assets this.

List B

a, Recoding a contingentliability

b, disclosure of a contingent liability

c, Interest expense

d, FICA

e, Commercial paper

f, The riskiness of a business's obligations

g, Current portion of Long-term debt

h, Unearned revenue

i, Acid=test ratio

j, Accual Accounting

chocolatewoodchuck193

Fridley Manufacturing's accounting records reveal the following account balances after adjusting entries are made on December 31, 2018:

Accounts payable		$ 62,500
Bonds payable (9.4%, due in 2025)		800,000
Lease liability*		41,500
Bonds payable (8.7%, due in 2021)		50,000
Deferred tax liability*		133,400
Discount on bonds payable (9.4%, due in 2025)		12,600
Income tax payable		26,900
Interest payable		38,700
Installment note payable (8% equal installments due 2019 to 2022)		120,000
Notes payable (7.8%, due in 2023)		400,000
Premium on notes payable (7.8%, due in 2023)		6,100
Zero coupon note payable, $50,000 face amount, due in 2024 (net of discount)		31,900

* Long-term liability

Required:

Prepare the current liabilities and long-term debt portions of Fridley's statement of financial position at December 31, 2018. Provide a separate line item for each issue (do not combine separate bonds or notes payable), but some items may need to be split into more than one item.

Fridley Manufacturing
Liabilities Section of the Statement of Financial Position
December 31, 2018
Liabilities
Current liabilities:
Accounts payable	$
Interest payable
Income tax payable
Current portion of installment note
Total current liabilities		$
Long-term liabilities:
Bonds payable:
Bonds payable (8.7%, due in 2021)
Bonds payable (9.4%, due in 2025)	$
Less: Discount on bonds payable
Notes payable:
Notes payable (7.8%, due in 2023)	$
Add: Premium on notes payable
Installment note payable (8%)
Note payable (4%, due in 2024)	$
Less: Discount on note payable
Other long-term liabilities:
Lease liability
Deferred tax liability
Total liabilities		$

amethystgerbil16

Define current liabilities. List the current liabilitieswe cover in this chapter.

What are payroll deductions? Provide someexamples.

How is net pay calculated?

Employer payroll taxes include FICA Tax andFederal & State Unemployment Tax. Which expense account isdebited for employer payroll taxes? Provide an example journalentry.

Employee payroll taxes include FICA Tax &Income Tax. Which expense account is debited for employee payrolltaxes? Provide an example journal entry.

What is the formula to calculate interest on a notepayable?

Provide the following journal entries:

Establish note payable

Accrue interest incurred but not paid

Record interest paid

Record principal paid

Explain the current portion of long termdebt.

What are contingent liabilities?

What is the debt-to-assets ratio and what does it tellyou?

What is the times interest earned ratio and what does ittell you?

What are the three key elements of a bond?

What types of bonds are available?

Explain the difference between face value and issueprice.

Explain when each occurs, how interest is recorded, andprovide the journal entry for:

Bonds issued at face value

Bonds issued at a premium

Bonds issued at a discount

Bond Amortization using the Effective InterestMethod:

Bond Retirement:

Time Value of Money:

ACCT 301 Lecture 10: Accounting Study Guide Ch 10

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