Answer:
(a)
Calculate the amount received on sale of bonds:
P Company sold $1,000,000 general obligation bonds for 102 i.e. at premium.
Therefore, total amount received by P Co. on sale of bonds is $ 1,020,000.
(b)
Calculate interest payment for quarter:
Interest is paid by P Company at the rate of 5 %.
Calculate annual interest payment:
Multiply interest payment for each quarter with number of quarters in a year.
Therefore, annual interest payment is $ 50,000.
Answer:
(1)
Instalment amount has to be segregated in to interest and principal repayment of loan to determine the unpaid balance in the loan account.
The following is the amortization table for loan:
One needs to save $7,760 to repay the loan at the end of third year.
Answer:
Liabilities:
Liabilities maybe defined as debts or obligations arising from past transactions or events that require settlement at a future date.
Characteristics that distinguish liabilities from owner's equity:
1) All liabilities eventually mature.
Owner's equity does not mature.
The date at which liabilities mature is called maturity date is called maturity date
2) The people to whom the business is liable to i.e, the creditors have financial claims against the business the owner's have right to control business operations.
3) The claims of creditors have legal priority over the claims of owner's.