Question 1

A company's income statement reported income tax expense of $200,000 during 2010.The deferred tax liability on the balance sheet increased $20,000 during 2010.How much was the company's tax liability during 2010?

Accepted Answer

The answer of A company's income statement reported income tax...

Question 2

Wolf Company borrowed $5,000 on an 8% note payable on March 1,2010.The maturity date of the note (and payment of all interest)is September 1,2011.The accounting period ends December 31.Assuming no adjusting entries are made during the year,prepare the journal entry for each of the following dates:
A.March 1, 2010.
B.December 31, 2010.
C.September 1, 2011.

Accepted Answer

The answer of Wolf Company borrowed $5,000 on an 8%...

Question 3

Fold and Hold Corporation purchased a machine which had a current cash equivalent cost of $38,971 on January 1,2010.Fold and Hold paid cash of $10,000 and signed an interest-bearing note for the balance,payable in six equal annual installments on each December 31 beginning with December 31,2010.The note specified a 10% interest rate on the unpaid balance.
Requirements:
A.Prepare the journal entry to record the purchase on January 1, 2010 (round to the nearest dollar).
B.Prepare the entry to record the first installment payment on December 31, 2010 (round to the nearest dollar).Assume that no adjusting entries have been made during the year.

Accepted Answer

When Fold and Hold Corporation purchases the machine, the company needs to record the purchase by debiting the asset account for the machine and crediting both the cash account and the notes payable account. The cash account is credited for the down payment, and the notes payable account is credited for the balance of the purchase price, which will be paid off in installments.
Here's the journal entry:
```
Date          Account Title            Debit       Credit
January 1, 2010
  Machinery                           38,971
    Cash                                           10,000
    Notes Payable                                  28,971
```
- Machinery is debited for the full purchase price of the machine, $38,971.
- Cash is credited to reflect the cash payment made, $10,000.
- Notes Payable is credited for the remaining balance that will be paid in installments, $28,971.
B. Entry to Record the First Installment Payment on December 31, 2010
The first installment payment will include both the principal repayment and the interest expense for the year. The interest for the year is calculated on the unpaid balance of the note. Since no payments have been made yet, the interest for the first year is calculated on the full amount of the note payable, $28,971.
Interest for one year at 10%:
Interest = Principal x Rate x Time
Interest = $28,971 x 10% x 1
Interest = $2,897.10 (rounded to the nearest dollar, $2,897)
The total annual installment payment is not given, but we can calculate the principal portion of the payment by subtracting the interest from the total payment. Since the payments are equal annual installments, we divide the principal amount by the number of payments (6) to find the principal portion of each installment.
Principal portion of each installment:
Principal portion = Total principal / Number of installments
Principal portion = $28,971 / 6
Principal portion = $4,828.50 (rounded to the nearest dollar, $4,829)
Now, we can record the first installment payment:
```
Date          Account Title            Debit       Credit
December 31, 2010
  Interest Expense                     2,897
  Notes Payable                        4,829
    Cash                                            7,726
```
- Interest Expense is debited for the interest for the year, $2,897.
- Notes Payable is debited to reflect the reduction in the liability for the principal portion of the installment, $4,829.
- Cash is credited to show the cash outflow for the installment payment, which is the sum of the interest and principal portions, $7,726.
Please note that the total annual installment payment should be provided to accurately determine the principal and interest portions. If the installment payment amount is different from the sum of the calculated interest and principal portions, the entries would need to be adjusted accordingly.

Question 4

Sharp Company borrowed $500,000 on a 6% one-year,interest bearing note dated November 1,2010 with interest payable at maturity.The annual accounting period ends on December 31.Assuming that adjusting entries are only made at December 31,the company's fiscal year-end,prepare journal entries for each of the following dates:
A.November 1, 2010.
B.December 31, 2010.
C.October 31, 2011.

Accepted Answer

The answer of Sharp Company borrowed $500,000 on a 6%...

Question 5

Halbur Company reported total assets of $150,000,current assets of $60,000,and total stockholders' equity of $60,000 and noncurrent liabilities of $65,000.
Requirements (show computations):
1.Compute working capital.
2.Compute the current ratio.

Accepted Answer

The answer of Halbur Company reported total assets of $150,000,current...

Question 6

Border Company purchased a truck that cost $17,000.The company signed a $17,000 note payable that specified four equal annual payments (at each year-end),each of which includes a payment on the principal and interest on the unpaid balance at 10% per annum.
Requirements:
A.Calculate the amount of each equal payment (round to the nearest dollar).
B.Prepare the journal entry to record the purchase of the truck.
C.Prepare the journal entry to record the first annual payment on the note (assume no interest has been accrued during the year).
D.Will the interest paid with the first annual payment be more or less than the interest paid with the second annual payment? Explain your answer.

Accepted Answer

The answer of Border Company purchased a truck that cost...

Question 7

The following data were provided by the detailed payroll records of Mountain Corporation for the month of March 2011:
 $\begin{array} { l r r } 
\text { Compensation (wages) } & 35,000 & \
\text { Income taxes withheld } & 7,350 & \
\quad \text { Union dues } & & 175
\end{array}$ FICA taxes at a 7.65% rate (no employee had reached the maximum).
Requirements:
A.Prepare the March 31,2011 journal entry to record the payroll and the related employee deductions.
B.Give the March 31,2011 journal entry to record the employer's FICA payroll tax expense.

Accepted Answer

The answer of The following data were provided by the...

Question 8

In a recent year,The Walt Disney Company reported the following increases or decreases in current assets and current liabilities.Identify whether each of these increases or decreases caused cash to increase or decrease.Show increases with a (+)in front of the amount and decreases with a (-)in front of the amount in the column labeled cash effect.:
 $ \quad $$ \quad $$ \quad $$ \quad $$ \quad $$\text { Changes in current assets and liabilities (in millions) }$

$\begin{array}{llc}
{\text { Account }} & \text { Account Balance Change } & \text { Cash Effect }(+/-) \
\text { Receivables-CA } & \text { Decrease } \$ 366 & 1 . \
\text { Inventories-CA } & \text { Decrease } \$ 103 & 2 . \
\text { Film and television } & \text { Increase } \$ 848 & 3 . \
\text { costs-CA } &&\
\text { Current portion of } & \text { Increase } \$ 292 & 5 .  \
\text { borrowings-CL } &&\
\text { Unearned royalties-CL } & \text { Increase } \$ 69 & 6 .
\end{array}$

Accepted Answer

The answer of In a recent year,The Walt Disney Company...

Question 9

The following is a partial list of account balances for Coen,Inc.as of December 31,2010:
 $$\begin{array} { l r } 
\text { Accounts payable } & \$ 5,000 \
\text { Accounts receivable } & 6,000 \
\text { Bonds payable (100\% due in 10 years) } & 40,000 \
\text { Mortgage payable ( } 10 \% \text { due within one year) } & 10,000 \
\text { Notes payable (due in six months) } & 2,000 \
\text { Salaries payable } & 800 \
\text { Sales revenue } & 49,000 \
\text { Income taxes payable } & 8,000 \
\text { Unearned revenue } & 800
\end{array}$$ Required:
Prepare the liability section of Coen Inc.'s classified balance sheet for December 31,2010.

Accepted Answer

The answer of The following is a partial list of...

Question 10

each of the independent problems (show computations):
A.Company A deposited $20,000 in a savings account on January 1, 2009, that will accumulate 6% interest each December 31.
1.What will be the fund balance as of December 31, 2013?
2.How much interest will be earned as of December 31, 2013?
B.Company B needs to accumulate a $50,000 fund by making five equal annual deposits.Assuming a 7% interest accumulation, how much must be deposited at the end of each year?
C.Company C has a new machine that has an estimated life of five years and a $5,000 residual value.Assuming an 8% interest rate, what is the present value of the estimated residual value?
D.Company D owes a $50,000 debt that is now due (January 1, 2011).Arrangements have been made to pay it off in five equal annual installments starting December 31, 2011 (an ordinary annuity situation).

Accepted Answer

The answer of each of the independent problems (show computations):
A.Company...

Question 11

Moore Company has the following partial list of account balances at year-end:
 $$\begin{array} { l r } 
\text { Accounts payable } & \$ 1,500 \
\text { Accounts receivable } & 4,600 \
\text { Cost of goods sold } & 3,200 \
\text { Cash } & 23,000 \
\text { Taxes payable } & 10,000 \
\text { Land } & 25,000 \
\text { Notes payable (due in } 6 \text { months) } & 1,000 \
\text { Salaries payable } & 900 \
\text { Inventory } & 4,300
\end{array}$$ Requirements:
A.Compute the quick ratio.
B.Determine the amount of working capital.
C.Assume that cash is used to pay the balance due on accounts payable.
1.Compute the new quick ratio.
2.Compute the new amount of working capital.
D.Compute the accounts payable turnover ratio (use year-end amounts,)

Accepted Answer

The answer of Moore Company has the following partial list...

Question 12

A company's income statement reported net income of $80,000 during 2010.The income tax return excluded a revenue item of $10,000 (reported on the income statement)because under the tax laws the $10,000 would not be reported for tax purposes until 2011.
Prepare the journal entry to record the 2010 income tax expense assuming a 40% tax rate.

Accepted Answer

The answer of A company's income statement reported net income...

Question 13

On January 1,2010,Mission Company agreed to buy some equipment from Anna Company.Mission Company signed a note,agreeing to pay Anna Company $500,000 for the equipment on December 31,2012.The market rate of interest for this note was 10%.
Requirements:
A.Prepare the journal entry Mission Company would record on January 1, 2010 related to this purchase.
B.Prepare the December 31, 2010, adjusting entry to record interest expense related to the note for the first year.Assume that no adjusting entries have been made during the year.
C.Prepare the December 31, 2011, adjusting entry to record interest expense related to the note for the second year.Assume that no adjusting entries have been made during the year.
D.Prepare the entry Mission Company would record on December 31, 2012, the due date of the note to record interest expense for the third year and payment of the note.Assume that no adjusting entries have been made during the year.

Accepted Answer

The answer of On January 1,2010,Mission Company agreed to buy...

Question 14

Why are present value concepts and applications so important when companies purchase equipment financed by the seller?

Accepted Answer

The answer of Why are present value concepts and applications...

Question 15

Information Company purchased an asset that cost $70,000 on January 1,2010.Arrangements were made with the supplier to pay $10,000 cash on January 1,2010,and the balance was to be paid over a three-year period,with equal annual payments of $24,553 to be made at the end of 2010,2011,and 2012.Each payment will include principal plus interest on the unpaid balance at 11% per year.
Requirements:
 
$\begin{array}{l}
\text { Date } & \text { Payment } & \text { Interest }&\text { Reduction in} & \text { Unpaid } \
 &  & \text { Expense}&\text { Principal} & \text { Principal } \
01 / 01 / 10 & &&&\
12 / 31 / 10 & &&&\
12 / 31 / 11& &&&\
12 / 31 / 12 & &&&\
\text { Totals }& &*&&
\end{array}$ *Round to reduce principal to zero.
B.Prepare the journal entry for the payment on December 31,2011.
C.Explain the change,over time,on the amount of interest and the balance of the debt principal.

Accepted Answer

The answer of Information Company purchased an asset that cost...

Question 16

the following four questions.
A.What is a contingent liability?
B.When must a contingent liability be recorded through a journal entry?
C.When should a contingent liability be disclosed in the footnotes to the financial statements?
D.When is disclosure of a contingent liability not required?

Accepted Answer

The answer of the following four questions.
A.What is a contingent...

Question 17

The following data is available for Tommy's Toys for the years 2008 through 2011:
 $\begin{array}{lcccc}
& \underline{2011} & \underline{2010} & \underline{2009} & \underline{2008} \
\text { Cost of goods sold }  & \$ 7,506 & \$ 7,646 & \$ 7,799 & \$ 7,815 \
\text { Accounts payable }& \$ 1,023 & \$ 1,022 & \$ 878 & \$ 896
\end{array}$

A. Calculate the accounts payable turnover ratio for the following years:
1. 2011
2. 2010
3. 2009
B. Calculate the number of days it is taking Tommy's Toys to pay their vendors (assume a 365 day year):
1. 2011
2. 2010
3. 2009
C. Explain whether Tommy's Toys is doing a better job of paying their vendors in a timely manner.

Accepted Answer

The answer of The following data is available for Tommy's...

Quiz 9: Reporting and Interpreting Liabilities

A company's income statement reported income tax expense of $200,000 during 2010.The deferred tax liability on the balance sheet increased $20,000 during 2010.How much was the company's tax liability during 2010?

Halbur Company reported total assets of $150,000,current assets of $60,000,and total stockholders' equity of $60,000 and noncurrent liabilities of $65,000. Requirements (show computations): 1.Compute working capital. 2.Compute the current ratio.

Why are present value concepts and applications so important when companies purchase equipment financed by the seller?

the following four questions. A.What is a contingent liability? B.When must a contingent liability be recorded through a journal entry? C.When should a contingent liability be disclosed in the footnotes to the financial statements? D.When is disclosure of a contingent liability not required?