Question 1

Villarente Company issued 5-year $200,000 face value bonds at 95 on January 1,2012.The stated interest rate on these bonds is 9%,and the effective interest rate is 10.33%.Use the effective interest rate method to complete the amortization schedule below.

Accepted Answer

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Question 2

On December 27,2012,Terrell Corp.signed an agreement for a line of credit with the Barnett Bank.Under the agreement,Terrell can borrow up to $50,000 at any time during the following year.Terrell will make any borrowings or paybacks on the first day of a month and make interest payments on the last day of any month when a balance exists.The annual interest rate will be the bank's prime rate plus 1% and will be applied to the outstanding monthly balance.The following table gives the appropriate information for the first three months of 2013.  Determine the amount of interest to be paid at the end of each of the three months.

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Question 3

Saba Company borrowed $10,000 from the bank by issuing a promissory note on June 1,2012.The note had a one-year term and a 6 percent annual interest rate.On December 31,2012,Saba accrued the interest on the note.
Required:
Show how the issuance of the note and accrual of interest affect the financial statements by using the horizontal model provided.Indicate the dollar amount of increases and decreases; enter NA if an item is not affected.In the cash flows column,designate cash flows as operating activities (OA),investing activities (IA.or financing activities (FA).

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Question 4

At the beginning of 2012,Orendi Designs,InC.had a balance in the Warranty Payable account of $10,500.During the year,Orendi sold several products that carried a two-year warranty for $450,000.Orendi estimated that warranty expense would be 5% of sales for the year.
a)What is the amount of warranty expense for 2012?
b)If Marianne paid warranty costs of $23,000 during 2012,what is the balance in the Warranty Payable account after the adjusting entry is made?

Accepted Answer

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Question 5

In 2012,the balance sheet of Worth Company incorrectly reported as long term some liabilities that should have been treated as current liabilities.How would this error affect financial statement users' analysis and assessment of the company?

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Question 6

Rominger Company borrowed $10,000 from the bank by issuing a promissory note on June 1,2012.The note had a six-month term and a 6 percent annual interest rate.On November 30,2012,Rominger paid principal and interest on the note.
Required:
Show how the issuance of the note and payment of principal and interest at maturity affect the financial statements by using the horizontal model provided.Indicate the dollar amount of increases and decreases; enter NA if an item is not affected.In the cash flows column,designate cash flows as operating activities (OA),investing activities (IA.or financing activities (FA).

Accepted Answer

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Question 7

Osgood Company estimated that its warranty expense would be $2,125 for the current year.During the year,Osgood paid $950 to repair merchandise that was returned by customers.
a)What type of transaction is the recording of warranty expense?
b)If this is the first year of operations,what is the amount of warranty liability that will be shown on the balance sheet at the end of the year?

Accepted Answer

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Question 8

The Candy Junction operates two candy stores.Sales at the two stores in 2012 were $320,000 and $201,000; these amounts do not include sales tax.Both stores are in a state with a 5% sales tax rate.
Required:
a)What is the total amount of sales tax that the stores collected in 2012?
b)What kind of transaction is the collection of the sales tax? (asset source,asset use,asset exchange,claims exchange).
c)At the end of the year,the company remitted the sales tax to the state.What kind of transaction is the remission (payment)of the sales tax?

Accepted Answer

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Question 9

What is solvency? How could you measure solvency based on a company's financial statements?

Accepted Answer

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Question 10

Rosen Hardware Company recorded the following sales for the first quarter of 2012:  These amounts do not include sales taxes.The company is in a state with a sales tax rate of 6 percent.
Required:
a)Calculate the amount of sales tax that the company collected from its customers for each month.
b)For each month,indicate the effect of the sales and collection of sales tax on the statements model,below.Show dollar amounts of increases and decreases; enter NA if an item is not affected.In the cash flows column,designate cash flows as operating activities (OA),investing activities (IA).or financing activities (FA).
c)On March 31,Rosen Hardware remitted to the state the total amount of sales tax for the quarter.Indicate in the statements model the effect of this transaction.

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Question 11

Roskos Corporation issued to Ewold Bank a two-year,$200,000,6% interest-bearing note on August 1,2012.Interest is paid annually on July 31.Principal and the final interest payments are to be made on July 31,2014.
Using the financial statements model provided,indicate the effect on Roskos' financial statements of:
a)the issuance of the note payable.
b)Roskos' adjusting entry on 12/31/12
c)the first interest payment on 7/31/13.
Include dollar amounts of increases and decreases.Also,indicate whether cash flows are operating activities,investing activities,or financing activities.

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Question 12

Saam Company borrowed $40,000 from the bank on December 1,2012.The note had an 8 percent annual interest rate and matured on May 31,2013,when Saam paid the principal and interest on the note.
Required:
a)What amount of cash did Saam pay for interest in 2012?
b)What amount of interest expense did Saam report on the 2012 income statement?
c)What was the amount of liabilities that Saam reported on its balance sheet at the end of 2012?
d)What was the amount of cash that Saam paid to the bank on May 31,2013? How was the cash payment reported on the statement of cash flows?
e)What amount of interest expense was reported on the 2013 income statement?

Accepted Answer

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Question 13

San Jose Company issued 5-year $200,000 face value bonds at 105 on January 1,2012.The stated interest rate on these bonds is 9%.Use the straight line method to complete the amortization schedule below.

Accepted Answer

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Question 14

Rugh Company has been sued by two customers who claim to have been injured by products Rugh sold.The two lawsuits are unrelated to each other.For lawsuit #1,Rugh expects to lose the suit,and its attorney estimates that the amount of the damages awarded to the customer will be $500,000.For lawsuit #2,Rugh believes that loss of the suit is possible but not probable.The attorney thinks the amount of the damages may be $15,000.
Required:
Describe the correct accounting treatment for lawsuit #1 and lawsuit #2.

Accepted Answer

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Question 15

What is a bond discount? What is a bond premium? How do they affect the interest expense on bonds?

Accepted Answer

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Question 16

The following is a list of balance sheet accounts (in random order)and balances for the Community Naval Supply Company.They have been updated as of December 31,2012.  Required:
Prepare a classified balance sheet for Community Naval Supply Company at December 31,2012.

Accepted Answer

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Question 17

Walden Company offers a six-month warranty on all the merchandise it sells.For 2012,total sales were $528,000.The company estimates that its warranty cost will be 2% of sales.During the year,the company paid $6,100 for repairs provided to customers.
Required:
Indicate how the company's financial statements would be affected by
a)the sales during 2012
b)warranty expense
c)payment for repairs
Use the statements model,below.Show dollar amounts of increases and decreases; enter NA if an item is not affected.In the cash flows column,designate cash flows as operating activities (OA),investing activities (IA)or financing activities (FA).

Accepted Answer

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Question 18

Orzoff Electronics offers a six-month warranty on the products it sells.It estimates the warranty expense will be 3 percent of sales.One of the company managers wondered how the warranty affects the company's profit.The income statement for the most recent year was:  The manager estimates that if the company did not offer the warranty,sales and cost of goods sold would both decrease by 30 percent and selling and administrative expenses would decrease by 20 percent.Based on this information,would you recommend that the company discontinue the warranty? Prepare an income statement to support your answer.

Accepted Answer

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Question 19

On January 1,2012,Muller Co.borrowed cash from Washington Valley Bank by issuing a $100,000 face value 3-year installment note payable that carried a 7% interest rate.The note is to be repaid by making annual cash payments of $38,105,which includes both principal and interest.The payments are to be made on December 31 of each year.
Required:
a)Prepare an amortization schedule for the term of the loan,showing the amounts to be paid on principal and interest for 2012,2013,and 2014 and the loan balance at the end of each year.
b)What amount of interest expense will be shown on the 2013 income statement?
c)What amount of liability for the note will be shown on the balance sheet on December 31,2013?

Accepted Answer

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Quiz 7: Accounting for Liabilities

Villarente Company issued 5-year $200,000 face value bonds at 95 on January 1,2012.The stated interest rate on these bonds is 9%,and the effective interest rate is 10.33%.Use the effective interest rate method to complete the amortization schedule below.

In 2012,the balance sheet of Worth Company incorrectly reported as long term some liabilities that should have been treated as current liabilities.How would this error affect financial statement users' analysis and assessment of the company?

What is solvency? How could you measure solvency based on a company's financial statements?

San Jose Company issued 5-year $200,000 face value bonds at 105 on January 1,2012.The stated interest rate on these bonds is 9%.Use the straight line method to complete the amortization schedule below.

What is a bond discount? What is a bond premium? How do they affect the interest expense on bonds?

The following is a list of balance sheet accounts (in random order)and balances for the Community Naval Supply Company.They have been updated as of December 31,2012. Required: Prepare a classified balance sheet for Community Naval Supply Company at December 31,2012.