Question 1

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 your answer to the nearest whole dollar amount).
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 than, or less than, the interest paid with the second annual payment? Explain your answer.

Accepted Answer

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Question 2

A company's income statement reported income tax expense of $200,000 during 2014. The deferred tax liability on the balance sheet increased $20,000 during 2014. How much was the company's tax liability during 2014?

Accepted Answer

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

Question 3

A company's income statement reported net income of $80,000 during 2014. 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 2015.
Required:
Prepare the journal entry to record the 2014 income tax expense assuming a 40% tax rate.

Accepted Answer

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

Question 4

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

Accepted Answer

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Question 5

Answer 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 Answer the following four questions.
A. What is...

Question 6

Information Company purchased an asset that cost $70,000 on January 1, 2014. Arrangements were made with the supplier to pay $10,000 cash on January 1, 2014, 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 2014, 2015, and 2016. Each payment will include principal plus interest on the unpaid balance at 11% per year.
Requirements:  
B. Prepare the journal entry for the payment on December 31, 2015.
C. Explain the change, over time, on the amount of interest and the balance of the debt principal.

Accepted Answer

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Question 7

Fold and Hold Corporation purchased a machine, which had a current cash equivalent cost of $38,971 on January 1, 2014. 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, 2014. The note specified a 10% interest rate on the unpaid balance.
Requirements:
A. Prepare the journal entry to record the purchase on January 1, 2014 (round to the nearest dollar).
B. Prepare the entry to record the first installment payment on December 31, 2014 (round to the nearest dollar). Assume that no adjusting entries have been made during the year.

Accepted Answer

The answer of Fold and Hold Corporation purchased a machine,...

Question 8

Answer each of the independent problems (show computations):
A. Company A deposited $20,000 in a savings account on January 1, 2013, that will accumulate 6% interest each December 31.
1. What will be the savings balance as of December 31, 2017?
2. How much interest will be earned as of December 31, 2017?
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 at the end of that life. 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, 2015). Arrangements have been made to pay it off in five equal annual installments starting December 31, 2015 (an ordinary annuity situation).

Accepted Answer

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Question 9

The following data were provided by the detailed payroll records of Mountain Corporation for the last week of March 2015, which will not be paid until April 5, 2015: $\begin{array}{lr}
\text { Compensation (wages) } & \$ 36,000 \
\text { Income taxes withheld } & 7,350 \
\text { Health insurance withheld } & 200
\end{array}$ FICA taxes at a 7.65% rate (no employee had reached the maximum).
Required: 
A. Prepare the March 31, 2015 journal entry to record the payroll and the related employee deductions.
B. Prepare the March 31, 2015 journal entry to record the employer's FICA payroll tax expense.
C. Calculate the total payroll-related liabilities at March 31, 2015 using the results of requirements (A) and (B) above.

Accepted Answer

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

Question 10

In a recent year, The Walt Disney Company reported the following increases and decreases in current assets and current liabilities.
Required:
Identify whether each of these increases or decreases caused cash to increase or decrease. Enter an I if the change in the account balance caused an increase in cash flow or enter a D if the change in the account balance caused a decrease in cash flow. $\text { Changes in current assets and liabilities (in millions) }$
$\begin{array}{lll}
\text { Account }&\text { Account Balance Change }&\text { Cash Effect (+/-) }\
\text { Receivables-CA } & \text { Decrease } \$ 366 & 1 . \
\text { Inventories-CA } & \text { Decrease } \$ 103 & 2 . \
\begin{array}{l}
\text { Film and television } \
\text { costs-CA }
\end{array} & \text { Increase } \$ 848 & 3 . \
\begin{array}{l}
\text { Current portion of } \
\text { borrowings-CL }
\end{array} & \text { Increase } \$ 292 & 4 . \
\begin{array}{l}
\text { Unearned royalties-CL } \
\text { Sncease }
\end{array} & \text { In } 69 & 5 .
\end{array}$

Accepted Answer

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

Question 11

The following is a partial list of account balances for Coen, Inc. as of December 31, 2014. $$\begin{array} { l r } 
\text { Accounts payable } & \$ 5,000 \
\text { Accounts receivable } & 6,000 \
\text { Bonds payable (100\% due in 10 years) } & 40,000 \
\text { Mortgage payable (10\% due within one year) } & 10,000 \
\text { Notes payable (due in six months) } & 2,000 \
\text { Salaries payable } & 800 \
\text { Sales revenue } & 49,000 \
\text { Income taxes payable } & 8,000 \
\text { Unearned revenue } & 800
\end{array}$$ Required:
Prepare the liabilities section of Coen Inc.'s classified balance sheet for December 31, 2014.

Accepted Answer

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

Question 12

The following data is available for Tommy's Toys for the years 2012 through 2015: $\begin{array}{lllrr}&2015&2014&2013&2012\
\text { Cost of goods sold } & \$ 7,506 & \$ 7,646 & \$ 7,799 & \$ 7,815 \
\text { Accounts payable } & \$ 1,240 & \$ 1,022 & \$ 878 & \$ 896
\end{array}$ 
A. Calculate the accounts payable turnover ratio for the following years:
 1. $\quad$2015
2. $\quad$2014
3. $\quad$2013 
B. Calculate the number of days it is taking Tommy's Toys to pay its vendors (assume a 365-day year):
 1. $\quad$2015
2. $\quad$2014
3. $\quad$2013 
C. Explain whether Tommy's Toys is doing a better job over the years of paying its vendors in a timely manner.

Accepted Answer

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

Question 13

On January 1, 2014, Mission Company agreed to buy some equipment from Anna Company. Mission Company signed a note, agreeing to pay Anna Company the entire $500,000 for the equipment on December 31, 2016. The market rate of interest for this note was 10%.
Required:
(Round all answers to whole dollar amounts.)
A. Prepare the journal entry Mission Company would record on January 1, 2014 related to this purchase.
B. Prepare the December 31, 2014, 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, 2015, 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, 2016, 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. Round the interest expense to an amount that will increase notes payable to the correct final payoff amount.

Accepted Answer

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Quiz 9: Reporting and Interpreting Liabilities

A company's income statement reported income tax expense of $200,000 during 2014. The deferred tax liability on the balance sheet increased $20,000 during 2014. How much was the company's tax liability during 2014?

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