Question 1

On March 21,2019,the bond accounts of Pet Supplies Sales showed the following balances.  Pet Supplies Sales retires the bonds for $66,150.Prepare the journal entry to record the retirement of the bonds.Omit explanation.

Accepted Answer

The answer of On March 21,2019,the bond accounts of Pet...

Question 2

On July 1,2019,Michigan Company has bonds with balances as shown below.  Premium on Bonds Payable
 If the company retires the bonds for $74,150,what will be the effect on the income statement?
A) gain on retirement of $6950
B) loss on retirement of $6950
C) gain on retirement of $650
D) loss on retirement of $650

Accepted Answer

The answer of On July 1,2019,Michigan Company has bonds with...

Question 3

On July 1,2019,Montana Company has bonds with balances as shown below.  Discount on Bonds Payable
 If the company retires the bonds for $71,150,what will be the effect on the income statement?
A) loss on retirement of $4750
B) gain on retirement of $4750
C) sales revenue of $66,400
D) no effect on net income

Accepted Answer

The answer of On July 1,2019,Montana Company has bonds with...

Question 4

The Employee Bonus Payable would normally be shown on the balance sheet under long-term liabilities.

Accepted Answer

The Employee Bonus Payable would be shown on the balance sheet under current liabilities instead of long-term liabilities. This is because it is a liability that is expected to be paid within one year or less.

Question 5

When bonds are retired at maturity ________.
A) the bondholders are paid the face value plus the unamortized premium or less the unamortized discount
B) the carrying value equals the face value plus the unamortized premium or less the unamortized discount
C) the carrying value always equals the face value
D) the entry to retire the bonds may include a gain or loss on retirement of bonds

Accepted Answer

When bonds are retired at maturity, the carrying value always equals the face value because any premium or discount associated with the bond issuance would have been fully amortized by the maturity date.

Question 6

FICA-OASDI Taxes Payable would normally be shown on the balance sheet under long-term liabilities.

Accepted Answer

FICA-OASDI taxes are considered payroll taxes and are categorized as current liabilities, not long-term liabilities, on the balance sheet.

Question 7

An alternative to calling the bonds is to purchase any available bonds in the open market at their current market price.

Accepted Answer

This is a valid alternative to calling the bonds. Instead of calling the bonds, the issuer can try to locate and purchase any available bonds on the open market at their current market price. This could be more cost-effective than calling the bonds if the market price is lower than the call price. However, finding available bonds on the open market can be challenging, especially if the issue is illiquid or has a small outstanding balance.

Question 8

The balance sheet shows the balance in Bonds Payable plus any discount or minus any premium.

Accepted Answer

The balance sheet shows the carrying amount of Bonds Payable, which is the face value of the bonds minus any discount or plus any premium.

Question 9

When a bond is matured,the carrying value always equals the face value.

Accepted Answer

When a bond reaches maturity, its carrying value will always equal the face value, which is also known as the par value or principal amount. This means that the company will repay the bondholder the full face value of the bond, and any interest payments will have already been made throughout the life of the bond.

Question 10

Scotland,Inc.issued a $5,000 face value,10%,five-year bond at 98.What will be the journal entries at the maturity of the bond? The bonds have semiannual interest,and the company uses the straight-line method of amortization.Omit explanations.

Accepted Answer

The answer of Scotland,Inc.issued a $5,000 face value,10%,five-year bond at...

Question 11

Refer to the following list of liability balances at December 31,2019. $$\begin{array} { | l | r | } 
\hline \text { Accounts Payable } & \$ 15,000 \
\hline \text { Employee Health Insurance Payable } & 1150 \
\hline \text { Employee Income Tax Payable } & 600 \
\hline \text { Estimated Warranty Payable (Due 2020) } & 1400 \
\hline \text { Long-Term Notes Payable (Due 2022) } & 40,000 \
\hline \text { FICA-OASDI Taxes Payable } & 1060 \
\hline \text { Sales Tax Payable } & 670 \
\hline \text { Mortgage Payable (Due 2023) } & 15,000 \
\hline \text { Bonds Payable (Due 2024) } & 54,000 \
\hline \text { Current Portion of Long-Term Notes Payable } & 10,500 \
\hline
\end{array}$$ What is the total amount of long-term liabilities?
A) $55,000
B) $109,000
C) $94,000
D) $40,000

Accepted Answer

To find the total amount of long-term liabilities, we need to identify the balances that are classified as long-term in the list. Based on the information provided, the following liabilities are classified as long-term: 
- Bonds payable, due in 10 years: $50,000 
- Notes payable, due in 3 years: $54,000 
Therefore, the total amount of long-term liabilities is $50,000 + $54,000 = $104,000. The correct answer, closest to this amount, is B ($109,000).

Question 12

On March 21,2019,the bond accounts of Fitzhugh Sales showed the following balances.  Fitzhugh Sales retires the bonds for $66,150.Prepare the journal entry to record the retirement of the bonds.Omit explanation.

Accepted Answer

The answer of On March 21,2019,the bond accounts of Fitzhugh...

Question 13

England Corporation issued a $400,000,5.5%,10-year bonds payable at 101 on January 1,2009.The bonds are retired on January 1,2019.Prepare the journal entries on the date of issuance and at the date of retirement.Omit explanations.

Accepted Answer

The answer of England Corporation issued a $400,000,5.5%,10-year bonds payable...

Question 14

The United Way Payable account would normally be shown on the balance sheet under current liabilities.

Accepted Answer

The United Way Payable account represents a debt owed by the company and must be paid within a year, therefore it is considered a current liability and would be shown on the balance sheet under that category.

Question 15

Federal Unemployment Taxes Payable is typically shown on the balance sheet under the long-term liabilities section.

Accepted Answer

Federal Unemployment Taxes Payable is typically shown on the balance sheet under the current liabilities section because it is a liability expected to be paid within one year.

Question 16

Callable bonds are bonds that the issuer may call and pay off at a specified price whenever the issuer wants.

Accepted Answer

Callable bonds can be redeemed by the issuer prior to their maturity date, usually at a premium to their face value.

Question 17

Refer to the following list of liability balances at December 31,2018. $$\begin{array} { | l | r | } 
\hline \text { Accounts Payable } & \$ 22,000 \
\hline \text { Employee Health Insurance Payable } & 1450 \
\hline \text { Employee Income Tax Payable } & 400 \
\hline \text { Estimated Warranty Payable (Due 2019) } & 1200 \
\hline \text { Long-Term Notes Payable (Due 2022) } & 37,000 \
\hline \text { FICA-OASDI Taxes Payable } & 1560 \
\hline \text { Sales Tax Payable } & 1270 \
\hline \text { Mortgage Payable (Due 2023) } & 7000 \
\hline \text { Bonds Payable (Due 2024) } & 53,000 \
\hline \text { Current Portion of Long-Term Notes Payable } & 7500 \
\hline
\end{array}$$ What is the total amount of current liabilities?
A) $35,380
B) $27,880
C) $27,480
D) $26,280

Accepted Answer

Current liabilities include obligations due within one year: Accounts Payable ($22,000), Employee Health Insurance Payable ($1,450), Employee Income Tax Payable ($400), Estimated Warranty Payable ($1,200), FICA-OASDI Taxes Payable ($1,560), Sales Tax Payable ($1,270), and Current Portion of Long-Term Notes Payable ($7,500). Total = $35,380.

Question 18

The main reason companies retire bonds prior to their maturity date is to relieve the pressure of paying interest payments.

Accepted Answer

Companies often retire bonds prior to their maturity date to avoid the burden of making interest payments. When interest rates fall or the company's financial situation improves, it may become advantageous for the company to retire its outstanding debt early and secure financing at a lower rate, potentially saving money in the long run.

Question 19

The Current Portion of Long-Term Notes Payable would normally be shown on the balance sheet under current liabilities.

Accepted Answer

The Current Portion of Long-Term Notes Payable represents the portion of a long-term debt that is due within the next year and is therefore classified as a current liability on the balance sheet.

Question 20

When bonds are retired at maturity,assuming the last interest payment has already been recorded,the journal entry includes a debit to the Bonds Payable account and a credit to the Cash account.

Accepted Answer

When bonds are retired at maturity, the company pays the bondholders the principal amount and any remaining interest. This results in a decrease in the Bonds Payable account (debit) and a decrease in the Cash account (credit). Therefore, the journal entry would include a debit to Bonds Payable and a credit to Cash.

Quiz 14: Long-Term Liabilities

On March 21,2019,the bond accounts of Pet Supplies Sales showed the following balances. Pet Supplies Sales retires the bonds for $66,150.Prepare the journal entry to record the retirement of the bonds.Omit explanation.

On July 1,2019,Michigan Company has bonds with balances as shown below. Premium on Bonds Payable If the company retires the bonds for $74,150,what will be the effect on the income statement?

On July 1,2019,Montana Company has bonds with balances as shown below. Discount on Bonds Payable If the company retires the bonds for $71,150,what will be the effect on the income statement?