Week Three Individual Assignment

Week Three Individual Assignment

E10-6

Debit Payroll Taxes Expense $352.16

Credit FICA Taxes Payable $198.40

Credit Federal Unemployment Tax Payable $19.84

Credit State Unemployment Tax Payable $133.92

E10-8

1. Bonds are a form of interest-bearing notes payable.

True

2. When seeking long-term financing, an advantage of issuing bonds over issuing common stock is that stockholder control is not affected.

True

3. When seeking long-term financing, an advantage of issuing common stock over issuing bonds is that tax savings result.

False - there is no tax effect resulting from the issuance of common stock

4. Secured bonds have specific assets of the issuer pledged as collateral for the bonds.

True

5. Secured bonds are also known as debenture bonds.

False -debenture bonds are not secured by specific property. In the event that the issuer is liquidated, the holder of a debenture becomes a general creditor and therefore is less likely than the secured creditors to recover in full. Because of their high risk factor, debentures pay higher rates of interest than secured debt of the same issuer.

6. Bonds that mature in installments are called term bonds.

False -Serial Bonds mature in installments.

7. A conversion feature may be added to bonds to make them more attractive to bond buyers.

True

8. The rate used to determine the amount of cash interest the borrower pays is called the stated rate.

True

9. Bond prices are usually quoted as a percentage of the face value of the bond.

True

10. The present value of a bond is the value at which it should sell in the marketplace.

True

E10-18

a) The issuance of the bonds

Jan. 1

Dr Cash $562,613

Dr Bonds discount $37,387

Cr Bonds payable $600,000

b) The payment of interest and the discount amortization on July 1, 2011, assuming that interest was not accrued on June 30.

Dr Bonds interest expense $28,131 [($562,613 x 10%)/2]

Cr Cash $27,000 ($600,000 x 9% x 6/12)

Cr...