On January 1, 2009, Buchheit Enterprises reported $95,000 in a liability called “Bonds Payable, Net.” This liability related to a $100,000 bond with a stated interest rate of 5 percent that was issued when the market interest rate was 6 percent. Assuming that interest is paid December 31 each year. Required: Prepare the journal entry to record interest paid on December 31, 2009, using the simplified effective-interest method shown in chapter supplement 10C. (Omit the "$" sign in your response.) General Journal Debit Credit Dec. 31 2009 Interest expense Cash Bonds payable, net ________________________________________ Explanation: Dec. 31 2009: Interest Expense: ($95,000 × 6% × 12/12) = 5,700 Cash: ($100,000 × 5% × 12/12) = 5000 Bonds Payable: ($5,700 – $5,000) = 700

On January 1, 2009, Buchheit Enterprises reported $95,000 in a liability called “Bonds Payable, Net.” This liability related to a $100,000 bond with a stated interest rate of 5 percent that was issued when the market interest rate was 6 percent. Assuming that interest is paid December 31 each year.

Required:

Prepare the journal entry to record interest paid on December 31, 2009, using the simplified effective-interest method shown in chapter supplement 10C. (Omit the "$" sign in your response.)

	General Journal	Debit	Credit
Dec. 31 2009	Interest expense
	Cash
	Bonds payable, net

Explanation:

Dec. 31 2009:

Interest Expense: ($95,000 × 6% × 12/12) = 5,700

Cash: ($100,000 × 5% × 12/12) = 5000

Bonds Payable: ($5,700 – $5,000) = 700

Simko Company issued $600,000, 10-year, 5 percent bonds on January 1, 2009. The bonds were issued for $580,000. Interest is payable annually on December 31. Required: Using straight-line amortization, prepare journal entries to record (a) the bond issuance on January 1, 2009, and (b) the payment of interest on December 31, 2009. (Omit the "$" sign in your response.) Date General Journal Debit Credit Jan. 1 2009 Cash Discount on bonds payable Bonds payable Dec. 31 2009 Interest expense Discount on bonds payable Cash ________________________________________ Explanation: Dec. 31 2009: Interest Expense: ($30,000 + $2,000) = 32,000 Discount on Bonds Payable: ($20,000 ÷ 10 years = $2,000 per year) Cash: ($600,000 × 5% × 12/12) = 30,000

Simko Company issued $600,000, 10-year, 5 percent bonds on January 1, 2009. The bonds were issued for $580,000. Interest is payable annually on December 31.

Required:

Using straight-line amortization, prepare journal entries to record (a) the bond issuance on January 1, 2009, and (b) the payment of interest on December 31, 2009. (Omit the "$" sign in your response.)

Date	General Journal	Debit	Credit
Jan. 1 2009	Cash
	Discount on bonds payable
	Bonds payable
Dec. 31 2009	Interest expense
	Discount on bonds payable
	Cash

 

Explanation:

 

Dec. 31 2009:

Interest Expense: ($30,000 + $2,000) = 32,000

Discount on Bonds Payable: ($20,000 ÷ 10 years = $2,000 per year)

Cash: ($600,000 × 5% × 12/12) = 30,000

Lightning Electronics is a midsize manufacturer of lithium batteries. The company's payroll records for the November 1–14 pay period show that employees earned wages totaling $100,000 but that employee income taxes totaling $14,000 and FICA taxes totaling $5,250 were withheld from this amount. The net pay was directly deposited into the employees' bank accounts. Assume Lighting Electronics must pay $500 of unemployment taxes for this pay period. Required: Prepare the journal entry or entries that Lightning would use to record the payroll. Include both employee and employer taxes. (Omit the "$" sign in your response.) General journal Debit Credit Salaries and wages expense Withheld income taxes payable FICA payable Cash Payroll tax expense FICA payable Unemployment taxes payable ________________________________________ If the market price of a bond increased after it was issued and the company decided to retire its debt early, It will report a loss on debt retirement. Yes No The company will report a loss on debt retirement because, to retire the bonds, the company must pay more than their carrying value. On the balance sheet, cash and bonds payable will decrease. On the income statement a loss would be reported in a line item appearing between “Income from Operations” and “Income before Income Tax Expense.”

Lightning Electronics is a midsize manufacturer of lithium batteries. The company's payroll records for the November 1–14 pay period show that employees earned wages totaling $100,000 but that employee income taxes totaling $14,000 and FICA taxes totaling $5,250 were withheld from this amount. The net pay was directly deposited into the employees' bank accounts. Assume Lighting Electronics must pay $500 of unemployment taxes for this pay period.

Required:

Prepare the journal entry or entries that Lightning would use to record the payroll. Include both employee and employer taxes. (Omit the "$" sign in your response.)

  

General journal	Debit	Credit
Salaries and wages expense
Withheld income taxes payable
FICA payable
Cash
Payroll tax expense
FICA payable
Unemployment taxes payable

If the market price of a bond increased after it was issued and the company decided to retire its debt early, It will report a loss on debt retirement.

 

	Yes
	No

The company will report a loss on debt retirement because, to retire the bonds, the company must pay more than their carrying value. On the balance sheet, cash and bonds payable will decrease.  On the income statement a loss would be reported in a line item appearing between “Income from Operations” and “Income before Income Tax Expense.”

Lightning Electronics is a midsize manufacturer of lithium batteries. The company’s payroll records for the November 1–14 pay period show that employees earned wages totaling $100,000 but that employee income taxes totaling $14,000 and FICA taxes totaling $5,250 were withheld from this amount. The net pay was directly deposited into the employees’ bank accounts. Required: (a) What was the amount of net pay? (Omit the "$" sign in your response.) Net pay $ (b) Assuming Lighting Electronics must pay $500 of unemployment taxes for this pay period, what amount would be reported as the total payroll costs? (Omit the "$" sign in your response.) Total payroll cost $ Explanation: (a) Employees Gross salaries & wages $ 100,000 Employee income tax withheld (14,000 ) Employee FICA withheld (5,250 ) ________________________________________ ________________________________________ ________________________________________ ________________________________________ Net Pay $ 80,750 ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________ (b) Total payroll costs would include the gross pay ($100,000) as well as the additional employer payroll taxes ($5,250 FICA) and unemployment taxes ($500). In total, Lightning Electric would report $105,750 as the total payroll cost for this pay period.

Lightning Electronics is a midsize manufacturer of lithium batteries. The company’s payroll records for the November 1–14 pay period show that employees earned wages totaling $100,000 but that employee income taxes totaling $14,000 and FICA taxes totaling $5,250 were withheld from this amount. The net pay was directly deposited into the employees’ bank accounts.

 

Required:

(a)	What was the amount of net pay? (Omit the "$" sign in your response.)

Net pay

$

 

(b)	Assuming Lighting Electronics must pay $500 of unemployment taxes for this pay period, what amount would be reported as the total payroll costs? (Omit the "$" sign in your response.)

Total payroll cost

$

 

Explanation:

(a)  

	Employees
Gross salaries & wages	$	100,000
Employee income tax withheld		(14,000	)
Employee FICA withheld		(5,250	)
Net Pay	$	80,750

(b)

Total payroll costs would include the gross pay ($100,000) as well as the additional employer payroll taxes ($5,250 FICA) and unemployment taxes ($500). In total, Lightning Electric would report $105,750 as the total payroll cost for this pay period.