The list below is not complete – all class notes, book, etc. may be on test unless it was specifically eliminated.
You should do all study questions and brief exercises at the end of the chapter, as well as, the homework
exercises quizzes, etc.
Do the Wiley Plus Homework
Chapter 10 study guide
Know all current liabilities and entries
Sales taxes payable – who is paying?
Who is acting for taxing authority?
Salaries payable – all associated current liabilities with Salaries Expense/Salaries Payable – FICA,
Income Tax (state and fed), Union dues, etc.
Payroll Taxes – Employer FICA Match, Unemployment taxes (state and Fed)
Interest Payable (how to calculate and accrue interest)
Current Maturity of Long Term Debt
Current Ratio – liquidity
Solvency – difference from liquidity
Definition of contingent liability – estimable, probable loss, etc.
Notes Payable – all entries
Date proceeds are received, interest accrual, date of payment
Bonds – concepts and theories, selling at face, premium or discount, straight-line amortization of discount and
Chapter 10 Bond Notes – long handout given out in class
ABC Water Company decides to sell bonds.
On January 1, 2007 they sell a $100,000, 5 year bond that pays
10% interest annually.
The bond sells for 90.
Compute the selling price of the bond.
Write the journal entry for ABC Company on the date of sale.
market rate of interest higher or lower than the stated rate?
Market rate is HIGHER
than the stated rate.
Thought Process -
If people are only willing to pay 90% of the face value of the bond, then they must be
able to earn a higher level of interest than the bond is paying in the open market.
$100,000 * 90% = $90,000
Discount on Bond
Thought process – (1) How much cash came in? Selling Price: $90,000.
(2) What is the face value of the
bond which needs to be paid back (bond payable):
$100,000 (3) Now I have a DR and a CR.
How can I
balance the entry?
Need a 10,000 DR.
Thus, Discount on Bond $10,000.
On December 31 of each year, ABC
interest on the bonds.
Write the journal entry for the interest payment