Financial Accounting_10_Q.

12

Difference between straight line and effect interest method of amortization

Straight line method: The fundamental distinctionbetween straight-line amortization
andpowerful investment amortization of security rebateand premium is that, under
straight-line amortization, anequivalent measureof premium ormarkdown is amortized to
premium cost every period Straight-line amortization for every premium period is
processed by isolating the aggregate sumof the premium ormarkdown by the quantityof
periods thesecurities will be exceptional.
Effective interest - Under effective interest amortization, the measure of premium or rebate
amortized is diverse every period. Effective-premium amortization of security premium and
markdown effectively measures the current money comparable measure of the securities and the
premium cost provided details regarding the pay articulation focused around the issuance entry. It
measures the measureof amortization by relating thebusiness sector (yield) rate to the netrisk
toward the start of every period.
Consequently investment costand the bondconvey worth ismeasured on a presentquality premise.
The straight-line strategy can be utilized just when the results are not substantially the same as
theconsequences of the viable investment system.

Financial Accounting_10_Q.10

Differentiate between the effective rates of interest on the bond

a.) At par
When somebody sells the bond at par. the mentionedrate of interest and the market or
effective rates of interest are identical.
b.) At discount
When a bond is sold at a discounted value, the mentionedinterest rate islesser than the
effectiverate of interest on the bond.
c.) At premium
In contrast, when a bond is being sold at a premium value, the mentioned interest rate is
elevated than the effective interest rate.

Financial Accounting_10_Q.8

Explain the nature of premiums and discounts on payable bonds

Bonds: An obligation interest in which a speculator credits cash to a substance (corporate
or administrative) that obtains the FUNDS for a characterized time of time at an altered
premium rate. Securities are utilized by organizations, districts, states and U.S. what's
more remote governments to back a mixed bag of undertakings and exercises.
At the point when a bond is issued (sold) at its face value, It is issued at standard or par
value. Conversely, when a bond is sold at a sum lower than the standard or par value, it is
issued at a rebate. Also then again, when it is sold at a cost better than average. it is
issued at a premium. A security will offer at a markdown when the business sector, or
powerful, rate of investment is higher than the expressed rate of enthusiasm on the
security
Conversely,when the effective rate of interest or market rate is lower than theexpressed rate, the
security will offer at a premium. Rebates or premiums on securities payable are conformity to the
viable investment rate on the securities. Consequently, the rebate or premium is amortized over
the lifeof the bonds as an expansion or lessening in the measure of investment cost for every
period.

Financial Accounting_10_Q.6

Explain how the net borrowing cost decreases when the interest rate increases

The high the rate of tax is, the lower the net cost of borrowing money because the paid
interest on borrowed money is reducible on the return of income taxof the borrower. The
higher the income tax rate the less the net cost of interest for the borrower
This can be better explained with the help of an example:
For instance, a business with an average rate of tax of 40% and debt with 10% interest
per annum incurs a net rate of interest of 10% x 50% = 5% In contrast, the same
corporation with a 20% average tax rate incurs a net interest rate of 10% x 80% = 8%
Thus from the example it can be seen that the rise in the interest rate lessens the net
borrowing cost.
Financial Accounting_10_Q.4

Difference between callable and convertible bonds

Callable bondsBonds that might be called for premature withdrawal at the choice of the issuer.
The primary driver of a call is a decrease in investment rates. On the off chance that investment
rates have declined since an organization initially issued the securities, it will probably need to
refinance this obligation at a lower rate of premium. For this situation, organization will call its
present securities and reissue them at a lower rate of investment.

Convertible bondsbonds that may be transformed to other different securities of the issuer
(usually common stock) after a particular future time at the choice of the holder of the bond.
Issuing convertible securities is restricted for an organization to minimize negative financial
specialist translation of its corporate activities.
For instance, if an effectively open organization decides to issue STOCK, the business sector
typically deciphers this as a sign that the organization's offer cost is to a degree exaggerated. To
maintain a strategic distance from this negative impression, the organization may decide to issue
convertible securities, which bondholders will probably change over to value in any case ought to
the organization keep on doing admirably.

Financial Accounting_10_Q.2

Difference between bond indenture and bond certificate

Bond indenture: A bond indenture is anunderstandingdrawn up byan organization
wanting to offera bond issue. The agreement defines the lawful procurements of the
security issue, for example, development date, Rate of investment, date of premium
installments. What's more any change benefits when a bond is sold.
Bond certificate: An investor gets a bond endorsement (i .e. a security) the greater part of the
security endorsements for a solitary security issue are indistinguishable in many regards that is
each one declaration expresses the same development date investment rate premium dates, and
different procurements of the security issue .

Financial Accounting_10_P.14

Financing activity: It is a category in an organization's money stream proclamation that

records for outer exercises that permit a firm to raise capital and reimburse speculators,
for example, issuing money profits, including or changing advances or issuing more
stock. Money stream from financing exercises shows financial specialists the
organization's monetary quality.
1. This would be a financing activity and would result in the inflow of the cash.
2. This isnot included in the financing activity.
3. This would be a financing activity and would result in the outflow of cash.
4. This is not included in the financing activity.
5. This would be a financing activity and would result in the outflow of cash.
6. This transaction would result in nil effect.
Financial Accounting_10_P.2

Requirement 1
Compute the price of the issue
Extracted information
Amount of bond $5, 000, 000
Maturity 5 years
Interest rate when stated 8%
Interest rate at the time of selling 8%

Step-1
Compute the Interest as:
$40, 000
2
$20, 000

$500, 000 8%

Step-2
Compute the Present value

$500, 000 0.6756 337,800

$20, 000 8.1109 162, 218
Issue Price

$500, 018

The precise present value is $500,000. The $18 distinction is because of the rounding of
the present valuefactor at the place of four digits.
Requirement 2
Calculate the interest expense

Interest expense

June 30
2014
$20, 000

Dec 31
2015
$20, 000

June 30
2014
$20, 000

Dec 31
2015
$20, 000

Requirement 3
Compute the cash paid on 31 Dec 2013, and 2015

Cash Paid

Requirement 4
Calculate the amount of bonds payable at 31 Dec 2014 and 2015
2014
$500, 000

Bonds payable

2015
$500, 000

Financial Accounting_10_ME.12

Cash paid to retired bonds: Cash paid to retired bond is a cash payment made to longterm creditors (with the exception of interest expenses). Cash paid to retired bonds are
reported as outflows from financing activities.

Cash paid for interest: Cash paid for interest is a cash payment involving short-term
creditors affecting working capital and are consequently shown in the Operating activities
segment of the cash flow statement.

Financial Accounting_10_ME.10

Explain the effect on financial statements of the debt retirement in some situations
In some cases, a company may elect to retire debt early by purchasing it on the open
market, just as an investor would this approach is necessary when the bonds do not have
a call feature. It might also be an attractive approach if the cost of the bonds fell after the
issue date. The most ordinary cause for fall in cost of bonds is rise interest rates. As per
the present value concepts, bond prices move in the opposite direction of interest rates. If
interest rates go up, bond prices fall, and if interest rates fall, bond price will rise.
When interest rates fell, a company that wants to retire a bond before maturity may find
buying the bond on the open market is more expensive due to increase in the bond price
and is going report a loss on debt retirement.
The financial statement affects are described as follows:
Journal entry for recording the retirement of
bond at loss:
Bonds payable (_L)
Loss on retirement of bonds (+Loss, -SE)
Cash (-A
)
xxx

xxx
xxx

Assets
Liabilities
Stockholders ' Equity

Cash xxx Bonds payable xxx

Loss xxx

The loss on the bond retirement is the amount over par that is paid in the open market
purchase. This loss on the bond retirement will be shown on the statement of income.
Financial Accounting_10_ME.6

The bond can be recorded in the following manner:

JANUARY 1. 2014:
Cash (+A)
Discount on Bonds Payable (+XL, L)
Bone Payable (41...)

$910,000.00
$60,000.00
$850,000.00

JUNE 30, 2014:

Interest Expense (+E, .SE)($940,000 11 %x 112)
Discount on Bonds Payable (-XL, +1...)
Cash (-A) ($1,000,000 x 10% x 1/2 )....

$63,700.00
$43,000.00
$68,000.00

Financial Accounting_10_ME.6

Computethe issue price of the bond

Extracted information

Bond amount to be issued $500, 000

Maturity of the bond 10 years
Interest rate 10%
Calculate the issue price with calculatinginterest and principalfirst:

Principal

$500,000 0.4564

$228, 200

Interest

$25000 13.5903

339758

Issue price

$567,958

The issue price should be exactly $567,958 .

Financial Accounting_10_ME.4

The bond can be recorded in the following manner:

JANUARY 1. 2014:
Cash (+A)
Discount on Bonds Payable (+XL, L)
Bone Payable (41...)

$940,000.00
$60,000.00
$1,000,000.00

JUNE 30, 2014:

Interest Expense(+E, .SE)($940,000 11%x 112)
Discount on Bonds Payable (+XL, L)
Cash (-A) ($1,000,000 x 10% x 1/2 )..

$51,700.00
$1,700.00
$50,000.00

Financial Accounting_10_ME.2

Compute the issue price of the bond

Extracted information

Bond amount to be issued $600, 000

Maturity of the bond 10 years
Interest rate 8%
Calculate the issue price with calculating interest and principal first:
Principal

$600000 0.4564

$273,840

Interest

$24000 13.5903

326,167

Issue price

$600007

The issue price should be exactly $600000 . The $7 dissimilarity is the consequence of
rounding of the PV factor.
Financial Accounting_10_E.6

Computethe price of the bondat which it was issued

Extracted Information
Amount of bond $250, 000
Maturity of bond 5 years

Step-1
Compute the Interest as

$250, 000 6% 1/ 2 $7500

Step-2
Compute the Present value as
$250, 000 0.6756 168,900
$7500 8.1109 168900
Issue price $229, 732

Thus the issue price is $299,732.

Financial Accounting_10_E.4

Compute the issue price in the following cases:

CASE A:
Calculate the present value of the issue cost at 4% rate for 10 years then add with
the present value of the rate of interest that is
$500.000x 0.6730
15000x 16.3514
Issue price (market rate less than stated rate)

$336,500.00
$245,271.00
$581,771.00

Thus the issue price at 4%market yield rateis $581,771.

CASE B:
Compute the present value of the issue price at 6% rate for 10 years then add with
the interests present value that is:

$500.000x 0.5537
15000x 14.8775
Issue price (market rate less than stated rate)

$276,850.00
$223,163.00
$500,013.00

Thus the issue price at 6% market yield rate is $500,013.

CASE C:
Compute the present value of the issue price at 8.5% rate for 10 years then add with
the interests present value that is:

$500.000xO.4350

$217,500

S15.000x 132944

199.416

Issue price (marks rate more than stated rate)

$ 416,916 (at discount)

Thus the issue price at 8.5% market yield rate is $416,916.

Financial Accounting_10_E.2

Compute the price paid when the bonds are bought and the decline in the cost of the
bond if it is originally sold at par.
The AT&T securities have a coupon investment rate of 65%. In the event that securities
Mth a $10000 face quality were bought, the issue value would be $8950 and they would
give a money yield of 7 .3%. A decrease in worth after issuance would have no effect on
AT&T money related explanations
Financial Accounting_10_CP.4

Requirement 1
Reason for the investor buying bond with zero interest
An investor buyszero coupon bondsbecause, a bond with a zero coupon interest rate is
simply a deeply discounted bond that will sell for substantially less than its maturity
value.
Requirement 2
Compute the money received when the bonds were issued
Given information:
Number of Years
Effective interest rate
Face (maturity) value

8 Years
15%
$400(Million)

Bond valuation
Here the present value of bonds is to be calculated as follows:
The investor would earn 15 percent on similar investments; JC Penny would receive the
amount with a face value of $400M .
PV 400M PVF8.15 % 400M
From the Present Value Tables
PVF8.15 % 0.327
$400 Million 0.327
$130.8 Million
Value of JC Penny's Receipt $130.8

Thus the money which would be received when the bonds would be issued is $130.8
million.
Financial Accounting_10_CP.2

Requirement 1
Reason for not including the interest paid in the books of accounts
Organizations are not needed to report unimportant sums. No doubt, the measure of
money premium paid by Urban Outfitters was Immaterial. This question is related to the
next one.
Requirement 2
Reason why the organization does not report the payable bonds in the statement of
balance sheet
Bonds should be reported except the corporation has not issued any. Therefore, the
company must not have issued bonds.
Requirement3
The notes disclose that the corporation has established an unsecured credit line.
Financial Accounting_10_AP.4

Requirement 1
Compute the issue price
Amount of bond $2, 000, 000
Maturity 5 years
Interest rate when stated 6%
Interest rate at the time of selling 7%

To calculate the issue price follow the following steps:

Step-1
Calculate the interest
Interest:
$2,000,000 6% $120,000
Thus the interest is $120,000.
Step-2
Calculate the present value
Present value
$2, 000, 000 0.7130 1, 426, 000
$120, 000 4.1002 492, 024
Issue Price
$1,918, 024

Thus the issue price is $1,918,024.

Requirement 2
Calculate the interest expense
2014
$134, 262*

Interest expense

2015
$135, 260**

$1,98,024 7% $134, 262

** $1,918,024 $134, 262 $120,000 7% $135, 260

Thus in year 2014 the interest expense should be $134,262 and in 2015 should be
$135,260.
Requirement 3
Compute the cash paid on 31 Dec 2013, and 2015
2014
$120, 000

Cash Paid

2015
$120, 000

The amount of cash paid would be same as the interest calculated which would be same
for both the years.
Requirement 4
Compute the bonds book value

2014
$1,932, 286*

Bonds payable

2015
$1,947,546**

*$1,918, 024 $14, 262 $1,932, 286

**$1,932, 286 $15, 260 $1,947,546

Thus the bonds value on 31st Dec 2014 is $1,932,286 and in 2015 is $1,947,546.
Financial Accounting_9_Q.16

Calculate the amount for each payment

Information extracted

XIT auto cost $18, 000

Cash payment $3, 000
Rate of interest 12%
Calculate the interest as

Interest

Cos t cashpayment
Pr esent value factor for 6 years at 12% int erest rate

$15, 000
4.9173
$3, 050

$18, 000 $3, 000

Thus the interest payment amount would be $3,050.

Financial Accounting_9_Q.14

Explain the term annuity

Annuity:
An annuity is a term thatalludes to equivalent intermittent money
installmentsor receipts of anequivalent sum everyperiod for two or more periods. As
opposedto a futureestimationof $1 or a presentestimationof $1 (whichinclude a solitary
commitment or sum), an annuity includes an arrangement of equivalent commitments for
an arrangement of equivalent periods. An annuity may allude to a future worth or a
present quality.
Numerous parts of an annuity can be customized to the particular needs of the
beneficiary. Notwithstanding picking between a protuberance entirety installment or an
arrangement of installments to the backup plan, you can pick when you need to annuitize
your commitments - that is, begin accepting installments. An annuity that starts paying
out quickly is alluded to as a quick annuity, while those that begin at a preset date later on
are called conceded annuities.
Financial Accounting_9_Q.12

Elucidate the distinction between the present value and the future value

Future value-Thefuture worth of a figure of dollars is the quantity that it will boost to in
the future at i interest rate for n periods. The future value is the principal plus
accumulated interest compounded each period.
Present value- The present worth of an amount of dollars; to be received at some
specified date in the future is that amount discounted to the present at i interest rate for n
periods. It is the converse of future value. In compound discounting, the interest is
subtracted rather than added as in compounding.
Financial Accounting_9_Q.10

Calculate the interest payable

Extract the information

Face value $4, 000

Interest rate 12%
Date of note 1st April , 2014
Calculate the interest as
Face value 12% time Interest
$4, 000 12%

9
$360
12

Thus the interest payable for the note is $360.

Financial Accounting_9_Q.8

Explain notes payable

Notes payable: A note payable is a composed guarantee to pay an expressed aggregate at

one or more determined dates later on. A financial security that for the most part has a
more drawn out term than a bill, however a shorter term than a bond is called notes
payable. Then again, the length of time of a note can differ essentially, and may not
generally fall conveniently into this classification. Notes are like bonds in that they are
sold at, above or beneath face (standard) worth, make general investment installments
and have a detailed term until development.

Difference between secured note and unsecured note

A secured note payable is one that has joined to it (or coupled with it) a home loan record
which confers tagged holdings as insurance to ensure installment of the note when due.
An unsecured note is one that does not have particular holdings vowed, or conferred, to
its installment at development. A secured note conveys less hazard for the note holder
(bank).
Financial Accounting_9_Q.6

Give the meaning for accrued responsibility and the entry which shows the accrued
accountability
Accrued Liability: An accrued liability isa cost that was causedbefore the end of the
current periodhoweverhas not been paid or recorded. Therefore, an accrued liability is
recognized when such a transaction is recorded.
Example
A typical example is wages incurred during the last few days of the accounting period but
not recorded because no payroll was prepared and paid that included these wages.
Presuming wages of $2000 were incurred, the adjusting entry to record the accrued
liability and the wage expense would be as follows:

31-Dec
Wage expense
Wages payable

$2,000.00
$2,000.00

Financial Accounting_9_Q.4
Liability: An organizations lawful obligations or commitments that emerge amid the
course of business operations. Liabilities are settled about whether through the exchange
of monetary profits including money, administrations or merchandise.
Explanation
Most obligations detail a positive sum that is expected at a defined date later on. On the
other hand, there are circumstances where it is realized that a commitment or obligation
exists despite the fact that the definite sum is obscure.Liabilities that are known to
existyet the precise sumis not yet known must be recorded in therecordsand reported in
thebudgetary explanations at an expected sum.
Examples of a known obligation of an estimated amount are estimated income tax at the
yearend property taxes at the finish of the year, and responsibility under warranty
agreement for products sold.
Financial Accounting_9_Q.2
Liabilities: An organizations lawful obligations or commitments that emerge amid the
course of business operations. Liabilities are settled about whether through the exchange
of monetary profits including money, administrations or merchandise.
Explanation
External parties have difficulty determining the amountof liabilities of a businessin the
absence of a balance sheet. Therefore, about the only sources available to external parties
for determining the number, type, and amounts of liabilities of a business are the
published financial statements These statement have more trustworthiness when they
have been audited by an autonomous CPA.
Financial Accounting_9_P.10

Requirement 1
Deferred income tax amount: It is the amountwhich is specified on the balance sheet
which outcomes from the money already earned by the organization and recognized for
the accounting, and not the purposes of tax. These differences could also mention as the
deferred income tax.
The following steps can be incorporated to calculate the deferred tax liability:
Step-1
1,000,000
20
years
=
$50,000
1,000 000 x 10% = $100,000

GAAP depreciation
Tax depreciation

Step-2
Book Value:
2014
GAAP
Cost
Accumulated depreciation
Book value
Deferred tax liability-2014

Deferred tax liability-2015

Tax
$1,000,000.00
$50,000.00
$950,000.00

2015
GAAP
Tax
$1,000,000.00
$1,000,000.00
$1,000,000.00
$100,000.00
$100,000.00
$200,000.00
$900,000.00
$900,000.00
$800,000.00

($950,000-$900,000)x34% = $17,000
($900,000 $800,000) x34% =
$34,000

The distinction in the liability on the grounds that extra wage charges must be paid later
on .This is an aftereffect of lower deterioration derivations in the expense form for the
future; that is, lower charge findings implies more salary assessment later on other
assessable sums .
Requirement 2
Calculate the income tax expense
Income tax expense 2014:

Taxes payable
Deferred taxes
Income tax expense

Income tax expense 2015:

$400,000
$17,000.00
$417,000.00

Taxes payable
Deferred taxes
Income tax expense

$625,000
$17,000.00
$642,000.00

Financial Accounting_9_ME.6

Record the coverage of the responsibility in every year

2014 This company does not need to record or reveal the obligation in light of the fact
that the possibility of the risk happening is remote.
2015 The company should reveal the liability in a note because the liability is reasonably
possible.
2016 Buzz must disclose the liability in a note since the existence of a liability is
reasonably possible. If the lawyers believe that the case will be lost on appeal, a liability
should be recorded.
2017 The company must witness the liability and the loss since the out of court resolution
made the $150,000 loss probable.
Financial Accounting_9_ME.4

Compute the working capital of Stevensons

Working capital: It is the measure of both an organization's proficiency and its fleeting
financial health.
Extracted Information
Noncurrent assets $240, 000
Total assets $360, 000
Non current liabilities $176, 000
Stockholders equity $94, 000

Compute the working capital from the information above

Working Capital= Current assets- current liabilities

$120,000-$90,000
= $30,000
Thus the working capital is $30,000.
Financial Accounting_9_ME.2

The adjusting entry for recording the interest as on December 31 is as follows:

On 1 October
Cash (+A)

$290,000.00
Note payable (+L)

$290,000.00

On 31 December:
Interest Expense(+E, .SE)($940,000 11%x 112)
Interest payable (+L)

$7,250.00
$7,250.00

Financial Accounting_9_E.20

Compute the liability which has to be recorded by the company

Extracted information

Payment per year $200, 000

Time 10 years
At the end of 10th year , additional payment $1, 000, 000

Calculate the present value of principal amount, then the present value of interest , the
present value can be calculated by adding both the values:
$1, 000, 000 0.5584

$558, 400

$200, 000 7.3601

$1, 472, 020

Present Value

$2, 030, 420

Thus the present value is $2,030,420.

Financial Accounting_9_E.18

Calculate the payments present value

Present value: The current worth of a future entirety of MONEY or stream of money
streams given an indicated rate of return. Future money streams are marked down at the
rebate rate, and the higher the markdown rate, it reduces the present estimation without
bounds money streams. Deciding the suitable rebate rate is the way to appropriately
esteeming future money streams, whether they are income or commitments.
Extract the information
Payment at the end of 1st year $20, 000
Payment at the end of 1st year $30, 000
Payment at the end of 1st year $50, 000
Interest rate 10%

Calculatethe value of the paymentas follows:

Present value of unequal payments:
For 1st year $20, 000 0.9091 $18,182
For 2st year $30, 000 0.8264 24, 792
For 3rd year $50, 000 0.7513 37.565
$80,539

Thus the total present worth of the savings is $80,539.

Financial Accounting_9_E.16

Calculate the additional amount which the investor needs to deposit

For the calculation certain steps can be followed:
Step-1
Calculate the present value of theamount to be received infuture, which can be calculated
by multiplying the amount with the present value factor for 8 years at the rate of 9%.
Present value of amount to be received in future: $1,000,000 0.5019 $501,900
Thus the present value of the amount which she needs after 8 years would be $501,000.
Step-2
Calculate the additional amount required apart from the amount already there in the
account.
Since the client previously has $300,000 in the account, she needs to deposit an
additional $201.900, which is calculated by subtracting the present value of the total
amount from the amount deposited,
Financial Accounting_9_E.12

Requirement 1
Income tax: It is the amount which is to be paid by the individual, organizations etc for
the income which they have earned in a specified period.
Income tax payablecan be calculated in the followingmanner:

Tax expense
Less: Deferred taxes
Income tax payable

$580,000
$108,000.00
$472,000.00

Thus the income tax payable

Requirement 2
There arediscrete tenets legislatingthe determination ofduty cost (GAAP) and themeasure
of charges as of nowpayable (IRS regulations). Organizations are obligedto keep separate
records. Luckily, most organizations have the capacity diminish the measure of expenses
presently payable by keeping up two sets of books. This fund advocates the extra
accounting expenses.
Financial Accounting_9_E.6

Short term borrowings- A record indicated in the current liabilities allotment of an

organization's accounting report. This record is embodied any DEBT caused by an
organization that is expected inside one year. The obligation in this record is typically
made up of transient bank credits taken out by an organization.

Long term borrowings- In bookkeeping, an area of the accounting report that rundowns
commitments of the organization that get to be expected more than one year into what's
to come. Long haul liabilities incorporate things like debentures, advances, conceded
duty liabilities and benefits commitments. The segments of long haul liabilities that will
come due inside the following 12 months are recorded under present liabilities, for
example, the current part of long haul debt.
Explanation to the statement
Analysts need to assess the shorter commitments of a business with a specific end goal to
survey liquidity or the capacity to fulfill an obligation that must be paid within a brief
span of time. In the event that PepsiCo needed to pay the $3 6 billion instantly, the
examiners would need to know the wellspring of the required money. Since PepsiCo
arrangements to refinance the obligation, it won't need to pay it promptly. Hence, an
expert would be less worried about this kind of obligation.
The key condition that must be satisfied for a short-term borrowing to be classified as
long duration is the declaration that the liability can be refinanced. A desire or a plan is
not sufficient. There must be evidence that the company has the capability to do so.
Financial Accounting_9_E.2

Requirement 1
31 March

Salary and wage expense (+E, -SE )

Liability for income taxes withheld-employees (+L)
Liability for insurance premiums withheld-employees (+L)
FICA taxes payable-employees
Cash

$200,000
$40,000.00
$1,000.00
$15,000.00
$144,000.00

Payroll for March including employee deductions

Requirement 2
March 31

Payroll tax expense (+E, -SE )

FICA taxes payable-employees

$15,000
$15,000.00

Employer payroll taxes on March payroll

Requirement 2
Liability for taxes on income taxes withdrawn workers (-L)
Liability for insurance premiums withheld-employees (-L)
FICA taxes payable-employees (-1)
FICA taxes payable-employer (-L)
Cash (-A)
Remittanceof payroll taxesand deductions for March payroll

40,000
1,000
15,000
15,000
71,000

Financial Accounting_9_CP.4

Determine the hidden interest in a real estate.

By extracting the information:
Price of house = $150,000
Annual interest = 12%
Time periods (n) = 48 months
Rate of interest (r) = 1%

a) Determine whether builder provide interest at zero rate or not.

No, the builder was not given 0 percent interest.
b) Determine the advertised price of the house.
Compute the price of the house.
To compute the price of the house following step will be followed.
Step-1:
To find the present value of annuity, following formula is used.
1 n r
Present value 1

1 r
Substitute
Present Value 1 1/1.01 ^ 48 / 0.01

$37.9740
Step-2
Present value of $3,125 for 48 periods A Present Value Factor
=$3,125 37.9740
The true price of the building $ 118, 668.75
The accrual amount is being paid for the house was $150,000 though it had present value
of $118, 668 , the difference can be called as an interest $31,332.
Financial Accounting_9_CP.2

Requirement 1
Accrued compensation: Income that is earned in a FUND or by organization by giving
an administration or offering an item however has yet to be gotten. Shared stores or other
pooled stakes that amass salary over a time of time however just pay it out to
shareholders once a year are, by definition, collecting their pay. Singular organizations
can likewise accumulate pay without really getting it, which is the premise of the
accumulation bookkeeping framework.
The amount of accrued compensation is $15,630,000 .
Requirement 2
Accounts payable: A bookkeeping entry that shows that an element's commitment to pay
off a fleeting obligation to its lenders. The accounts payable section is found on an asset
report under the heading current liabilities.
Accounts payable improved by $21,310, 000 (as reported on the SCF). This change
increased operating cash flows.
Requirement 3
Long term liabilities: In bookkeeping, an area of the accounting report that rundowns
commitments of the organization that get to be expected more than one year into what's
to come. Long haul liabilities incorporate things like debentures, advances, conceded
duty liabilities and benefits commitments. The segments of long haul liabilities that will
come due inside the following 12 months are recorded under present liabilities, for
example, the current part of long haul debt.
Long-term liabilities are $183,974, 000 .
Financial Accounting_9_AP.2

Determine the effects of schedule on transaction and discuss its effects on cash flow:
Cash flow statement: In the financial accounting, a statement of cash flow is the
statement which shows how the alteration in the balance sheet affects the cash and its
equivalents like marketable securities and distributes the analysis to operating activity,
investing activity and financing activity.
a) Determine the effects of schedule on transaction:

Date

Assets

Stockholders
equity

Liablities

Deferred
Tax liability +
Taxes payable
15-Jan No effect
+

Expense -

31-Jan

Cash-

No effect

30-Apr

Cash + Note Payable +

3-Jun

Inventory
+

5-Jul

31-Aug

Interest Payable-

No effect

Cash -

Accounts
Payable +
Accounts
Payable -

No effect

Cash+

Deferred
Revenue+

Revenue+

No effect

Interest Payable
31-Dec No effect
+
Interest Expense -

Long-term
Liability Current Liability
31-Dec No effect
+

31-Dec No effect

Wages Payable
+

No effect

Wage Expense -

Operating activity: These are the organization's average day by day forms that create
income. Working exercises relate to an organization's center business exercises, for
example, assembling, appropriating, marketing and offering an item or administration.
These exercises ought to give the larger part of an organization's money stream and will
to a great extent figure out if an organization is beneficial.
b) Effects on Cash flow from activities of Operation

15-Jan

No effect

31-Jan

Decreased

30-Apr
3-Jun
5-Jul
31-Aug
All December 31

No effect
No effect
Decreased
Increased
No effect