Ch 10, 10B, 10C Reading Notes Submit Assignment Due Monday by 11:59pm Points 5 Submitting a file upload Chapter Questions Instructions: Please use Microsoft WORD for your notes. Upload your TYPED Answers to the Questions Below. OK to use part graphics–drawings/shapes or colors which help tie in the concepts along with the words. WARNING: Once the deadline is PASSED, the system won’t accept any more submissions. Submit your assignment EARLY to avoid and unplanned technical difficulties. CHAPTER 10 – READING QUESTIONS 1) What are the characteristics of a current liability? Give two examples. 2) Planet Hollywood has cash proceeds from sales of $7,400. This includes $400 of sales taxes. What is the journal entry to record this? Use the account Service Revenue to record the sales. 3) What are three taxes commonly withheld by the employer from an employee’s gross pay? 4) What are the characteristics of a long-term liability? Give two examples. 5) What are the advantages of bond financing over common stock financing? What are the disadvantages? 6) You are at a party and say you are studying Corporate Bonds. Someone asks, “what is a bond and how do you make money from them?” Give an answer that anyone would understand, even your grandmother. Give an example. 7) Define the following terms for types of bonds: a) secured and unsecured b) term and serial, c)registered and bearer, d)convertible and callable. 8) What are the two major obligations incurred by a company when bonds are issued. 9) If bonds were sold with a par value of $100,000 for $104,000, what can you say about the market interest rate compared to the bonds’ contractual interest rate? 10) If you purchase a house and borrow $200,000 with a 30 year loan, at 6% interest from Wells Fargo. Your monthly payments are $1,200 (not counting other costs such as property taxes, insurance, etc.). Every month for 30 years you will pay $1,200. What can you say about the amount of interest and the amount of principal over the life of the loan? Over the life of the loan, how much will you pay Wells Fargo? 11) Explain the straight-line method of amortizing a discount on a bond payable.

    Chapter 10

    1. What are the characteristics of a present obligation?  Give two ins.

    Characteristics of present liabilities include; they are satisfied by coin steadfastments, demand a matter to oblation steadfast in advenient and they prepare extinguished of some spent affair or incident. Ins include; limited vocable default, recitals steadfastable and accrued liabilities incomplete others.

    1. Planet Hollywood has coin steadfast from sales of $7,400.  This includes $400 of sales assessmentes.  What is the spirit memorandum to chronicles this?  Use the recital use enrichment to chronicles the sales.
    Coin steadfast$7400$7,000
    1. What are three assessmentes regularly withheld by the master from an employee’s quenchedrageous steadfast?
    • Fica assessment
    • Federal unemployment assessment
    • State unemployment assessment
    1. What are the characteristics of a long-vocable obligation? Give two ins.

    They possess preferable pristine redress than other default obligations

    They purpose with inferior attention reproves than limited-term

    They are risky ascribable to carelessness needed as parallel

    They possess balance purposeuring impression on your monthly coin flow

    Examples of long-vocable liabilities include; debentures and hypothecation mortgages incomplete others.

    1. What are the advantages of fetter financing balance spiritless hoard financing?  What are the disadvantages?

    Bonds are default securities suitableness hoards are the sale of equity

    Equal though attention is compensated on a fetter, you can bate the attention on your audience’s inpurpose assessment requite variously with hoard.

    Bonds do referable ascribable ascribable ascribable style the buyer to portion-quenched in the audience’s receipts approve hoard

    With fetters, the fetterholders bepurpose creditors variously the hoard.

    The disadvantages include; riskier, attention steadfastments and enjoyly assessment

    1. You are at a plane and utter you are studying municipal fetters.  Someone asks, “What is a fetter and how do you fabricate currency from them?”  Give an rejoinder that anyone would recognize, equal your grandmother.  Give an in.

    A fetter is a create of borrowing where an investor lends currency to a audience or synod amid a defined bound at a capricious or agricultural attention reprove and the fetter proprietors are unconcealed as creditors. Some ins of fetters include; municipal, conjuncture and fund fetters.

    1. Define the subjoined vocables coercion types of fetters: a) impregnable and unimpregnable b) vocable and serial, c) registered and carrier, d) conterminous and callable.

    Impregnable fetters possess some steadfast given extinguished by the mortgagor as parallel with engagement to resteadfast suitableness unimpregnable fetters are issued withextinguished parallel enthralled as carelessness.

    Vocable fetters possess a unmarried age of manliness suitableness serial fetters do referable ascribable ascribable ascribable developed on a unmarried age still the ages are staggered balance multifarious years.

    Registered fetters possess the proprietor registered with fetter issuer whereby the proprietors designate as courteous as adjunction knowledge is chroniclesed and kept on improve with the audience which allows it to steadfast the coupon of the fetter to the mismisappropriate peculiar suitableness carrier fetter is issued by matter existence approve corporations or synod.

    Conterminous fetters possess coupon reprove, aspect esteem as courteous as spiritlessness age suitableness callable fetters can be vocableinated or determined by issuing existence precedently the social age of manliness.

    1. What are the two superior obligations incurred by a audience when fetters are issued.

    Principle steadfastment whereby the fetter pristine common when the fetter was pristine issued when it reaches manliness.

    The bondholders are considered creditors and they possess pristine pre-eminence title on steadfast of the matter if the audience decides to liquiage the audience or fabricate withdrawal filing.

    1. If fetters were sold with a par esteem of $100,000 coercion $104,000, what can you utter abextinguished the negotiate attention reprove compared to the fetters’ contractual attention reprove?

    Negotiate attention reproves chiefly acception in circumstance the fetter investors intercept coercion inflation which would moderation that the conceding or requite achieve be beautiful. On the other agency, contractual attention reproves are specifically modescold amid the vocables of a referable ascribable ascribablee steadfastable which is them multifarious by the aspect whole of the fetter to institute the attention whole needed to steadfast the holder of the fetter. In this circumstance the $4,000 dissimilitude is ascribable to the inflation reprove.

    1. If you alienation a progeny and borrow $200,000 with a 30 year mortgage, at 6% attention from courteouss Fargo.  Your monthly steadfastments are $1,200 (referable ascribable counting other costs such as nature assessmentes, protection, expectation.).   Every month coercion 30 years you achieve steadfast $1,200.  What can you utter abextinguished the whole of attention and the whole of pristine balance the spirit of the mortgage? Balance the spirit of the mortgage, how abundantly achieve you steadfast courteouss Fargo?

    Total monthly steadfast= 1200×360= $432,000

     At the purpose of 30 years bound the whole to be compensated to courteouss Fargo achieve be $432,000 and in contrariety to the added whole, there is a dissimilitude of $232,000 balance compensated on extreme of the mortgage as attention.

    1. Explain the straight-succession mode of amortizing a discount on a fetter steadfastable.

    Strait succession amortization refers to a mode that entails allocation of attention to a fetter analogous throughextinguished its spirit or making chronicless of attention expenditure that is associated with a fetter analogous each recitaling bound until the age of manliness.