Author: Anonymous

The effective interest amortization method:

A discount reduces the interest expense of a bond over its life.

A company borrows $40,000 and issues a 3-year, 10% installment note with interest payable annually. The factor for the present value of an annuity at 10% for 3 years is 2.4869. The factor for the present value of a single sum at 10% for 3 years is 0.7513. The amount of the annual payment is $12,000.

An employee earned $128,500 working for an employer in the current year. The current rate for FICA Social Security is 6.2% payable on earnings up to $118,500 maximum per year and the rate for FICA Medicare 1.45% of all earnings. The employer’s total FICA payroll tax for this employee is:

Payments on installment notes normally include accrued interest plus a portion of the principal amount borrowed.

During August, Boxer Company sells $356,000 in merchandise that has a one year warranty. Experience shows that warranty expenses average about 5% of the selling price. The warranty liability account has a credit balance of $12,800 before adjustment. Customers returned merchandise for warranty repairs during the month that used $9,400 in parts for repairs. The entry to record the estimated warranty expense for the month is:

Plant assets are reported on a balance sheet at their undepreciated costs (book value), not at fair (market) values.

Employees earn vacation pay at the rate of one day per month. During the month of July, 25 employees qualify for one vacation day each. Their average daily wage is $100 per day. What is the amount of vacation benefit expense to be recorded for the month of July?

On January 1, a company issues bonds dated January 1 with a par value of $200,000. The bonds mature in 3 years. The contract rate is 4%, and interest is paid semiannually on June 30 and December 31. The market rate is 5%.  Using the present value factors below, the issue (selling) price of the bonds is:   n=   i=   Present Value of an Annuity   Present value of $1 3   4.0 %     2.7751   0.8890 6   2.0 %     5.6014   0.8880 3   5.0 %     2.7232   0.8638 6   2.5 %     5.5081   0.8623

A trademark is an exclusive right granted to its owner to publish and sell a musical, literary, or artistic work during the life of the creator plus 70 years.