CHAPTER 10
Liabilities
ASSIGNMENT CLASSIFICATION TABLE
Learning Objectives
Questions
Brief
Exercises
Do It!
Exercises
A
Problems
B
Problems
* 1. Explain a current liability,
and identify the major types
of current liabilities.
1
1
1A
1B
* 2. Describe the accounting for
notes payable.
2
2
1
1, 2
1A, 2A
1B
* 3. Explain the accounting for
other current liabilities.
3, 4, 5, 6
3, 4, 5, 6
1, 2
3, 4, 5, 6, 7
1A
1B
* 4. Explain why bonds are
issued, and identify the
types of bonds.
7, 8, 9,
10, 11
7
3
8, 9
* 5. Prepare the entries for the
issuance of bonds and
interest expense.
12, 13, 14
8, 9, 10
4
10, 11, 12,
13, 18, 19,
20, 21
3A, 4A, 6A,
7A, 8A, 9A
2B, 3B, 5B,
6B, 7B,
8B, 9B
*6. Describe the entries when
bonds are redeemed or
converted.
15, 16
11
5
13, 14
3A, 4A,
10A
2B, 3B, 9B
7. Describe the accounting for
long-term notes payable.
17
12
6
15
5A
4B
8. Identify the methods for the
presentation and analysis of
long-term liabilities.
18
13
16
3A, 4A, 5A
2B, 3B, 4B
*9. Compute the market price of
a bond.
21
14
17
*10. Apply the effective-interest
method of amortizing bond
discount and bond
premium.
19, 20
15
18, 19
6A, 7A
5B, 6B
ASSIGNMENT CLASSIFICATION TABLE (Continued)
Learning Objectives
Questions
Brief
Exercises
Do It!
Exercises
A
Problems
B
Problems
*11. Apply the straight-line method of
amortizing bond discount and
bond premium.
22, 23
16, 17
20, 21
8A, 9A, 10A
7B, 8B, 9B
*Note: All asterisked Questions, Exercises, and Problems relate to material contained in the appendices to the
chapter.
ASSIGNMENT CHARACTERISTICS TABLE
Problem
Number
Description
Difficulty
Level
Time
Allotted (min.)
1A
Prepare current liability entries, adjusting entries, and
current liabilities section.
Moderate
30–40
2A
Journalize and post note transactions and show balance
sheet presentation.
Moderate
30–40
3A
Prepare entries to record issuance of bonds, interest
accrual, and bond redemption.
Moderate
20–30
4A
Prepare entries to record issuance of bonds, interest
accrual, and bond redemption.
Moderate
15–20
5A
Prepare installment payments schedule and journal
entries for a mortgage note payable.
Moderate
20–30
*6A
Prepare entries to record issuance of bonds, payment
of interest, and amortization of bond premium using
effective-interest method.
Moderate
30–40
*7A
Prepare entries to record issuance of bonds, payment of
interest, and amortization of discount using effective-
interest method. In addition, answer questions.
Moderate
30–40
*8A
Prepare entries to record issuance of bonds, interest
accrual, and straight-line amortization for 2 years.
Simple
30–40
*9A
Prepare entries to record issuance of bonds, interest,
and straight-line amortization of bond premium and
discount.
Simple
30–40
*10A
Prepare entries to record interest payments, straight-line
premium amortization, and redemption of bonds.
Moderate
30–40
1B
Prepare current liability entries, adjusting entries, and
current liabilities section.
Moderate
30–40
2B
Prepare entries to record issuance of bonds, interest
accrual, and bond redemption.
Moderate
20–30
3B
Prepare entries to record issuance of bonds, interest
accrual, and bond redemption.
Moderate
15–20
4B
Prepare installment payments schedule and journal
entries for a mortgage note payable.
Moderate
20–30
*5B
Prepare entries to record issuance of bonds, payment
of interest, and amortization of bond discount using
effective-interest method.
Moderate
30–40
ASSIGNMENT CHARACTERISTICS TABLE (Continued)
Problem
Number
Description
Difficulty
Level
Time
Allotted (min.)
*6B
Prepare entries to record issuance of bonds, payment of
interest, and amortization of premium using effective-
interest method. In addition, answer questions.
Moderate
30–40
*7B
Prepare entries to record issuance of bonds, interest
accrual, and straight-line amortization for two years.
Simple
30–40
*8B
Prepare entries to record issuance of bonds, interest, and
straight-line amortization of bond premium and discount.
Simple
30–40
*9B
Prepare entries to record interest payments, straight-line
discount amortization, and redemption of bonds.
Moderate
30–40
WEYGANDT FINANCIAL ACCOUNTING 9E
CHAPTER 10
LIABILITIES
Number
LO
BT
Difficulty
Time (min.)
BE1
1
C
Simple
3–5
BE2
2
AP
Simple
2–4
BE3
3
AP
Simple
2–4
BE4
3
AP
Simple
2–4
BE5
3
AP
Simple
3–5
BE6
3
AP
Simple
3–5
BE7
4
AP
Simple
6–8
BE8
5
AP
Simple
4–6
BE9
5
AP
Simple
3–5
BE10
5
AP
Simple
4–6
BE11
6
AP
Simple
3–5
BE12
7
AP
Simple
6–8
BE13
8
AP
Simple
3–5
*BE14
9
AP
Simple
3–5
*BE15
10
AP
Simple
4–6
*BE16
11
AP
Simple
4–6
*BE17
11
AP
Simple
4–6
DI1
2, 3
C
Simple
6–8
DI2
3
AP
Simple
5–7
DI3
4
C
Simple
2–3
DI4
5
AP
Simple
4–6
DI5
6
AP
Simple
3–5
DI6
7
AP
Simple
4–6
EX1
2
AN
Moderate
8–10
EX2
2
AN
Simple
6–8
EX3
3
AP
Simple
4–6
EX4
3
AN
Simple
6–8
EX5
3
AP
Simple
8–10
EX6
3
AP
Simple
3–5
EX7
3
AP
Simple
6–8
EX8
4
C
Simple
4–6
EX9
4
AN
Simple
4–6
EX10
5
AP
Simple
4–6
EX11
5
AP
Simple
4–6
EX12
5
AP
Simple
6–8
EX13
5, 6
AP
Simple
6–8
EX14
6
AP
Moderate
8–10
LIABILITIES (Continued)
Number
LO
BT
Difficulty
Time (min.)
EX15
7
AP
Simple
6–8
EX16
8
AP
Simple
3–5
*EX17
9
AP
Simple
4–6
*EX18
5, 10
AP
Moderate
8–10
*EX19
5, 10
AP
Moderate
8–10
*EX20
5, 11
AP
Simple
6–8
*EX21
5, 11
AP
Simple
6–8
P1A
1–3
AN
Moderate
30–40
P2A
2
AN
Moderate
30–40
P3A
5, 6, 8
AP
Moderate
20–30
P4A
5, 6, 8
AP
Moderate
15–20
P5A
7, 8
AP
Moderate
20–30
*P6A
5, 10
AP
Moderate
30–40
*P7A
5, 10
AP
Moderate
30–40
*P8A
5, 11
AP
Simple
30–40
*P9A
5, 11
AP
Simple
30–40
*P10A
6, 11
AP
Moderate
30–40
P1B
1–3
AN
Moderate
30–40
P2B
5, 6, 8
AP
Moderate
20–30
P3B
5, 6, 8
AP
Moderate
15–20
P4B
7, 8
AP
Moderate
20–30
P5B
5, 10
AP
Moderate
30–40
*P6B
5, 10
AP
Moderate
30–40
*P7B
5, 11
AP
Simple
30–40
*P8B
5, 11
AP
Simple
30–40
*P9B
5, 6, 11
AP
Moderate
30–40
BYP1
1, 8
AN
Simple
5–10
BYP2
1, 3, 8
AP
Simple
10–15
BYP3
1, 3, 8
AP
Simple
10–15
BYP4
4
C
Simple
10–15
BYP5
5, 6
AN
Moderate
15–20
BYP6
4
C
Simple
10–15
BYP7
—
E
Simple
5–10
BYP8
3
AP
Moderate
15–20
BYP9
—
E
Simple
10–15
BYP10
1, 4, 8
AP
Simple
10–15
BLOOM’S TAXONOMY TABLE
Copyright © 2014 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 9/e, Solutions Manual (For Instructor Use Only) 10-7
Correlation Chart between Bloom’s Taxonomy, Learning Objectives and End–of-Chapter Exercises and Problems
Learning Objective
Knowledge
Comprehension
Application
Analysis
Synthesis
Evaluation
1. Explain a current liability, and identify
the major types of current liabilities.
Q10-1
P10-1A
2. Describe the accounting for notes
payable.
Q10-2
DI10-1
BE10-2
E10-1
E10-2
P10-1A
P10-2A
P10-1B
3. Explain the accounting for other
current liabilities.
Q10-6
Q10-3
Q10-4
DI10-1
Q10-5
BE10-3
BE10-4
BE10-5
BE10-6
DI10-2
E10-3
E10-5
E10-6
E10-7
E10-4
P10-1A
P10-1B
4. Explain why bonds are issued, and
identify the types of bonds.
Q10-11
Q10-7
Q10-8
Q10-9
Q10-10
DI10-3
E10-8
BE10-7
E10-9
5. Prepare the entries for the issuance
of bonds and interest expense.
Q10-12
Q10-14
Q10-13
BE10-8
BE10-9
BE10-10
DI10-4
E10-10
E10-11
E10-12
E10-13
E10-18
E10-19
E10-20
E10-21
P10-3A
P10-4A
P10-6A
P10-7A
P10-8A
P10-9A
P10-2B
P10-3B
P10-5B
P10-6B
P10-7B
P10-8B
P10-9B
6. Describe the entries when bonds are
redeemed or converted.
Q10-15
Q10-16
BE10-11
DI10-5
E10-13
E10-14
P10-3A
P10-4A
P10-10A
P10-2B
P10-3B
P10-9B
7. Describe the accounting for long-
term notes payable.
Q10-17
BE10-12
DI10-6
E10-15
P10-4B
P10-5A
8. Identify the methods for the
presentation and analysis of
long-term liabilities.
Q10-18
BE10-13
E10-16
P10-3A
P10-4A
P10-5A
P10-2B
P10-3B
P10–4B
*9. Compute the market price of a bond.
Q10-21
BE10-14
E10-17
*10. Apply the effective-interest method
of amortizing bond discount and
bond premium.
Q10-19
Q10-20
BE10-15
E10-18
E10-19
P10-6A
P10-7A
P10-5B
P10-6B
*11. Apply the straight-line method of
amortizing bond discount and
bond premium.
Q10-22
Q10-23
BE10-16
BE10-17
E10-20
E10-21
P10-8A
P10-9A
P10-10A
P10-7B
P10-8B
P10-9B
Broadening Your Perspective
Communication
Real-World Focus
Comparative Analysis
FASB Codification
Financial
Reporting
Decision-Making
Across the
Organization
Ethics Case
All About You
ANSWERS TO QUESTIONS
1. Lori is not correct. A current liability is a debt that a company expects to pay within one year or
the operating cycle, whichever is longer.
2. In the balance sheet, Notes Payable of $40,000 and Interest Payable of $700 ($40,000 X .07 X 3/12)
3. (a) Disagree. The company only serves as a collection agent for the taxing authority. It does not
government.
(b) The entry to record the proceeds is:
Cash…………………………………………………………………………….. 8,400
Sales Revenue ……………………………………………………….. 8,000
Sales Taxes Payable ……………………………………………….. 400
4. (a) The entry when the tickets are sold is:
Cash…………………………………………………………………………….. 1,200,000
Unearned Ticket Revenue ………………………………………… 1,200,000
(b) The entry after each game is:
Unearned Ticket Revenue ……………………………………………….. 200,000
Ticket Revenue ……………………………………………………….. 200,000
5. Liquidity refers to the ability of a company to pay its maturing obligations and meet unexpected
6. Three taxes commonly withheld by employers from employees’ gross pay are: (1) federal income
7. (a) Long-term liabilities are obligations that are expected to be paid after one year. Examples
include bonds, long-term notes, and lease obligations.
governmental agencies.
8. (a) The major advantages are:
(1) Stockholder control is not affected—bondholders do not have voting rights, so current
stockholders retain full control of the company.
additional shares of common stock are issued.
(b) The major disadvantages in using bonds are that interest must be paid on a periodic basis
and the principal (face value) of the bonds must be paid at maturity.
Questions Chapter 10 (Continued)
9. (a) Secured bonds have specific assets of the issuer pledged as collateral. In contrast, unse-
cured bonds are issued against the general credit of the borrower. These bonds are called
debenture bonds.
issuer.
10. (a) Face value is the amount of principal due at the maturity date.
the rate stated on the bonds.
(c) A bond indenture is a legal document that sets forth the terms of the bond issue.
(d) A bond certificate is a legal document that indicates the name of the issuer, the face value of the
11. The two major obligations incurred by a company when bonds are issued are the interest
12. Less than. Investors are required to pay more than the face value; therefore, the market interest
rate is less than the contractual rate.
13. $28,000. $800,000 X 7% X 1/2 year = $28,000.
14. $780,000. The balance of the Bonds Payable account minus the balance of the Discount on
the carrying value of the bonds.
15. Debits: Bonds Payable (for the face value) and Premium on Bonds Payable (for the
unamortized balance).
Credits: Cash (for 97% of the face value) and Gain on Bond Redemption (for the difference
between the cash paid and the bonds’ carrying value).
16. A convertible bond permits bondholders to convert it into common stock at the option of the
bondholders.
the common stock increases substantially.
(b) For the issuer, convertible bonds usually have a higher selling price and a lower rate of
17. No, Rob is not right. Each payment by Rob consists of: (1) interest on the unpaid balance of the
loan and (2) a reduction of loan principal. The interest decreases each period while the portion
applied to the loan principal increases each period.
18. The nature and the amount of each long-term liability should be presented in the balance sheet
or in schedules in the accompanying notes to the statements. The notes should also indicate the
interest rates, maturity dates, conversion privileges, and assets pledged as collateral.
Questions Chapter 10 (Continued)
*19. Kelli is probably indicating that since the borrower has the use of the bond proceeds over the
term of the bonds, the borrowing rate in each period should be the same. The effective-interest
method results in a varying amount of interest expense but a constant rate of interest on the
method.
*20. Decrease. Under the effective-interest method the interest charge per period is determined by
multiplying the carrying value of the bonds by the effective-interest rate. When bonds are issued
at a premium, the carrying value decreases over the life of the bonds. As a result, the interest
expense will also decrease over the life of the bonds because it is determined by multiplying the
rate.
*21. No, Jill is not right. The market price of any bond is a function of three factors: (1) The dollar
amounts to be received by the investor (interest and principal), (2) The length of time until the
amounts are received (interest payment dates and maturity date), and (3) The market interest rate.
*22. The straight-line method results in the same amortized amount being assigned to Interest
the amortization amount is $20,000 ÷ 5 = $4,000. Thus, $32,000 – $4,000 or $28,000 equals
interest expense for 2014.