accounting homework 2

Chapter 10

Reporting and Analyzing Long-Term Liabilities

Quick Study 10-10 (10 minutes)

Ratio of debt to equity

	Canal Company	Sears Company
Total liabilities
Total equity
Debt-to-equity ratio

Analysis and interpretation:

Problem 10-2A (40 minutes)

Part 1

2011

Jan. 1

Part 2

[Note: The semiannual amounts for (a), (b), and (c) below are the same throughout the bonds’ life because this company uses straight-line amortization.]

(a)

(b)

(c)

Part 3

Thirty payments
Par value at maturity
Total repaid
Less amount borrowed
Total bond interest expense

or:

Thirty payments
Plus discount
Total bond interest expense

Part 4

Semiannual Period-End	Unamortized Discount	Carrying Value
1/01/2011
6/30/2011
12/31/2011
6/30/2012
12/31/2012

Part 5

2011

June 30
2011
Dec. 31

Problem 10-3A (40 minutes)

Part 1

2011

Jan. 1

Part 2

(a)

(b)

(c)

Part 3

Thirty payments
Par value at maturity
Total repaid
Less amount borrowed
Total bond interest expense

or:

Thirty payments
Less premium
Total bond interest expense

Part 4

Semiannual Period-End	Unamortized Premium	Carrying Value
1/01/2011
6/30/2011
12/31/2011
6/30/2012
12/31/2012

10-3A Continued

Part 5 Problem

2011

June 30
2011
Dec. 31

Ethics Challenge — BTN 10-3

1.

Ethics Challenge – BTN 10 – 3 Continued

2.

Read Appendix 10D pg. 438 Leases and Pensions.

Answer the following Questions:

1. Why are Leases long-term liabilities?

2. How are they journalized?

3. Where are they accounted for in the financial Statements?