Question Choice

1.CurrentLiabilties arevalued at _________. Net Realizable Value or Replacement Value

2.A liability account normal balance is a _______. Debit or Credit

3. When a bond issue sale price is higher than the bond face amount, the effective interest rate is ________ than the stated rate. Higher or Lower 4.When a loss contingency is probable but not estimable-the loss contingency is disclosed but not accrued. True or False

Problem P1

Requirement:Create a classified balance sheet using the information below:

Southern Corporation

Adjusted Trial Balance

Account Debit Credit

Cash $14,000

Accounts Receivable 3,400

Inventory 62,000

Equipment 47,000

Accumulated Depreciation-Equipment $10,000

Goodwill 2,000

Accounts Payable 4,100

Salaries Payable 450

Bonds Payable (Due 2025) 4,000

Common Stock 12,000

Retained Earnings 55,250

Sales 47,000

Insurance Expense 2,600

Prepaid Insurance 800

Interest Expense 1,000

Total $132,800 $132,800

Hint: Need to determine the change in retainedearnings to complete the balance sheet

Problem P3

Requirement:Calculate the issue price of bonds

Principal $350,000

Term Payable in 5 years

Interest Payable 7% payments due at end of each year

Market at issue date 8%