chapter 9-10

uncertainty of liabilities

whom, how much, and when to pay

wages

payment at hourly rate

salaries

payment at monthly or yearly rate

net pay/ take home pay

gross pay less all deducations (after taxes)

gross pay

total compensation an employee earns (before taxes)

payroll liabilties

employers incur expenses/liabilities from having employees

required payroll deductions

laws, income tax, social security tax

voluntary payroll deducations

pension, health contributions, union dues, insurance premium

FICA (federal insurance contribution act)

employers must pay withheld taxes to the IRS

Federal unemployment tax (FUTA) and state unemployment tax (SUta)

only paid by the employer

contingent liabilites

money set aside when there are lawsuits and written when found guilty

uncertainties that are not contingent

if from future events they are not contingent b/c they are future events and don’t come from past actions

involuntary taxes

fica ss, fica med, fed income tax

voluntary taxes

med insurance, pension, etc.

indenture

a bond’s legal contract

debenture

an unsecured bond

bond at par

stated rate = market rate

bond at discount

stated rate < market rate

bond at a premium

stated rate > market rate

bonds on balance sheet

stated rate and due date

discount on bonds payable account

contra liability account; inc with debit and dec total liabilites

premium on bonds payable account

adjunt liability; inc overall liability and inc with credit

unsecured bonds

backed by issuer’s credit standing and risker

term bonds

scheduled for maturity at specific date

serialbonds

mature at more than one date and repaid in # of periods

sinking fund bonds

reduce holders risk, issuer establishes a sinking fund of assets set aside at specific amounts

registered bonds

bonds issued in names and addresses of their holders

convertible bonds

can be exchanged for a fixed # of shares of the issuing corperations common stock

callable bonds

have option exercisable by the issuer to retire them aqt stated $ amount before maturing

bearer bonds

bonds payable to whoever holds them

coupon bonds (often with bearer bonds)

when coupon matures holder presents to bank for collection

zero coupon bond

bond issued at deep discount to its face value but pays no intrest