30 Minutes, Medium
a.
Accrued interest on mortgage note payabl
e
5,000
Trade accounts payable 250,000
Unearned revenu
e
1
5,
000
Total current liabilities
381
,
000
$
000
1
1
$
Long-term liabilities:
PROBLEM 10.2
A
DENVER CHOCOLATES
December 31, 2015
Partial Balance Shee
t
DENVER CHOCOLATES
25 Minutes, Medium
Aug 6 Cash 12,000
Se
p
t 20 12,000
180
Cash 12,180
Dec 1 5,000
5,000
Issued 3-month, 10% note to Seawald Equipment
To record purchase of merchandise and issue
@ 15% per annum.
Inventory
Notes Payable
Interest Expense
PROBLEM 10.3
A
SWANSON CORPORATION
a.
General Journal
20xx
as payment for office equipment.
Notes Payable
90-day, 14% note payable to Gathman Corporation.
p
25 Minutes, Medium PROBLEM 10.4
A
SPEEDY LUBE
a.
The amount of the monthly payments exceeds the amount of the monthly interest expense.
current liabilities in the borrower’s balance sheet. First, as payments are due on the
first day of each month, one month’s interest has accrued since the December 1
payment. This accrued interest will be paid on January 1, 2016, and therefore, is a
current liability.
Next, the portion of the unpaid principal that will be repaid during 2016 represents a
current liability.
15 Minutes, Easy
a.
PROBLEM 10.5
A
General Journal
2015
GREEN MOUNTAIN POWER COMPAN
Y
Dec 31 Bond Interest Expense 2,693,334
26,667
Bond Interest 2,666,667
(1) Bonds issued at 98:
2015
Discount on Bonds Payable
a.
General Journal
b.
Net bond liability at Dec. 31, 2016: Bonds Bonds
Issued Issued
at 98 at 101
PROBLEM 10.6
A
EVANSVILLE LUMBER COMPANY (concluded
)
45 Minutes, Strong
a.
Liabilities: (in thousands)
Unfunded obligation for postretirement benefits
other than pensions (current portion) 18,000
I
ncome taxes paya
bl
e
1
7,
300
Total current liabilities 234,201$
T
8
$
T
1
$
Current liabilities:
Long-term liabilities:
PROBLEM 10.7
A
MURFREESBORO TELEPHONE CORPORATION
December 31, 2015
Partial Balance Shee
t
CORPORATION (MTC)
M
URFREESBORO TELEPHONE
b. (1)
(2)
(4)
(6)
d.
Note to instructor: We do not expect students to have advance knowledge of telephone companies.
However, we believe this situation enables us to make a most important point: To properly
interpret financial information about a business organization, one must understand the nature of
the company’s operations and its business environment.
As the 6 3/4% bond issue is being refinanced on a long-term basis (that is, paid from the
proceeds of a long-term bond issue rather than from current assets), it is classified as a
long-term liability rather than a current liability.
The 8 1/2% bonds will be repaid from a bond sinking fund rather than from current
assets. Therefore, this liability continues to be classified as long-term, despite its
As the pension plan is fully funded, the company has no pension liability.
Income taxes payable relate to the current year’s income tax return and, therefore, are
a current liability. Although deferred income taxes can include a current portion, all of
the deferred income taxes are stated to be a long-term liability.
Based solely upon its debt ratio and interest coverage ratio, Murfreesboro Telephone
Corporation appears to be a good credit risk. One must consider, however, that MTC is a
ratio and interest coverage ratio makes this business entity a positive long-term credit risk.
PROBLEM 10.7
A
MURFREESBORO
TELEPHONE CORPORATION
(concluded)
20 Minutes, Strong
a.
Liabilities:
Unearned revenues 300,000$
PROBLEM 10.8
A
PETERSEN CORPORATION
Current liabilities:
25 Minutes, Easy
Current Long-Term Owners’
Transaction Revenue – Expenses = Net Income Assets = Liabilities + Liabilities + Equity
a. NE I D NE I NE D
b. NE NE NE NE I D NE
c. NE I D D I NE D
d. I NE I NE D NE I
e. NE NE NE NE D I NE
f. NE I D D D NE D
SOLUTIONS TO PROBLEMS SET B
PROBLEM 10.1B
PHILMAR, INC.
Income Statement Balance Sheet