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30 Minutes, Medium
a.
b.
(1)
(2)
(3)
(4)
PROBLEM 10.2B
GEORGIA PEACH
Partial Balance Shee
t
GEORGIA PEACH
The pending lawsuit is a loss contingency. As no reasonable estimate can be made of
the loss incurred (if any), this loss contingency does not meet the criteria for accrual.
It will be disclosed in the notes accompanying the financial statements, but it should
not be shown as a liability.
Comments on information in the numbered paragraphs:
Although the note payable to Smithfield Bank is due in 90 days, it is classified as a
long-term liability because it is approved to be refinanced on a long-term basis.
The $17,000 principal amount of the mortgage note payable scheduled for
As the accrued interest is payable within one month, it is a current liability.
25 Minutes, Medium
Jul 1 Cash 20,000
Notes Pa
y
able 20,000
Dec 1 10,000
Obtained 120-day loan from Jean Jones; interest
Bank. Issued a 90-day promissory note.
@ 5% per annum.
Inventory
PROBLEM 10.3B
SWANLEE CORPORATION
a.
General Journal
20xx
Borrowed $20,000 @ 12% per annum from Weston
25 Minutes, Medium
JENCO
a.
Nov 1 Interest Expense 1,000
1,633
Cash 2,633
c.
Reduction in
Monthly Interest Unpaid Unpaid
Payment Expense Balance Balance
100,000$
2015
Note Payable
PROBLEM 10.4B
b.
General Journal
V
icksburg State Bank.
Amortization Table
To record monthly payment on note payable to
Date
Issue date Oct. 1, 2015
(12%, 4-Year Mortgage Note Payable for $100,000;
Payable in 48 Monthly Installments of $2,633)
Interest Payment
current liability.
The amount of the monthly payments exceeds the amount of the monthly interest
current liabilities in the borrower’s balance sheet. First, as payments are due on the
first day of each month, one month’s interest has accrued since the December 1
payment. This accrued interest will be paid on January 1, 2016, and therefore, is a
current liability.
Period
15 Minutes, Easy
a.
PROBLEM 10.5B
General Journal
E
VENS MANUFACTURING COMPAN
Y
35 Minutes, Strong
RODRIGUEZ PLUMBING COMPAN
Y
Dec 31 Bond Interest Expense 203,333
3,333
Bond Interest Pa
y
able 200,000
To record accrual of bond interest expense for
2015
Discount on Bonds Payable
PROBLEM 10.6B
a.
General Journal
(1) Bonds issued at 98:
b.
Net bond liability at Dec. 31, 2016: Bonds Bonds
Issued Issued
at 98 at 104
PROBLEM 10.6B
RODRIGUEZ PLUMBING COMPANY (concluded)
45 Minutes, Strong
a.
Liabilities: (in thousands)
Accounts payabl
e
48,000$
7,200
Accrued interest payabl
e
3,650
Notes payable (short-term) 75,000
Capital lease obligation (current portion) 3,000
Part d appears on the following page.
Part b appears on the following page.
Current liabilities:
Accrued expenses payable (other than interest)
PROBLEM 10.7B
NEVADA UTILITY COMPAN
Y
December 31, 2015
Partial Balance Shee
t
NEVADA UTILITY COMPAN
Y
b. (1)
(3)
(4)
(6)
d.
PROBLEM 10.7B
NEVADA UTILITY COMPANY
(concluded)
As the 10% 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 portion of the capital lease obligation that will be repaid within one year ($3,000) is
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, Nevada Utility appears to be a
