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12.
13.
14.
2.
Problems
P1. Identification of Current Liabilities, Contingencies, and Commitments
5.
6.
7.
ge
fi
The items that would not be expected to be listed on a balance sheet include con-
tingent liabilities and commitments. The items that would be listed on the balance
liability.
dj
11-11
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
1. 2013
× 0.10 × 36
=
2014
=
2.
/
P2. Notes Payable and Wages Payable
Part A
$43,200
$426.08
365
To accrue interest expense
*Rounded
$284.05
When a company has notes payable, the user would also expect to see a current
*
*
11-12
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
1.
2.
2013
To record the payroll
P2. Notes Payable and Wages Payable (Concluded)
Part B
2013
11-13
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
3.
P3. Product Warranty Liability
Warranty replacements and related
If the product warranty liability is underestimated, the current year's income is over-
revenue during September
11-14
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
1.
(×
(×
(×
*Rounded
0.062
0.05
days*
P4. Identification and Evaluation of Current Liabilities
$ 9,000.00
2,500.00
2,310.00
2,213.50
1,128.40
1,128.40
$44,270
$18,200
$18,200 0.062
=4.8
Days' Payable = Payables Turnover
sooner than the 76.0 days would indicate.
76.0
times =
4.8 times. This position means that it takes on average 76.0 days for the company to
pay its accounts payable. Although the company seems to be profitable, its liquidity is
highly questionable. A majority of its current assets are dryer inventory, which must
be sold before it will generate cash, and most of its current liabilities must be paid
Sales tax payable
Social Security tax payable—employees
Social Security tax payable—employer
The current liabilities of Styka Repair Shop as of December 31, 2014, are as follows:
Accounts payable
Notes payable
Property taxes payable
)
)
)
Styka has a negative working capital of $3,852.10, and the payables turnover is only
11-15
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
1. a.
b.
2.
P5. Applications of Present Value
Present value of a future payment (Table 1 in Appendix B)
Factor: 10%, 3 periods
Present value of an ordinary annuity (Table 2 in Appendix B)
Factor: 10%, 4 periods
The fundamental reason present value is a useful tool in making business decisions
is that it allows the decision maker to compare various alternatives in the present,
when business decisions are actually made.
11-16
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
1. 1. 8.
6. 13.
7. 14.
2.
The items that would not be expected to be listed on a balance sheet include con-
tingent liabilities and commitments. The items that would be listed on the balance
fm
g
j
P6. Identification of Current Liabilities, Contingencies, and Commitments
sheet with a dollar amount and the ones that would involve the most judgment or
discretion include the estimated liabilities such as income taxes payable, property
taxes payable, promotional costs, product warranty liability, and vacation pay
dl
Alternate Problems
11-17
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
1.
2.
*Rounded
Part A
When a company has notes payable, the user would also expect to see a current
Paid note plus interest
year
To accrue interest expense at end of
liability for interest payable on the note. If interest payable does not appear, it may
P7. Notes Payable and Wages Payable
2014
11-18
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
1. 2014
To record payroll expenses
Computations:
P7. Notes Payable and Wages Payable (Concluded)
Part B
11-19
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
450 × 0.20 × $120 = $10,800
3.
for January, computed as follows:
require repair × average cost of parts
P8. Product Warranty Liability
HDTVs sold × percent expected to
To record estimated warranty expense
If the product warranty liability is overestimated, the current year's income is
11-20
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.
