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30 Minutes, Medium
a.
Liabilities:
Income taxes payable 40,000$
60,000
b.
(4
Current liabilities:
Accrued expenses and payroll taxes
PROBLEM 10.2A
DENVER CHOCOLATES
December 31, 2018
Partial Balance Sheet
DENVER CHOCOLATES
The pending lawsuit is a loss contingency. As no reasonable estimate can be made of the loss
Comments on information in the numbered paragraphs:
25 Minutes, Medium
Aug 6 Cash 12,000
Sept 16 18,000
Notes Payable 18,000
Sept 20 12,000
180
Dec 1 5,000
5,000
Dec 16 18,000
450
Notes Payable
90-day, 14% note payable to Gathman Corporation.
Notes Payable
Interest Expense
To record purchase of merchandise and issue
Inventory
Notes Payable
Interest Expense
PROBLEM 10.3A
SWANSON CORPORATION
a.
General Journal
20xx
Issued 3-month, 10% note to Seawald Equipment
Office Equipment
as payment for office equipment.
25 Minutes, Medium
PROBLEM 10.4A
SPEEDY LUBE
a.
Oct 1 Interest Expense 10,800
310
c.
Reduction in
Monthly Interest Unpaid Unpaid
Payment Expense Balance Balance
1,080,000$
Oct. 1 11,110$ 10,800$ 310$ 1,079,690
d.
Mortgage Note Payable
Amortization Table
1
Issue date
Payable in 360 Monthly Installments of $11,110)
(12%, 30-Year Mortgage Note Payable for $1,080,000;
The amount of the monthly payments exceeds the amount of the monthly interest expense.
At December 31, 2018, two amounts relating to this mortgage loan will appear as
current liabilities in the borrower’s balance sheet. First, as payments are due on the
Sept. 1, 2018
Period
Date
Interest
Payment
b.
General Journal
2018
15 Minutes, Easy
Aug 1 Cash 10,250,000
Bonds Payable 10,000,000
Bond Interest Payable 250,000
b.
Nov 1 250,000
250,000
Cash 500,000
c.
d.
e.
a.
Issued $10,000,000 face value of 10%, 20-year
PROBLEM 10.5A
General Journal
2018
GREEN MOUNTAIN POWER COMPANY
Bond Interest Payable
$500,000).
The market rate of interest on the date of issuance was 10%. Because the bonds were
Bond Interest Expense
Paid semiannual interest ($10,000,000 x 10% x 1/2 =
2019
35 Minutes, Strong
Dec 31 Bond Interest Expense 2,693,334
26,667
Bond Interest
2,666,667
Mar 1 2,666,667
1,346,667
13,334
Cash 4,000,000
(2)
Dec 31 2,653,334
13,333
Mar 1 2,666,667
1,326,667
2018
2019
Bond Interest Expense
interest expense for two months (1/2 of interest for
four months, as computed in preceding entry). *
Bond Interest Payable
Premium on Bonds Payable
Bonds issued at 101:
Bonds Interest Expense
To record semiannual bond interest payment and
Discount on Bonds Payable
(1)
Bonds issued at 98:
Bond Interest Expense
2019
2018
Discount on Bonds Payable
Bond Interest Payable
PROBLEM 10.6A
a.
General Journal
EVANSVILLE LUMBER COMPANY
b.
Net bond liability at Dec. 31, 2019: Bonds Bonds
Issued Issued
at 98 at 101
*
c.
PROBLEM 10.6A
EVANSVILLE LUMBER COMPANY (concluded)
The effective rate of interest would be higher under assumption 1. The less that investors
Discount amortized at Dec. 31, 2019:
45 Minutes, Strong
a.
Liabilities: (in thousands)
Accounts payable 65,600$
11,347
Accrued interest payable 7,333
100,000$
250,000$
260 249,740
c. (1) Computation of debt ratio:
Total liabilities (above) 1,088,620$
Total assets (given) 2,093,500$
Debt ratio ($1,088,620 ÷ $2,093,500) 52%
Part b appears on the following page.
6-3/4% Bonds payable, due February 1, 2019
8-1/2% Bonds payable, due June 1, 2019
Less: Discount on bonds payable
Current liabilities:
Accrued expenses payable (other than interest)
Long-term liabilities:
PROBLEM 10.7A
MURFREESBORO TELEPHONE CORPORATION
December 31, 2018
Partial Balance Sheet
CORPORATION (MTC)
MURFREESBORO TELEPHONE
b. (1)
(3)
(5)
(6)
d.
PROBLEM 10.7A
MURFREESBORO
TELEPHONE CORPORATION
(concluded)
As the 6 3/4% bond issue is being refinanced on a long-term basis (that is, paid from the
The portion of the capital lease obligation that will be repaid within one year ($4,621) is
in the periods in which these costs are incurred.
The $18,000 portion of the unfunded liability for postretirement benefits that will be
Income taxes payable relate to the current year’s income tax return and, therefore, are
Based solely upon its debt ratio and interest coverage ratio, Murfreesboro Telephone
Corporation appears to be a good credit risk. One must consider, however, that MTC is a
20 Minutes, Strong
a.
Liabilities:
Unearned revenues 300,000$
100,000
900,000$
b.
●
The following items listed by the company have been excluded from current and long-term
liabilities for the reasons indicated:
Interest expense that will arise in the future from existing obligations is not yet a liability.
PROBLEM 10.8A
PETERSEN CORPORATION
Bonds payable
Current liabilities:
Income taxes payable
Long-term liabilities:
25 Minutes, Easy
Current Long-Term Owners'
Transaction Revenue - Expenses = Net Income Assets = Liabilities + Liabilities + Equity
a. NE I D NE INE D
b. NE NE NE NE I D NE
c. NE I D D I NE D
SOLUTIONS TO PROBLEMS SET B
PROBLEM 10.1B
PHILMAR, INC.
Income Statement
Balance Sheet
30 Minutes, Medium
a.
Liabilities:
Income taxes payable 15,000$
26,000
b.
(2)
(4)
The pending lawsuit is a loss contingency. As no reasonable estimate can be made of
Comments on information in the numbered paragraphs:
The $17,000 principal amount of the mortgage note payable scheduled for
Current liabilities:
Accrued expenses and payroll taxes
PROBLEM 10.2B
GEORGIA PEACH
December 31, 2018
Partial Balance Sheet
GEORGIA PEACH
25 Minutes, Medium
Jul 1 Cash 20,000
Notes Payable 20,000
Dec 1 Cash 170,000
Notes Payable 170,000
Dec 1 10,000
10,000
c.
Inventory
Notes Payable
The Moontime Equipment note dated September 16 was due in full on December 16. The
PROBLEM 10.3B
SWANLEE CORPORATION
a.
General Journal
20xx
Bank. Issued a 90-day promissory note.
@ 5% per annum.
Borrowed $20,000 @ 12% per annum from Weston
To record purchase of merchandise and issue
90-day, 12% note payable to Listen Corporation.
Obtained 120-day loan from Jean Jones; interest
25 Minutes, Medium
JENCO
a.
Nov 1 Interest Expense 1,000
1,633
c.
Reduction in
Monthly Interest Unpaid Unpaid
Payment Expense Balance Balance
100,000$
Nov. 1 2,633$ 1,000$ 1,633$ 98,367
d.
The amount of the monthly payments exceeds the amount of the monthly interest
expense. Therefore, a portion of each payment reduces the unpaid balance of the loan.
At December 31, 2018, two amounts relating to this mortgage loan will appear as
1
Period
Date
Issue date
Oct. 1, 2018
(12%, 4-Year Mortgage Note Payable for $100,000;
Payable in 48 Monthly Installments of $2,633)
Interest
Payment
Amortization Table
PROBLEM 10.4B
b.
General Journal
2018
Note Payable
