APPENDIX J
Other Significant Liabilities
ASSIGNMENT CLASSIFICATION TABLE
Learning Objectives
Questions
Brief
Exercises
Exercises
A
Problems
ASSIGNMENT CHARACTERISTICS TABLE
Problem
Number
Description
Difficulty
Level
Time
Allotted (min.)
ANSWERS TO QUESTIONS
1. A contingent liability is a potential liability that may become an actual liability in the future.
5. In a capital lease agreement the lessee records the present value of the lease payments as an
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE J-1
BRIEF EXERCISE J-2
BRIEF EXERCISE J-3
SOLUTIONS TO EXERCISES
EXERCISE J-1
(a)
Estimated warranties outstanding:
Month
Estimate
Units Defective
Outstanding
November
December
Total
(b)
Warranty Expense (1,800 X $15) …………………………..
Warranty Liability ……………………………………….
Warranty Liability ………………………………………………..
Repair Parts ……………………………………………….
(c)
Warranty Liability (500 X $15) ………………………………
7,500
Repair Parts ……………………………………………….
EXERCISE J-2
(a) HARVEY ONLINE COMPANY
Partial Balance Sheet
Long-term debt due within one year ………………………..
Sales taxes payable ……………………………………………….
EXERCISE J-2 (Continued)
EXERCISE J-3
EXERCISE J-4
SOLUTIONS TO PROBLEMS
PROBLEM J-1A
(a)
Jan. 1
Cash …………………………………………………..
15,000
Notes Payable ……………………………..
15,000
(b)
(1) Jan. 31
Interest Expense ………………………………..
Interest Payable
($15,000 X 8% X 1/12) ………………
(2) Jan. 31
Warranty Expense ……………………………..
Warranty
Liability ($36,400 X 5%) …….
Cash …………………………………………………..
Sales Revenue ($9,540 ÷ 106%) …….
Sales Taxes Payable
Unearned Service Revenue ………………….
Service Revenue ………………………….
Sales Taxes Payable …………………………...
Cash …………………………………………..
Accounts Receivable …………………………..
Sales Revenue …………………………….
Sales Taxes Payable
(700 X $52 X 6%) ……………………..
Cash …………………………………………………..
Sales Revenue ($13,144 ÷ 106%) …..
Sales Taxes Payable
PROBLEM J-1A (Continued)
(c)
Current liabilities
Accounts payable …………………………………………………….
Unearned service revenue ($15,000 – $9,000) …………….
Warranty liability ………………………………………………………
Interest payable ……………………………………………………….
PROBLEM J-2A
(a) Carson Enterprises should record the Logan Co. lease as a capital
Cash ……………………………………………….. 4,800
BYP J-1 FINANCIAL REPORTING PROBLEM
BYP J-2 FINANCIAL REPORTING PROBLEM
BYP J-3 GROUP DECISION CASE
(a) The bank probably did not loan money to Stephens, Inc. because it
(b) This lease should be reported as an operating lease. To be reported as
a capital lease, it must meet one of four criteria:
(c) Alexis Long means that many companies use leasing as a means of