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Chapter 5 HW - E5-7 Current Assets Cash Less cash...

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E5-7 Current Assets Cash……………………………………… $92,000 Less: cash restricted for plant expansion… ($50,000) $42,000 Trade securities at fair value (cost $31,000) $29,000 $161,000 Less: Allowance for doubtful accounts……….. ($12,000) $149,000 Interest receivable [($40,000 x 6%) x 8/12]…. $1,600 Finished Goods………………………….. $52,000 Work-in-progress………………………… $34,000 Raw materials……………………………. $187,000 $273,000 Total current assets………………….. $494,600 ----------------------------------------------------------------------------------------------- E5-10 (a) (b) A current liability of $150,000 should be reported. (c ) (d) (e) (f) Accounts Receivable (of which $50,000 is pledged as collateral on a bank loan)………… Inventories at lower of cost (determined using LIFO ) or market The two conditions for any item to be accrued, the amount must be credible and compensation is realistically estimated are not met and therefore the liability of a threatened litigation cannot be accrued. The Accrued interest of $6,000 ($900,000 x 8% x 1/12) should be reported as current liability. In addition, if the $900,000 is due within a year’s time, it should also be recorded as current liability, if not partial amount (owed in a year) as current liability and rest as long-terms liability. The bad debt expense is debited and the Allowance for Doubtful accounts is credited for $200,000. Additionally, the Allowance for Doubtful account is not a liability, but is a contra asset and is deducted from the Accounts Receivable balance on the asset side of the balance sheet to reflect Net Account Receivable due as of the end of the period. A current liability of $80,000 should be recorded on December 15th, the date of declaration.
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