Ch13-H - AC551 Intermediate Accounting 2 Instructur: Wendy...

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Unformatted text preview: AC551 Intermediate Accounting 2 Instructur: Wendy Williams Student: Maira Bissembayeva E13-1 a b c Current liability or long-term liability depending on term of warranty. d e f g Current or noncurrent liability depending upon the time involved. h i j k Current liabilities or long-term liabilities as a deduction from face value of note. l Footnote disclosure (assume not probable and/or not reasonably estimable). m n o Footnote disclosure. p Separate presentation in either current or long-term liability section Current liability. Current liability. Current liability. Current liability. Current liability. Current liability. Current liability. Current liability. Current liability. Current liability. AC551 Intermediate Accounting 2 Instructur: Wendy Williams Student: Maira Bissembayeva E 13-4 Santana Company Partial Balance Sheet 31-Dec-10 Current liabilities: Notes payable (Note 1) $4,000,000 $7,000,000 ($5,000,000 X 60%) Long-term debt: (Note 1) 3,000,000 Note 1. Notes payable expected to be refinanced in 2011 Under a financing agreement with Golden State Bank the Company may borrow up to 60% of the gross amount of its accounts receivable at an interest cost of 1% above the prime rate. The Company intends to issue notes maturing in 2015 to replace $3,000,000 of short-term, 15%, notes due periodically in 2011. Because the amount that can be borrowed may range from $3,000,000 to $4,800,000, only $3,000,000 of the $7,000,000 of currently maturing debt has been reclassified as long-term debt. AC551 Intermediate Accounting 2 Instructur: Wendy Williams Student: Maira Bissembayeva E13-10 Accrual method Debit (a) Cash (150X4,000) $600,000.00 Sales Warranty Expenses $17,000.00 Cash, accrued Payroll Warranty Expenses (150*300)-17000 $28,000.00 Liability under warranties (b) Cash-basis method Cash $600,000.00 Sales Warranty Expenses $17,000.00 Cash Credit $600,000.00 $17,000.00 $28,000.00 $600,000.00 $17,000.00 AC551 Intermediate Accounting 2 Instructur: Wendy Williams Student: Maira Bissembayeva E13-13 (a) According to FASB any expected loss must be accrued in low range, thereofore, Maveric would report a liability of $800,000 at Decembr 31, 2010. (b) Holmgren Chemical should report the accrued for $6,000,000 at december 31, 2010. The insurance is not recorded until received. (c) A gain contingence, in this case, is not recorded and disclosed only when the probabilities to get it high. ic Inc AC551 Intermediate Accounting 2 Instructur: Wendy Williams Student: Maira Bissembayeva E13-19 (a)-1 $318,000 $87,000 = 3.66 times-2 $820,000 2-3 $1,400,000 $95,000 = 14.74 time-4 $210,000 52,000 = $4.04-5 $210,000 $1,400,000 = 15.0%-6 $210,000 $488,000 = 43.03% (b)-1 No effect on cu-2 Weaken current ratio by reducing c-3 Improve current -4 No effect on current ratio....
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This note was uploaded on 01/28/2010 for the course KELLER AC551 taught by Professor Williams during the Spring '10 term at DeVry Arlington.

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Ch13-H - AC551 Intermediate Accounting 2 Instructur: Wendy...

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