ch14HWSolutions - CHAPTER 14 Long-Term Liabilities...

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CHAPTER 14 Long-Term Liabilities SOLUTIONS TO EXERCISES EXERCISE 14-1 (a) Current liability if current assets are used to satisfy the debt. (b) Valuation account relating to the long-term liability, bonds payable (sometimes referred to as an adjunct account). The $3,000 would continue to be reported as long-term. (c) Current liability, $250,000; long-term liability, $750,000. (d) Current liability. (e) Probably noncurrent, although if operating cycle is greater than one year and current assets are used, this item would be classified as current. (f) Current liability. (g) Current liability unless (a) a fund for liquidation has been accumu- lated which is not classified as a current asset or (b) arrangements have been made for refinancing. (h) Current liability. (i) Current liability. EXERCISE 14-4 (a) 1/1/11 Cash ($800,000 X 102%). .......................... 816,000 Bonds Payable. ............................... 800,000 Premium on Bonds Payable. ......................................... 16,000 (b) 7/1/11 Interest Expense. ...................................... 39,600 Premium on Bonds Payable ($16,000 ÷ 40). ........................................ 400 Cash ($800,000 X 10% X 6/12). .............. 40,000 (c) 12/31/11 Interest Expense. ...................................... 39,600 Premium on Bonds Payable. ................... 400
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Interest Payable. .............................. 40,000
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ch14HWSolutions - CHAPTER 14 Long-Term Liabilities...

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