Intermediate Accounting II Chapter 13 WileyPlus Solution (ACCT-311)

Intermediate Accounting II Chapter 13 WileyPlus Solution (ACCT-311)

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BRIEF EXERCISE 13-4 (a) Since both criteria are met (intent and ability ), none of the $500,000 would be reported as a current liability. The entire amount would be reported as a long-term liability. (b) Because repayment of the note payable required the use of existing 12/31/10 current assets, the entire $500,000 liability must be reported as current. (This assumes Burr had not entered into a long-term agreement prior to issuance.) BRIEF EXERCISE 13-9 12/31/10 Bonus Expense. ............................................ 350,000 Bonus Payable. .................................... 350,000 2/15/11 Bonus Payable. .............................................. 350,000 Cash. ..................................................... 350,000 EXERCISE 13-4 (20–25 minutes) SANTANA COMPANY Partial Balance Sheet December 31, 2010 Current liabilities: Notes payable (Note 1). ................................................... $4,000,000* Long-term debt: Notes payable expected to be refinanced in 2011 (Note 1). .......................................................................... 3,000,000 Note 1.
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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. *[$7,000,000 – ($5,000,000 X 60%)]
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Intermediate Accounting II Chapter 13 WileyPlus Solution (ACCT-311)

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