AP-5902Q_liabs - PROBLEM NO 1 Cavaliers Corporation 1...

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1 Warranty payable, 3/31/04 252,000 Add warranty expense accrued during 2004-2005 630,000 Total 882,000 Less payments during 2004-2005 537,000 Warranty payable, 3/31/05 345,000 B 2 Bond discount, 10/1/99 (P5,000,000 x .04) 200,000 (110,000) Bond discount, 3/31/05 90,000 D 3 300,000 B 4 Notes payable - current (maturing up to 3/31/06) 2,400,000 Accounts payable 560,000 Estimated warranty payable (see no. 1) 345,000 Cash dividends payable (5 million shares x P0.30) 1,500,000 Accrued interest: Notes payable 340,000 Bonds payable (see no. 3) 300,000 640,000 Total current liabilities 5,445,000 C 5 Bonds payable: Face value 5,000,000 Unamortized bond discount (see no. 2) (90,000) 4,910,000 Notes payable - non current 2,700,000 Total non current liabilities 7,610,000 D Question No. 1 - A Warranty expense (P5,400,000 x 2%) 108,000 Question No. 2 - D Estimated liability from warranties, 1/1/05 136,000 Add warranty expense for 2005 108,000 Total 244,000 Less actual expenditures for 2005 164,000 Estimated liability from warranties, 12/31/05 80,000 Question No. 3 - A Premium expense [(1,800,000 x 60%)/200 x P14] 75,600 Question No. 4 - D Inventory of premium, 1/1/05 39,950 Add premium purchases (6,500 x P34) 221,000 Total premium available 260,950 Less premiums issued (1,200,000/200 x P34) 204,000 Inventory of premium, 12/31/05 56,950 Question No. 5 - C
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