Kieso 13th ed sol ch 14

Kieso 13th ed sol ch 14 - EXERCISE 14-1 (1520 minutes) (a)...

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Unformatted text preview: EXERCISE 14-1 (1520 minutes) (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 14-2 (1520 minutes) (a) Discount on Bonds PayableContra account to bonds payable on balance sheet. (b) Interest expense (credit balance)Reclassify to interest payable on balance sheet. (c) Unamortized Bond Issue CostsClassified as Other Assets on balance sheet. (d) Gain on repurchase of debtClassify as part of other gains and losses on the income statement. (e) Mortgage payableClassify one-third as current liability and the remainder as long-term liability on balance sheet. EXERCISE 14-2 (Continued) (f) Debenture bondsClassify as long-term liability on balance sheet. (g) Premium on bonds payableClassify as adjunct account to Bonds Payable on balance sheet. (h) Notes payableClassify as long-term liability on balance sheet. (i) Income bonds payableClassify as long-term liability on balance sheet. EXERCISE 14-3 (1520 minutes) 1. Divac Company: (a) 1/1/10 Cash.................................................... ............................................................. 300,000 Bonds Payable......................... 300,000 (b) 7/1/10 Interest Expense ($300,000 X 9% X 3/12)................... 6,750 Cash........................................... 6,750 (c) 12/31/10 Interest Expense................................ 6,750 Interest Payable........................ 6,750 2. Verbitsky Company: (a) 6/1/10 Cash.................................................... ............................................................. 210,000 Bonds Payable......................... 200,000 Interest Expense ($200,000 X 12% X 5/12)........ 10,000 (b) 7/1/10 Interest Expense................................ 12,000 Cash ($200,000 X 12% X 6/12)........ 12,000 EXERCISE 14-3 (Continued) (c) 12/31/10 Interest Expense................................ 12,000 Interest Payable........................ 12,000 Note to instructor : Some students may credit Interest Payable on 6/1/10. If they do so, the entry on 7/1/10 will have a debit to Interest Payable for $10,000 and a debit to Interest Expense for $2,000....
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Kieso 13th ed sol ch 14 - EXERCISE 14-1 (1520 minutes) (a)...

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