ch13 - 1771T_c13.qxd 04:18:2006 07:55 Page 1 REVISED PAGES...

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B EXERCISES E13-1B (Balance Sheet Classification of Various Liabilities) How would each of the following items be reported on the balance sheet? (a) Gift certificates sold to customers but not yet (i) Accrued vacation pay. redeemed. (j) Service warranties on appliance sales. (b) Discount on notes payable. (k) Employee payroll deductions unremitted. (c) Current maturities of long-term debts to (l) Deposit received from customer to be paid from current assets. guarantee performance of a contract. (d) Dividends in arrears on preferred stock. (m) Sales taxes payable. (e) Loans from officers. (n) Unpaid bonus to officers. (f) Cash dividends declared but unpaid. (o) Bank overdraft. (g) Personal injury claim pending. (p) Estimated taxes payable. (h) Premium offers outstanding. E13-2B (Accounts and Notes Payable) The following are selected 2007 transactions of Palmeiro Corporation. Sept. 1 Purchased inventory from Ripken Company on account for $125,000. Palmeiro records purchases gross and uses a periodic inventory system. Oct. 1 Issued a $125,000, 12-month, 12% note to Ripken in payment of account. Oct. 1 Borrowed $125,000 from the Shore Bank by signing a 12-month, zero-interest-bearing $142,000 note. Instructions (a) Prepare journal entries for the selected transactions above. (b) Prepare adjusting entries at December 31. (Use straight-line amortization of the discount.) (c) Compute the total net liability to be reported on the December 31 balance sheet for: (1) the interest-bearing note. (2) the zero-interest-bearing note. (Use straight-line amortization.) E13-3B (Refinancing of Short-Term Debt) On December 31, 2007, Hernandez Company had $3,000,000 of short-term debt in the form of notes payable due February 2, 2008. On January 21, 2008, the company issued 50,000 shares of its common stock for $50 per share, receiving $2,500,000 proceeds after brokerage fees and other costs of issuance. On February 2, 2008, the proceeds from the stock sale, supplemented by an additional $500,000 cash, are used to liquidate the $3,000,000 debt. The December 31, 2007, balance sheet is issued on February 23, 2008. Instructions Show how the $3,000,000 of short-term debt should be presented on the December 31, 2007, balance sheet, including note disclosure. E13-4B (Refinancing of Short-Term Debt) On December 31, 2007, Gibson Company has $18,200,000 of short-term debt in the form of notes payable to Blue Lagoon State Bank due in 2008. On January 28, 2008, Gibson enters into a refinancing agreement with Blue Lagoon that will permit it to borrow up to 60% of the gross amount of its accounts receivable. Receivables are expected to range between a low of $15,600,000 in May to a high of $20,800,000 in October during the year 2008. The interest cost of the ma- turing short-term debt is 15%, and the new agreement calls for a fluctuating interest at 1% above the prime rate on notes due in 2012. Gibson’s December 31, 2007, balance sheet is issued on February 15, 2008. Instructions
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ch13 - 1771T_c13.qxd 04:18:2006 07:55 Page 1 REVISED PAGES...

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