Exercise 12-1 Classify Current LiabilitiesKivi Company is preparing its financial statements as of Decemfollowing amounts or accounts:A. Liability for payroll taxes withheld from employees.B. Liability for vacation pay that accumulates and vests.C. Liability for sick pay that accumulates but does not vest.D. Note payable, due June 1, 2006, that Kivi has the intent anE. Liability for warranty for products sold during 2005. A basicall products sold and covers the cost of materials and laborF. Liability for extended warranty. During 2005, the company bwarranty to cover the costs after the expiration of the basic G. Note payable, due Juloy 1, 2007. The note requires annuaH. Cash dividends declared but unpaid.I. Stock dividends declared but unpaid.J. A competitor may file suit against the company for patent in2005, a suit has not been filed., but the company's lawyers Required: For each situation, indicate (1) whether a liability shdisclosure is required, and (3) whether the liability (if applicableterm. Record Liability A. Yes Current C. No D. Yes Long-term F. Yes Long-term B. Yes Current i paid with sheet da E. Yes Portion th liability G. Yes—interest that has accrued as of year end Current
H. Yes Current I. No—stockholders’ equity J. No—it is not a contingent liability until suit is filed. Does not need to be disclosed in notes.
mber 31, 2005, and reflects the nd ability to refinance. c two-year warranty accompanies r for defective products. began to offer for cash an extended warranty. al payments of principal and interest. nfringement. As of December 31, s feel that such a suit is probable. hould be recorded, (2) whether a note e) is classified as current or long- Current or Long-Term m m if vacation pay will be hin one year of balance ate hat will be paid within one year should be current
Exercise 12-2 Liability for Unearned IncomeWego Bus Company allows its customers to purchase 30-ride bus passes. As of June 1, 4,000passes had been purchased at $12 per pass. During the month of June, the price of a bus passincreased to $15 per pass. All outstanding passes will be honored at the price paid for them at the time of purchase. During June, 5,000 passes were purchased by customers at a cost of $15 perpass. In the month of June, the passes were accepted for 82,000 bus rides.Required:1. What amount of income should the company show on its monthly income statements for June?
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