ACTP 5007_additional liability problems

ACTP 5007_additional liability problems - Exercise 12-1...

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Exercise 12-1 Classify Current Liabilities Kivi Company is preparing its financial statements as of Decem following 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 an E. Liability for warranty for products sold during 2005. A basic all products sold and covers the cost of materials and labor F. Liability for extended warranty. During 2005, the company b warranty to cover the costs after the expiration of the basic G. Note payable, due Juloy 1, 2007. The note requires annua H. Cash dividends declared but unpaid. I. Stock dividends declared but unpaid. J. A competitor may file suit against the company for patent in 2005, a suit has not been filed., but the company's lawyers Required: For each situation, indicate (1) whether a liability sh disclosure is required, and (3) whether the liability (if applicable term. 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
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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.
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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 c warranty. al payments of principal and interest. infringement. As of December 31, s feel that such a suit is probable. hould be recorded, (2) whether a note le) is classified as current or long- Current or Long-Term rm rm if vacation pay will be hin one year of balance ate that will be paid within one year should be current
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Exercise 12-2 Liability for Unearned Income Wego Bus Company allows its customers to purchase 30-ride bus passes. As of June 1, 4,000 passes had been purchased at $12 per pass. During the month of June, the price of a bus pass increased 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 per pass. 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? Amount of income: Passes redeemed represent revenue: 82,000 ÷ 30 × $15 = $41,000 2. What amount of liability should appear on the June 30 balance sheet? Amount of liability: Beginning balance of liability (4,000 × $12) $48,000 Increase in liability due to price change (4,000 × $3) 12,000 Decrease due to usage ( 41,000) Passes sold in June (5,000 × $15) 75,000 Balance to appear on June 30 balance sheet $94,000
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Exercise 12-3 Warranty Liability Fuzz and Static Company began to manufacture and sell cell phones in 2005. Each cell phone is sold with a basic two-year warranty against defects. During 2005, 280 phones were sold at $120
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This note was uploaded on 06/06/2011 for the course ACCT 5007 taught by Professor Cherieabaker during the Spring '09 term at Nova Southeastern University.

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ACTP 5007_additional liability problems - Exercise 12-1...

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