Solutions to Current Liabilities Practice Problems

Solutions to Current Liabilities Practice Problems -...

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Solutions to Current Liabilities & Contingencies EXERCISE 13-2 (15–20 minutes) (a) Sept. 1 Purchases . ............................................. 50,000 Accounts Payable . ........................ 50,000 Oct. 1 Accounts Payable . ................................. 50,000 Notes Payable . .............................. 50,000 Oct. 1 Cash . ....................................................... 75,000 Discount on Notes Payable . .................. 6,000 Notes Payable . .............................. 81,000 (b) Dec. 31 Interest Expense . ................................... 1,000 Interest Payable ($50,000 X 8% X 3/12) . ............... 1,000 Dec. 31 Interest Expense . ................................... 1,500 Discount on Notes Payable ($6,000 X 3/12) . ........................... 1,500 (c) 1. Note payable . ................................ $50,000 Interest payable . ........................... 1,000 $51,000 2. Note payable . ................................ $81,000 Less discount ($6,000 – $1,500) . .. 4,500 $76,500
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EXERCISE 13-4 (20–25 minutes) SANTANA COMPANY Partial Balance Sheet December 31, 2010 Current liabilities: Notes payable (Note 1) . ................................................... $4,000,000* Long-term debt: Notes payable expected to be refinanced in 2011 (Note 1) . ......................................................................... 3,000,000 Note 1. Under a financing agreement with Golden State Bank the Company may borrow up to 60% of the gross amount of its accounts receivable at an interest cost of 1% above the prime rate. The Company intends to issue notes maturing in 2015 to replace $3,000,000 of short-term, 15%, notes due periodically in 2011. Because the amount that can be borrowed may range from $3,000,000 to $4,800,000, only $3,000,000 of the $7,000,000 of currently maturing debt has been reclassified as long-term debt. *[$7,000,000 – ($5,000,000 X 60%)]
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EXERCISE 13-10 (10–15 minutes) (a) Cash (150 X $4,000) . ............................................... 600,000 Sales . .............................................................. 600,000 Warranty Expense . ................................................. 17,000 Cash, Inventory, Accrued Payroll . ................ 17,000 Warranty Expense ($45,000* – $17,000) . ............... 28,000 Liability Under Warranties . ........................... 28,000 *(150 X $300) (b) Cash. ........................................................................ 600,000 Sales . .............................................................. 600,000 Warranty Expense . ................................................. 17,000
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This note was uploaded on 11/05/2011 for the course ACCT 401 taught by Professor Winchel during the Spring '10 term at South Carolina.

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Solutions to Current Liabilities Practice Problems -...

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