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B-12.02 Problem

B-12.02 Problem - Web hosting services are subject to sales...

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B-12.02 Server Planet operates a web hosting company. Examine the following items and prepare the current liability section of the company's December 31, 20X7, balance sheet. The beginning of year accounts payable was $100,000. Purchases on trade accounts during the year were $650,000, and payments on account were $610,000. The company incurs substantial costs for electricity to run its servers and air conditioning systems. As of December 31, 20X7, it is estimated that $55,000 of electricity has been used, although the monthly billing for December has not yet been received. Server Planet sells web hosting plans for as low as $25 per month. However, it requires its customers to prepay in 6-month increments. As of the end of the year, $375,000 had been collected for 20X8 web hosting plans.
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Unformatted text preview: Web hosting services are subject to sales taxes, and Server Planet collected $65,000 during the year. All of these amounts have been remitted to taxing authorities, with the exception of $5,000 that is due to be paid in January, 20X8. The company has total bank loans of $1,500,000. This debt bears interest at 6%, payable monthly. As of December 31, 20X7, all interest had been paid, with the exception of accrued interest for the last half of December. The company's bank loans ($1,500,000) are all due on June 30, 20X8. However, Server Planet has a firm lending agreement with the bank to renew and extend $1,000,000 of this amount on a 5-year basis. The company intends to exercise this renewal option, but is not yet sure about the final disposition of the remainder....
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