Instructions determine the premium expense to be

This preview shows page 4 - 6 out of 7 pages.

Instructions Determine the premium expense to be reported in the income statement and the estimated liability for premiums on the balance sheet for 2004 and 2005.
Question 7: At the financial statement date of December 31, 2004, the liabilities outstanding of Nyland Corporation included the following: 1. Cash dividends on common stock, $50,000, payable on January 15, 2005. 2. Note payable to Girard State Bank, $470,000, due January 20, 2005. 3. Serial bonds, $1,000,000, of which $200,000 mature during 2005. 4. Note payable to Third National Bank, $400,000, due January 27, 2005. The following transactions occurred early in 2005: January 15: The cash dividends on common stock were paid. January 20: The note payable to Girard State Bank was paid. January 25: The corporation entered into a financing agreement with Girard State Bank, enabling it to borrow up to $500,000 at any time through the end of 2007. Amounts borrowed under the agreement would bear interest at 1% above the bank's prime rate and would mature 3 years from the date of the loan. The corporation immediately borrowed $400,000 to replace the cash used in paying its January 20 note to the bank. January 26: 40,000 shares of common stock were issued for $400,000. $350,000 of the proceeds was used to liquidate the note payable to Third National Bank. February 1: The financial statements for 2004 were issued. InstructionsPrepare a partial balance sheet for Nyland Corporation, showing the manner in which the above liabilities should be presented at December 31, 2004. The liabilities should be properly classified between current and long-term, and appropriate note disclosure should be included. Q7 Solution: Current liabilities:
5 Dividends payable on common stock $ 50,000 Notes payable—Girard State Bank 470,000 Currently maturing portion of serial bonds 200,000Total current liabilities $ 720,000 Long-term debt: Note payable—Third National Bank, refinanced in January, 2005—Note 1 350,000 Serial bonds not maturing currently 800,000Total long-term debt 1,150,000Total liabilities $1,870,000Note 1: On January 26, 2005, the corporation issued 40,000 shares of common stock and received proceeds totaling $400,000, of which $350,000 was used to liquidate a note payable that matured on January 27, 2005. Accordingly, such note payable has been classified as long-term debt at December 31, 2004. Question 8:On June 30, 2004, Parks Co. had outstanding 8%, $2,000,000 face amount, 15-year bonds maturing on June 30, 2014. Interest is payable on June 30 and December 31. The unamortized balances in the bond discount and deferred bond issue costs accounts on June 30, 2004 were $70,000 and $20,000, respectively. On June 30, 2004, Parks acquired all of these bonds at 94 and retired them. What net carrying amount should be used in computing gain or loss on this early extinguishment of debt?

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture