Norma Smith is the controller of Baylor Corporation and is responsible for the preparation of the year-end financial statements. The following transactions occurred during the year. a. On December 20, 2020, a former employee filed a legal action against Baylor for $100,000 for wrongful dismissal. Management believes the action to be frivolous and without merit. The likelihood of payment to the employee is remote. b. Bonuses to key employees based on net income for 2020 are estimated to be $150,000. c. On December 1, 2020, the company borrowed $600,000 at 8% per year. Interest is paid quarterly. d. Accounts receivable at December 31, 2020, is $10,000,000. An aging analysis indicates that Baylor’s expense provision for doubtful accounts is estimated to be 3% of the receivables balance. e. On December 15, 2020, the company declared a $2.00 per share dividend on the 40,000 shares of common stock outstanding, to be paid on January 5, 2021. f. During the year, customer advances of $160,000 were received; $50,000 of this amount was earned by December 31, 2020. Instructions For each item above, indicate the dollar amount to be reported as a current liability. If a liability is not reported, explain why.
Norma Smith is the controller of Baylor Corporation and is responsible for the preparation of the year-end financial statements. The following transactions occurred during the year.
a. On December 20, 2020, a former employee filed a legal action against Baylor for $100,000 for wrongful dismissal. Management believes the action to be frivolous and without merit. The likelihood of payment to the employee is remote.
b. Bonuses to key employees based on net income for 2020 are estimated to be $150,000.
c. On December 1, 2020, the company borrowed $600,000 at 8% per year. Interest is paid quarterly.
d. Accounts receivable at December 31, 2020, is $10,000,000. An aging analysis indicates that Baylor’s expense provision for doubtful accounts is estimated to be 3% of the receivables balance.
e. On December 15, 2020, the company declared a $2.00 per share dividend on the 40,000 shares of common stock outstanding, to be paid on January 5, 2021.
f. During the year, customer advances of $160,000 were received; $50,000 of this amount was earned by December 31, 2020.
Instructions
For each item above, indicate the dollar amount to be reported as a current liability. If a liability is not reported, explain why.
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