Intermediate Accounting (2nd Edition)
2nd Edition
ISBN: 9780134730370
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Chapter 6, Problem 6.1E
Classification of Assets and Liabilities. Darin Development Company engaged in the following transactions during the current year.
- a. Borrowed $400,000 from Pleasantville Community Bank at the beginning of the year. The terms of the end call for annual payments of $50,000. The first annual payment has not been paid as of the end of the current year. (Ignore any interest payable.)
- b. Made sales for the current year amounting to $2,900,000 with 40% collected during the current year.
- c. Acquired inventory costing $345,000 on account.
- d. incurred taxes due on the current year's income of $76,000.
- e. Paid $60,000 for a three-year insurance policy in advance on January 1 of the current year.
- f. Acquired new equipment costing $890,000 by borrowing the full amount at the end of the current year The loan is due in 5 years.
Required
Identify and classify the noncash assets and liabilities resulting from the current-year transactions Assume that your classification is made as of the end of the current year
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Gil Corporation has current assets of $90,000 and current liabilities of $180,000.
Required:
Compute the effect of each of the following independent transactions on Gil's current ratio:
1. Refinancing a $30,000 long-term mortgage with a short-term note.
2. Purchasing $50,000 of merchandise inventory with short-term accounts payable.
3. Paying $20,000 of short-term accounts payable.
4. Collecting $10,000 of short-term accounts receivable.
Required information
[The following information applies to the questions displayed below)
The following transactions apply to Walnut Enterprises for Year 1, its first year of operations:
1. Received $41,000 cash from the issue of a short-term note with a 4 percent interest rate and a one-year maturity. The
note was made on April 1, Year 1.
2. Received $121,000 cash plus applicable sales tax from performing services. The services are subject to a sales tax rate
of 5 percent
3. Paid $72.500 cash for other operating expenses during the year.
4. Paid the sales tax due on $101,000 of the service revenue for the year. Sales tax on the balance of the revenue is not
due until Year 2.
5. Recognized the accrued interest at December 31, Year 1
The following transactions apply to Walnut Enterprises for Year 2:
1. Paid the balance of the sales tax due for Year 1.
2. Received $146,000 cash plus applicable sales tax from performing services. The services are subject to a sales tax rate
of 5 percent.…
Abardeen Corporation borrowed $118,000 from the bank on October 1, Year 1. The note had an 6 percent annual rate of interest and
matured on March 31, Year 2. Interest and principal were paid in cash on the maturity date.
Required
a. What amount of cash did Abardeen pay for interest in Year 1?
b. What amount of interest expense was recognized on the Year 1 income statement?
Note: Do not round intermediate calculations. Round your answer to the nearest dollar amount.
c. What amount of total liabilities was reported on the December 31, Year 1, balance sheet?
Note: Do not round intermediate calculations. Round your answer to the nearest dollar amount.
d. What total amount of cash was paid to the bank on March 31, Year 2, for principal and interest?
e. What amount of interest expense was reported on the Year 2 income statement?
Note: Do not rbund intermediate calculations. Round your answer to the nearest dollar amount.
a. Amount of cash paid
b. Interest expense
c. Total liabilities
d.…
Chapter 6 Solutions
Intermediate Accounting (2nd Edition)
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