Financial Accounting
3rd Edition
ISBN: 9780133791129
Author: Jane L. Reimers
Publisher: Pearson Higher Ed
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Chapter 7, Problem 2SEA
To determine
Indicate whether the obligations (a - e) are considered as current liability or non-current liability.
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a. Within the short-term obligations of Lance Company, as of December 31, 2011, the date on which the Balance Sheet is prepared, there are Notes payable to Madison National Bank in the amount of $ 250,000. They are 90-day notes, which can be renewed for an additional 90 days. These notes should be classified in the Lance Company's Statement of Situation as:
Current liabilities.
Deferred charges.
Long-term liabilities.
Intermediate obligations.
BE11-1 Jamison Company has the following obligations at December 31: (a) a note pay able for $100,000 due in 2 years, (b) a 10-year mortgage payable of $300,000 payable in ten $30,000 annual payments, (c) interest payable of $15,000 on the mortgage, and (d) accounts payable of $60,000. For each obligation, indicate whether it should be classified as a current liability. (Assume an operating cycle of less than one year.)
BE11-2 Peralta Company borrows $60,000 on July 1 from the bank by signing a $60,000,
10%, one-year note payable.
(a) Prepare the journal entry to record the proceeds of the note.
(b) Prepare the journal entry to record accrued interest at December 31, assuming adjust
ing entries are made only at the end of the year.
BE11-3 Coghlan Auto Supply does not segregate sales and sales taxes at the time of sale. The register total for March 16 is $16,380. All sales are subject to a 5% sales tax. Compute sales taxes payable, and make the entry to record sales taxes payable and…
The following amortization schedule indicates the interest and principal that Chip’s Cookie Corporation (CCC) must repay on an installment note established January 1, 2021. CCC has a December 31 year-end and makes the required annual payments on December 31.
Year
Beginning Notes Payable
Interest Expense
Repaid Principal on Notes Payable
Ending Notes Payable
1
39,000
2,730
8,784
30,216
2
30,216
2,115
9,399
20,817
3
20,817
1,457
10,057
10,760
4
10,760
753
10,760
0
Total
7,055
39,000
Use the amortization schedule to determine (a) the amount of the (rounded) annual payment; (b) the amount of interest expense to report in the year ended December 31, 2021 (Year 1); (c) the note payable balance at January 1, 2024; and (d) the total interest and total principal paid over the note’s entire life. (Round your answers to the nearest whole dollar amount.)
Chapter 7 Solutions
Financial Accounting
Ch. 7 - Prob. 1YTCh. 7 - Prob. 2YTCh. 7 - Prob. 3YTCh. 7 - If a 1,000 bond is selling for 95.5, how much cash...Ch. 7 - Prob. 5YTCh. 7 - Prob. 6YTCh. 7 - Prob. 7YTCh. 7 - Prob. 1QCh. 7 - Prob. 2QCh. 7 - What is a mortgage?
Ch. 7 - Prob. 4QCh. 7 - Prob. 5QCh. 7 - Prob. 6QCh. 7 - Prob. 7QCh. 7 - Prob. 8QCh. 7 - Prob. 9QCh. 7 - Prob. 10QCh. 7 - Prob. 11QCh. 7 - Prob. 12QCh. 7 - Prob. 13QCh. 7 - Prob. 1MCQCh. 7 - All of the following are current liabilities...Ch. 7 - Prob. 3MCQCh. 7 - Prob. 4MCQCh. 7 - Prob. 5MCQCh. 7 - Prob. 6MCQCh. 7 - Prob. 7MCQCh. 7 - Prob. 8MCQCh. 7 - A 1,000 bond with a stated rate of 8% is issued...Ch. 7 - Prob. 10MCQCh. 7 - Prob. 1SEACh. 7 - Prob. 2SEACh. 7 - Prob. 3SEACh. 7 - Prob. 4SEACh. 7 - Account for mortgages. (LO 3). Nunez Company has...Ch. 7 - Prob. 6SEACh. 7 - Account for bonds. (LO 4). If a 1,000 bound is...Ch. 7 - Prob. 8SEACh. 7 - Prob. 9SEACh. 7 - Prob. 10SEACh. 7 - Prob. 11SEACh. 7 - Prob. 12SEBCh. 7 - Prob. 13SEBCh. 7 - Prob. 14SEBCh. 7 - Prob. 15SEBCh. 7 - Account for mortgages. (LO 3). Curtain Company...Ch. 7 - Prob. 17SEBCh. 7 - Prob. 18SEBCh. 7 - Prob. 19SEBCh. 7 - Prob. 20SEBCh. 7 - Prob. 21SEBCh. 7 - Prob. 22SEBCh. 7 - Prob. 23EACh. 7 - Prob. 24EACh. 7 - Prob. 25EACh. 7 - Prob. 26EACh. 7 - Account for long-term liabilities. (LO 3, 5)....Ch. 7 - Prob. 28EACh. 7 - Prob. 29EACh. 7 - Prob. 30EACh. 7 - Prob. 31EACh. 7 - Prob. 32EACh. 7 - Prob. 33EACh. 7 - Prob. 34EACh. 7 - Prob. 35EACh. 7 - Prob. 36EACh. 7 - Prob. 37EACh. 7 - Prob. 38EACh. 7 - Prob. 39EACh. 7 - Prob. 40EACh. 7 - Prob. 41EACh. 7 - Prob. 42EBCh. 7 - Prob. 43EBCh. 7 - Prob. 44EBCh. 7 - Prob. 45EBCh. 7 - Prob. 46EBCh. 7 - Prob. 47EBCh. 7 - Prob. 48EBCh. 7 - Account for long-term liabilities. (LO 3, 5). On...Ch. 7 - Prob. 50EBCh. 7 - Prob. 51EBCh. 7 - Prob. 52EBCh. 7 - Prob. 53EBCh. 7 - Prob. 54EBCh. 7 - Prob. 55EBCh. 7 - Prob. 56EBCh. 7 - Prob. 57EBCh. 7 - Prob. 58EBCh. 7 - Prepare an amortization schedule for a bond issued...Ch. 7 - Prob. 60EBCh. 7 - Account for current liabilities. (LO 1, 5). On...Ch. 7 - Prob. 62PACh. 7 - Prob. 63PACh. 7 - Prob. 64PACh. 7 - Prob. 65PACh. 7 - Prob. 66PACh. 7 - Prob. 67PBCh. 7 - Prob. 68PBCh. 7 - Prob. 69PBCh. 7 - Prob. 70PBCh. 7 - Prob. 71PBCh. 7 - Prob. 72PBCh. 7 - Prob. 1FSACh. 7 - Prob. 2FSACh. 7 - Prob. 3FSACh. 7 - Prob. 1IECh. 7 - Prob. 2IECh. 7 - Do owners or creditors have more claims on the...Ch. 7 - Prob. 4IE
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- Six events relating to liabilities follow: a. Paid the liability for interest payable accrued at the end of the last accounting period. b. Made the current monthly payment on a 12-month installment note payable, including interest and a partial repayment of principal. c. Issued bonds payable at 98 on March 1 of the current year. The bonds pay interest March 1 and September 1. d. On September 1 of the current year, recorded interest expense and made semiannual interest payment on bonds referred to in part c. e. Recorded necessary adjusting entry on December 31 of the current year for bonds referred to in part c. f. Recorded estimated six-month warranty expense on December 31 of the current year. Indicate the effects of each transaction or adjusting entry on the financial measurements in the five column headings listed. Use the code letters I for increase, D for decrease, and NE for no effect. Transaction Current Liabilies Long-Term Liabilties Net Income Net Cash Flow from…arrow_forwardOn July 1, 2020, Thomas Company, which follows calendar year accounting, issued $240.000 note to be repaid over four years in monthly installments of $5,000. What would be the proper balance sheet presentation of this transaction at December 31, year 2020. Show it: The Current Portion of the Long-Term Debt and the Long-Term Debt.arrow_forwardBE11-1 Jamison Company has the following obligations at December 31: (a) a note pay- able for $100,000 due in 2 years, (b) a 10-year mortgage payable of Ș300,000 payable in ten $30,000 annual payments, (c) interest payable of $15,000 on the mortgage, and (d) accounts payable of $60,000. For each obligation, indicate whether it should be classified as a current liability. (Assume an operating cycle of less than one year.)arrow_forward
- The following amortization schedule indicates the interest and principal that Chip's Cookie Corporation (CCC) must repay on an installment note established January 1, 2021. CCC has a December 31 year-end and makes the required annual payments on December 31. Year 1 2 3 4 Total Beginning Notes Payable 52,000 40,629 28, 235 14,725 Repaid Principal Interest Expense on Notes Payable (a) Annual Payment (b) Interest Expense (c) Notes Payable (d-1) Total Interest (d-2) Total Principal 4,680 3,657 2,541 1,325 12, 203 11,371 12,394 13,510 14,725 52,000 Ending Notes Payable 40,629 28,235 14,725 0 Use the amortization schedule to determine (a) the amount of the (rounded) annual payment; (b) the amount of interest expense to report in the year ended December 31, 2021 (Year 1); (c) the note payable balance at January 1, 2024; and (d) the total interest and total principal paid over the note's entire life. (Round your answers to the nearest whole dollar amount.)arrow_forwardThe Company issued a short-term debt of $65,000 on July 1, 2021 for a period of 5 months with a note payable of 14% interest. The company uses the accounting period on a quarterly basis. Required: Prepare the journal entries needed to record the issuance of the debt, recognize interest expense, and pay off the debt as it matures. Note: Include the current method of processing and the excel formulaarrow_forwardCanton Cave Company provided the following schedule of liabilities on December 31, 2019: Accounts payable Notes payable-bank Interest payable Mortgage payable-10% Bonds payable *Bank notes payable include two separate notes payable to First Bank > AP3, 000,000, 10% note issued March 1, 2018, payable on demand. Interest is payable every six 6,500,000 8,000,000 150,000 2,000,000 4,000,000 months. > A one-year, P5,000,000, 11% note issued January 2, 2019. On December 31, 2019, Canton Cave negotiated a written agreement with First Bank to replace the note with a 2-year, P5,000,000, 10% note issued January 2, 2020. *The 10% mortgage note was issued October 1, 2016 with a term of 10 years. > Terms of the note give the holder the right to demand immediate payment if the entity fails to make a monthly interest within 10 days of the date the payment is due. On December 31, 2019, Canton Cave is three months behind in paying its required initial payment. The bonds payable are 10-year, 8% bonds,…arrow_forward
- In the case of the notes payable due to bank, supposing the entity has the discretion to refinance the obligation for at least 12 months after the given maturity date, as seen in its loan agreement,A. Compute for the current liabilities as of December 31, 2021.B. Compute for the non-current liabilities as of December 31, 2021.arrow_forwardOn May 31, Baker Co. issued an $35,679, 8%, 120-day note payable to Samunck Co. Assume Baker's fiscal year ends on June 30. Assume a 360- day year for your calculations. a) What is the interest EXPENSE recognized by Baker in the current fiscal year? b) What is the maturity value of the note? c) What is the maturity date of the note?arrow_forwardAt December 31, 20X1, Evans Corp. has a note payable balance of $100,000. This note was originally issued on December 31, 20X1, and will be paid back in installments over a five-year period. $15,500 of the outstanding amount of $100,000 on December 31, 20X1, will be paid back in 20X2. Question: How should this note be classified in the liability section of Evans's balance sheet at December 31, 20X1? Select one: a. The full $100,000 should be classified in the long-term liability section. b. $15,500 should be classified in the current liability section, and $84,500 should be classified in the long-term liability section. c. $84,500 should be classified in the current liability section, and $15,500 should be classified in the long-term liability section. d. The full $100,000 should be classified in the current liability section.arrow_forward
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7.2 Ch 7: Notes Payable and Interest, Revenue recognition explained; Author: Accounting Prof - making it easy, The finance storyteller;https://www.youtube.com/watch?v=wMC3wCdPnRg;License: Standard YouTube License, CC-BY