Chapter 8, Problem 8.44AP

Group A

 LO 1, 2, 3, 4

(Learning Objective 1, 2, 3, 4: Measure and report current liabilities) Sea Air Marine experienced these events during the current year.

  a.    December revenue totaled $120,000; and, in addition, Sea Air collected sales tax of 5%. The tax amount will be sent to the state of Florida early in January.

  b.    On August 31, Sea Air signed a six-month, 6% note payable to purchase a boat costing $86,000. The note requires payment of principal and interest at maturity.

  c.    On August 31, Sea Air received cash of $2,400 in advance for service revenue. This revenue will be earned evenly over six months.

  d.    Revenues of $850,000 were covered by Sea Air’s service warranty. At January 1, accrued warranty payable was $11,800. During the year, Sea Air recorded warranty expense of $34,000 and paid warranty claims of $34,500.

  e.    Sea Air owes $90,000 on a long-term note payable. At December 31, 10% interest for the year plus $30,000 of this principal are payable within one year.

 Requirement

  1.    For each item, indicate the account and the related amount to be reported as a current liability on the Sea Air Marine balance sheet at December 31.