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Chapter 13: Q1E (page 693)

Question: E13-1 (L01) (Balance Sheet Classification of Various Liabilities) How would each of the following items be reported on the balance sheet? (a) Accrued vacation pay. (j) Premium offers outstanding. (b) Estimated taxes payable. (k) Discount on notes payable. (c) Service warranties on appliance sales. (l) Personal injury claim pending. (d) Bank overdraft. (m) Current maturities of long-term debts to be paid (e) Employee payroll deductions unremitted. from current assets. (f) Unpaid bonus to officers. (n) Cash dividends declared but unpaid. (g) Deposit received from customer to guarantee (o) Dividends in arrears on preferred stock. performance of a contract. (p) Loans from officers. (h) Sales taxes payable. (i) Gift certificates sold to customers but not yet redeemed.

Short Answer

Expert verified

Answer:

Classification of the itmes are shown in the step 1 to step 16. The liabilities are settled by transferring the economic benefits such as money, goods, and services. Examples of liabilities are bank debt and mortgage debt.

Step by step solution

01

(a) Accrued vacation pay – Current liability

Current liability 鈥� The accrued vacation pay is recorded in the balance sheet as a current liability.

02

(b) Estimated taxes payable – Current liability

Current liability 鈥� The estimated taxes payable is recorded in the balance sheet as a current liability.

03

(c) Service warranties on appliance sales – Current liability or long-term liability based on the term of the warranty  

Current liability or long-term liability 鈥� The service warranties on appliance sales is recorded in the balance sheet as a current liability or long-term liability based on the term of the warranty.

04

(d) Bank overdraft– Current liability

Current liability 鈥� The bank overdraft is recorded in the balance sheet as a current liability.

05

(e) Employee payroll deductions unremitted – Current liability

Current liability 鈥� The Employee payroll deductions unremitted are recorded in the balance sheet as a current liability.

06

(f) Unpaid bonus to officers – Current liability

Current liability 鈥� The Unpaid bonus to officers is recorded in the balance sheet as a current liability.

07

(g) Deposit received from customers to guarantee the performance of a contract – Current liability or long-term liability based on the time involved

Current liability or long-term liability 鈥� The Deposit received from customers to guarantee the performance of a contract is recorded in the balance sheet as a current liability

08

(h) sales tax payable – Current liability

Current liability 鈥� The sales tax payable is recorded in the balance sheet as a current liability.

09

(i) Gift certificates sold to customers but not yet redeemed – Current liability

Current liability 鈥� The Gift certificates sold to customers but not yet redeemed is recorded in the balance sheet as a current liability

10

(j) Premium offers outstanding – Current liability

Current liability 鈥� The premium offers outstanding are recorded in the balance sheet as a current liability.

11

(k) Discount on notes payable – Current liability

Current liability 鈥� The discount on notes payable is recorded in the balance sheet as a current liability.

12

(l)  Personal injury claim pending – Footnote disclosure

Footnote disclosure 鈥� The personal injury claim pending is recorded in the balance sheet as a footnote disclosure

13

(m) Current maturities of long-term debts to be paid from current assets  – Current liability

Current liability 鈥� The Current maturities of long-term debts to be paid from current assets is recorded in the balance sheet as a current liability.

14

(n) Cash dividends declared but unpaid – Current liability

Current liability 鈥� The cash dividends declared but unpaid is recorded in the balance sheet as a current liability

15

(o) Dividends in arrears on preferred stock – Footnote disclosure

Footnote disclosure 鈥� The dividends in arrears on preferred stock is recorded in the balance sheet as a footnote disclosure.

16

(p)  Loans from officers – Current liability or long-term liability based on the tenure or maturity

Current liability or long-term liability 鈥� The loans from officers is recorded in the balance sheet as a current liability.

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Most popular questions from this chapter

(Fair Value and Equity Methods) Brooks Corp. is a medium-sized corporation specializing in quarrying stonefor building construction. The company has long dominated the market, at one time achieving a 70% market penetration. Duringprosperous years, the company鈥檚 profits, coupled with a conservative dividend policy, resulted in funds available for outside

investment. Over the years, Brooks has had a policy of investing idle cash in equity securities. In particular, Brooks has made periodicinvestments in the company鈥檚 principal supplier, Norton Industries. Although the firm currently owns 12% of the outstandingcommon stock of Norton Industries, Brooks does not have significant influence over the operations of Norton Industries.

Cheryl Thomas has recently joined Brooks as assistant controller, and her first assignment is to prepare the 2017 year-endadjusting entries for the accounts that are valued by the 鈥渇air value鈥� rule for financial reporting purposes. Thomas has gatheredthe following information about Brooks鈥� pertinent accounts.

1. Brooks has equity securities related to Delaney Motors and Patrick Electric. During 2017, Brooks purchased 100,000 shares of

Delaney Motors for \(1,400,000; these shares currently have a fair value of \)1,600,000. Brooks鈥� investment in Patrick Electrichas not been profitable; the company acquired 50,000 shares of Patrick in April 2017 at \(20 per share, a purchase that currentlyhas a value of \)720,000.

2. Prior to 2017, Brooks invested \(22,500,000 in Norton Industries and has not changed its holdings this year. This investmentin Norton Industries was valued at \)21,500,000 on December 31, 2016. Brooks鈥� 12% ownership of Norton Industries has acurrent fair value of \(22,225,000 on December 2017.

Instructions

(a) Prepare the appropriate adjusting entries for Brooks as of December 31, 2017, to reflect the application of the 鈥渇airvalue鈥� rule for the securities described above.

(b) For the securities presented above, describe how the results of the valuation adjustments made in (a) would be reflectedin the body of Brooks鈥� 2017 financial statements.

(c) Prepare the entries for the Norton investment, assuming that Brooks owns 25% of Norton鈥檚 shares. Norton reportedincome of \)500,000 in 2017 and paid cash dividends of $100,000.

BE13-6 (L01) Lexington Corporation鈥檚 weekly payroll of \(24,000 included FICA taxes withheld of \)1,836, federal taxes with-held of \(2,990, state taxes withheld of \)920, and insurance premiums withheld of $250. Prepare the journal entry to record Lexington鈥檚 payroll.

Indicate how unrealised holding gains and losses should be reported for investments classified as trading and held-for-collection.

A typical provision is:

(a) bonds payable (c) a warranty liability

(2) cash (d) accounts payable

BE13-2 (L01) Upland Company borrowed \(40,000 on November 1, 2017, by signing a \)40,000, 9%, 3-month note. Prepare Upland鈥檚 November 1, 2017, entry; the December 31, 2017, annual adjusting entry; and the February 1, 2018, entry.
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