Larry M. Walther; Christopher J. Skousen Liabilities and Equity Exercises I Download free books at Download free eBooks at bookboon.com 2 Larry M. Walther & Christopher J. Skousen Liabilities and Equity Exercises I Download free eBooks at bookboon.com 3 Liabilities and Equity Exercises I 1 st edition © 2011 Larry M. Walther, Christopher J. Skousen & bookboon.com All material in this publication is copyrighted, and the exclusive property of Larry M. Walther or his licensors (all rights reserved). ISBN 978-87-7681-774-9 Download free eBooks at bookboon.com Click on the ad to read more Liabilities and Equity Exercises I 4 Contents Contents Problem 1 6 Worksheet 1 6 Solution 1 7 Problem 2 8 Worksheet 2 8 Solution 2 9 Problem 3 10 Worksheet 3 10 Solution 3 11 Problem 4 12 Worksheet 4 12 Solution 4 13 www.sylvania.com We do not reinvent the wheel we reinvent light. Fascinating lighting offers an infinite spectrum of possibilities: Innovative technologies and new markets provide both opportunities and challenges. An environment in which your expertise is in high demand. Enjoy the supportive working atmosphere within our global group and benefit from international career paths. Implement sustainable ideas in close cooperation with other specialists and contribute to influencing our future. Come and join us in reinventing light every day. Light is OSRAM Download free eBooks at bookboon.com Click on the ad to read more Liabilities and Equity Exercises I 5 Contents Problem 5 14 Worksheet 5 15 Solution 5 17 Problem 6 19 Worksheet 6 20 Solution 6 22 Problem 7 24 Worksheet 7 25 Solution 7 26 360° thinking . © Deloitte & Touche LLP and affiliated entities. Discover the truth at www.deloitte.ca/careers Download free eBooks at bookboon.com Liabilities and Equity Exercises I 6 Problem 1 Problem 1 Best Electronics operates a retail electronics company. Examine the following items and prepare the current liability section of the company’s December 31, 20X8, balance sheet. e beginning of year accounts payable was $150,000. Purchases on trade accounts during the year were $975,000, and payments on account were $915,000. e company incurs substantial costs for electricity to run its stores and air conditioning systems. As of December 31, 20X8, it is estimated that $82,500 of electricity has been used, although the monthly billing for December has not yet been received. Best Electronics sells service plans for as low as $25 per month. However, it requires its customers to prepay in 6-month increments. As of the end of the year, $562,500 had been collected for 20X9 web hosting plans. Best Electronic’s service plans are subject to sales taxes, and Best collected $97,500 during the year. All of these amounts have been remitted to taxing authorities, with the exception of $7,500 that is due to be paid in January, 20X9. e company has total bank loans of $2,250,000. is debt bears interest at 6%, payable monthly. As of December 31, 20X8, all interest had been paid, with the exception of accrued interest for the last half of December. e company’s bank loans ($2,250,000) are all due on June 30, 20X9. However, Best Electronics has a rm lending agreement with the bank to renew and extend $1,500,000 of this amount on a 5-year basis. e company intends to exercise this renewal option, but is not yet sure about the nal disposition of the remainder. Worksheet 1 Liabilities Current liabilities $ - - - - - - $ - Download free eBooks at bookboon.com Liabilities and Equity Exercises I 7 Problem 1 Supporting calculations: Solution 1 Liabilities Current liabilities Accounts payable $ 210,000 Utilities payable 82,500 Unearned revenue 562,500 Sales tax payable 7,500 Interest payable 5,625 Current portion of loan payable 750,000 $ 1,618,125 Supporting calculations: Accounts payable ($150,000 + $975,000 – $915,000 = $210,000) Interest payable ($2,250,000 × 6% × 15/360 = $5,625) Download free eBooks at bookboon.com Liabilities and Equity Exercises I 8 Problem 2 Problem 2 On April 1, 20X1, Geo Farming Services purchased a new GPS surveying instrument. Farmer paid $2,500 down and executed the following promissory note: FOR VALUE RECEIVED, the undersigned promises to pay to the order of GPS Surveying Company the sum of: *******FIFTEEN-THOUSAND AND NO/100Dollars******* ($15,000) with annual interest of 8% on any unpaid balance. This note shall mature and be payable, along with accrued interest, on March 31, 20X2. April 1, 20X1 Issue Date T.W. Farmer Geo Farming Services Signature a) Prepare the appropriate journal entry to record the purchase on April 1, 20X1. b) Prepare the appropriate journal entry to record the year-end interest accrual on December 31, 20X1. c) Prepare the appropriate journal entry to record the payment of the note and accrued interest on March 31, 20X2. Worksheet 2 a), b), c) GENERAL JOURNAL Date Accounts Debit Credit