Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 11: Q5SE (page 605)

On January 1, Irving Company purchased equipment of \(280,000 with a long-term note payable. The debt is payable in annual installments of \)56,000 due on December 31 of each year. At the date of purchase, how will Irving Company report the note payable?

Short Answer

Expert verified

Answer

At the time of purchase, $56,000 will be considered as current liability and $224,000 will be considered as long term liability in its balance sheet.

Step by step solution

01

Step-by-step solution

Step 1:Accounting treatment to report the note payable”

Generally, notes payable are long-term but the first installment is due within the 12 months, so first installment should be considered as current liability and rest of the amount be considered as long-term liability.

02

Calculation for long-term liability

Longterm=Purchase-Installments=$280,000-$56,000=$224,000

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

The following transactions of Jasmine Reef occurred during 2018:

Apr. 30 Reef is party to a patent infringement lawsuit of \(190,000. Reef’sattorney is certain it is remote that Reef will lose this lawsuit.

Jun. 30 Estimated warranty expense at 2% of sales of \)350,000.

Jul. 28 Warranty claims paid in the amount of \(5,500.

Sep. 30 Reef is party to a lawsuit for copyright violation of \)80,000. Reef’sattorney advises that it is probable Reef will lose this lawsuit. Theattorney estimates the loss at \(80,000.

Dec. 31 Reef estimated warranty expense on sales for the second half of the yearof \)510,000 at 2%.

Requirements

1. Journalize required transactions, if any, in Reef ’s general journal. Explanations arenot required.

2. What is the balance in Estimated Warranty Payable assuming a beginning balanceof $0?

Rios Raft Company had the following liabilities.

a. Accounts Payable

b. Note Payable due in 3 years

c. Salaries Payable

d. Note Payable due in 6 months

e. Sales Tax Payable

f. Unearned Revenue due in 8 months

g. Income Tax Payable

Determine whether each liability would be considered a current liability (CL) or a long-term liability (LTL).

How is the times-interest-earned ratio calculated, and what does it evaluate?

On December 31, Weston Company estimates that it will pay its employees a 5% bonus on net income after deducting the bonus. The company reports net income of $64,000 before the calculation of the bonus. The bonus will be paid on January 15 of the next year.Requirements

1. Journalize the December 31 transaction for Weston.

2. Journalize the payment of the bonus on January 15.

Lily Carter works for JDK all year and earns a monthly salary of \(12,100. There is no overtime pay. Lily’s income tax withholding rate is 10% of gross pay. In addition to payroll taxes, Lily elects to contribute 5% monthly to United Way. JDK also deducts \)250 monthly for co-payment of the health insurance premium. As of September 30, Lily had $108,900 of cumulative earnings. Requirements

1. Compute Lily’s net pay for October.

2. Journalize the accrual of salaries expense and the payment related to the employment of Lily Carter.
See all solutions

Recommended explanations on Business Studies Textbooks

Business Case Studies

Read Explanation

Organizational Communication

Read Explanation

Corporate Finance

Read Explanation

Business Operations

Read Explanation

Financial Performance

Read Explanation

Organizational Behavior

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free