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Chapter 12: 5TI (page 638)

Weaver Corporation includes the following selected accounts in its general ledger on December 31, 2018:

Notes Payable (long-term) \( 75,000 Interest Payable (due next year) \) 720

Bonds Payable (long-term) 195,000 Sales Tax Payable 480

Accounts Payable 20,400 Premium on Bonds Payable 5,850

Salaries Payable 1,680 Estimated Warranty Payable 1,080

Prepare the liabilities section of Weaver Corporation’s balance sheet at December 31, 2018.

Short Answer

Expert verified

The total liabilities on the balance sheet are $299,490

Step by step solution

01

Definition of accounts payable

Accounts payable is when the company buys goods on credit from the supplier.

02

Liabilities side of balance sheet

Weaver Corporation

Balance Sheet

As on December 31, 2018

Liabilities

Current Liabilities:

Accounts Payable

$20,400

Salaries Payable

$1,680

Warranty Payable

$1,080

Sales Tax Payable

$480

Premium on Bonds Payable

$5,850

Total Current Liabilities

$29,490

Long-Term Liabilities

Notes Payable

$75,000

Bonds Payable

$195,000

Total Long-Term Liabilities

$270,000

Total Liabilities

$299,490

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Most popular questions from this chapter

Bill and Edna had been married two years and had just reached the point where they

had enough savings to start investing. Bill’s uncle Dave told them that he had recently

inherited some very rare railroad bonds from his grandmother’s estate. He wanted

to help Bill and Edna get a start in the world and would sell them 50 of the bonds at

\(100 each. The bonds were dated 1873, beautifully engraved, showing a face value of

\)1,000 each. Uncle Dave pointed out that “United States of America” was printed

prominently at the top and that the U.S. government had established a sinking fund to

retire the old railroad bonds. A sinking fund is a fund established for the purpose of

repaying the debt. It allows the organization (the U.S. government, in this example)

to set aside money over time to retire the bonds. All Bill and Edna needed to do was

hold on to them until the government contacted them, and they would eventually get

the full \(1,000 for each bond. Bill and Edna were overjoyed—until a year later when

they saw the exact same bonds for sale at a coin and stamp shop priced as “collectors’

items” for \)9.95 each!

Requirements

1. If a company goes bankrupt, what happens to the bonds it issued and the investorswho bought the bonds?

2. When investing in bonds, how can you tell whether the bond issue is a legitimatetransaction?

3. Is there a way to determine the relative risk of corporate bonds?

Determining the present value of bonds payable and journalizing using the effective-interest amortization method

Sleep Well, Inc. is authorized to issue 9%, 10-year bonds payable. On January 1, 2018, when the market interest rate is 10%, the company issues $500,000 of the bonds. The bonds pay interest semiannually.

Requirements

1. How much cash did the company receive upon issuance of the bonds payable? (Round to the nearest dollar.)

2. Prepare an amortization table for the bond using the effective-interest method, through the first two interest payments. (Round to the nearest dollar.)

3. Journalize the issuance of the bonds on January 1, 2018, and the first and second payment of the semiannual interest amount and amortization of the bonds on June 30, 2018, and December 31, 2018. Explanations are not required.

Analyzing, journalizing, and reporting bond transactions

Johnny’s Hamburgers issued 8%, 10-year bonds payable at 85 on December 31, 2018.

At December 31, 2020, Johnny reported the bonds payable as follows:

Long-term Liabilities:

Bonds Payable \( 300,000

Less: Discount on Bonds Payable (36,000) \) 264,000

Johnny pays semiannual interest each June 30 and December 31.

Requirements

1.Answer the following questions about Johnny’s bonds payable:

a.What is the maturity value of the bonds?

b.What is the carrying amount of the bonds at December 31, 2020?

c.What is the semiannual cash interest payment on the bonds?

d.How much interest expense should the company record each year?

2. Record the June 30, 2020, semiannual interest payment and amortization of discount.

Analyzing and journalizing bond transactions

On January 1, 2018, Educators Credit Union (ECU) issued 8%, 20-year bonds payablewith face value of $1,000,000. These bonds pay interest on June 30 and December 31.The issue price of the bonds is 109.Journalize the following bond transactions:

a. Issuance of the bonds on January 1, 2018.

b. Payment of interest and amortization on June 30, 2018.

c. Payment of interest and amortization on December 31, 2018.

d. Retirement of the bond at maturity on December 31, 2037, assuming the lastinterest payment has already been recorded.

Schmidt Company issued $100,000, 4%, 10-year bonds payable at 98 on January 1, 2018.

6. Journalize the issuance of the bonds payable on January 1, 2018.

7. Journalize the payment of semiannual interest and amortization of the bond discount or premium (using the straight-line

amortization method) on July 1, 2018.

8. Assume the bonds payable was instead issued at 106. Journalize the issuance of the bonds payable and the payment of the

first semiannual interest and amortization of the bond discount or premium.
See all solutions

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