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Chapter 12: Q36PGA_1 (page 664)

Reporting liabilities on the balance sheet and computing debt toequity ratio.The accounting records of Pack Leader Wireless include the following as ofDecember 31, 2018:

Accounts Payable \( 77,000 Salaries Payable \) 7,500

Mortgages Payable (long-term) 73,000 Bonds Payable (current portion) 25,000

Interest Payable 18,000 Premium on Bonds Payable 10,000

Bonds Payable (long-term) 63,000 Unearned Revenue (short-term) 2,700

Total Stockholders’ Equity 140,000

Requirements

1. Report these liabilities on the Pack Leader Wireless balance sheet, includingheadings and totals for current liabilities and long-term liabilities.

2. Compute Pack Leader Wireless’s debt to equity ratio at December 31, 2018.

Short Answer

Expert verified

The total of the liabilities side is $343, 200.

Step by step solution

01

Definition of the interest payable

The interest payable is those interest amount that are due and not paid by the company.

02

Balance Sheet

Pack Leader Wireless
Balance Sheet
As of December 31, 2018

Current Liabilities:

Accounts Payable

$77,000

Salaries Payable

$7,500

Bonds Payable (Current Portion)

$25,000

Interest Payable

$18,000

Unearned Revenue

$2,700

Total Current Liabilities

$130,200

Long-term Liabilities:

Bonds Payable

$63,000

Add: Premium on Bonds Payable

$10,000

Shareholder’s Equity

$140,000

Total Long-term Liabilities

$213,000

Total Liabilities

$343,200

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Most popular questions from this chapter

Accounting for long-term notes payable transactions

Consider the following note payable transactions of Caleb Video Productions.

2018

Oct. 1 Purchased equipment costing \(80,000 by issuing a five-year, 8% note

payable. The note requires annual principal payments of \)16,000 plus

interest each October 1.

Dec. 31 Accrued interest on the note payable.

2019

Oct. 1 Paid the first installment on the note.

Dec. 31 Accrued interest on the note payable.

Requirements

1. Journalize the transactions for the company.

2. Considering the given transactions only, what are Caleb Video Productions’ total

liabilities on December 31, 2019?

Journalizing bond issuance and interest payments

On June 30, Parker Company issued 11%, five-year bonds payable with a face value

of $120,000. The bonds are issued at face value and pay interest on June 30 and

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1. Journalize the issuance of the bonds on June 30.

2. Journalize the semiannual interest payment on December 31

Preparing the liabilities section of the balance sheet

Luxury Suites Hotels includes the following selected accounts in its general ledger at

December 31, 2018:

Notes Payable (long-term) \( 200,000 Accounts Payable \) 33,000

Bonds Payable (due 2022) 450,000 Discount on Bonds Payable 13,500

Interest Payable (due next year) 1,000 Salaries Payable 2,600

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Prepare the liabilities section of Luxury Suites’s balance sheet at December 31, 2018.

Analyzing and journalizing bond transactions

On January 1, 2018, Nurses Credit Union (NCU) issued 8%, 20-year bonds payable

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1. If the market interest rate is 7% when NCU issues its bonds, will the bonds be

priced at face value, at a premium, or at a discount? Explain.

2. If the market interest rate is 9% when NCU issues its bonds, will the bonds be

priced at face value, at a premium, or at a discount? Explain.

3. The issue price of the bonds is 92. Journalize the following bond transactions:

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

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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.
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