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Chapter 5: Question 7 (page 239)

BE5-7 (L03) Thomas Corporation’s adjusted trial balance contained the following liability accounts at December 31, 2017: Bonds Payable (due in 3 years) \(100,000, Accounts Payable \)72,000, Notes Payable (due in 90 days) \(22,500, Salaries and Wages Payable \)4,000, and Income Taxes Payable $7,000. Prepare the current liabilities section of the balance sheet.

Short Answer

Expert verified

The current liabilities of the business entity total$105,500.

Step by step solution

01

Definition of Salaries and Wages Payable

Salaries and wages payable are defined as the current liabilities of the business entity reporting the amount of money not paid to the employees for services they rendered in the previous period.

02

Current Liabilities Section

Particular

Amount $

Accounts Payable

$72,000

Note payable (due in 90 days)

22,500

Salaries and wages payable

4,000

Income tax payable

7,000

Total current liabilities

$105,500

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Most popular questions from this chapter

IFRS5-3 Briefly describe the convergence efforts related to financial statement presentation.

Case 1: Uniroyal Technology Corporation

Uniroyal Technology Corporation (UTC), with corporate offices in Sarasota, Florida, is organized into three operating segments. The high-performance plastics segment is responsible for research, development, and manufacture of a wide variety of products, including orthopedic braces, graffiti-resistant seats for buses and airplanes, and a static-resistant plastic used in the central processing units of microcomputers. The coated fabrics segment manufactures products such as automobile seating, door and instrument panels, and specialty items such as waterproof seats for personal watercraft and stain-resistant, easy-cleaning upholstery fabrics. The foams and adhesives segment develops and manufactures products used in commercial roofing applications.

The following items relate to operations in a recent year.

1. Serious pressure was placed on profitability by sharply increasing raw material prices. Some raw materials increased in price 50% during the past year. Cost containment programs were instituted and product prices were increased whenever possible, which resulted in profit margins actually improving over the course of the year.

2. The company entered into a revolving credit agreement, under which UTC may borrow the lesser of \(15,000,000 or 80% of eligible accounts receivable. At the end of the year, approximately \)4,000,000 was outstanding under this agreement. The company plans to use this line of credit in the upcoming year to finance operations and expansion.

Instructions

(a) Should investors be informed of raw materials price increase, such as described in item 1? Does the fact that the company successfully met the challenge of higher prices affect the answer? Explain.

(b) How should the information in item 2 be presented in the financial statements of UTC?

Aero Inc. had the following balance sheet at December 31, 2016.

LANSBURY INC.

BALANCE SHEET

DECEMBER 31, 2016

Cash

\(20,000

Account payable

\)30,000

Accounts receivables

21,200

Bond payable

41,000

Investment

32,000

Common stock

100,000

Plant assets (net)

81,000

Retained earnings

23,200

Land

40,000

\(194,200

\)194,200

During 2017, the following occurred.

1. Aero liquidated its available-for-sale debt investment portfolio at a loss of \(5,000.

2. A tract of land was purchased for \)38,000.

3. An additional \(30,000 in common stock was issued at par.

4. Dividends totaling \)10,000 were declared and paid to stockholders.

5. Net income for 2017 was \(35,000, including \)12,000 in depreciation expense.

6. Land was purchased through the issuance of \(30,000 in additional bonds.

7. At December 31, 2017, Cash was \)70,200, Accounts Receivable was \(42,000, and Accounts Payable was \)40,000.

Instructions

(a) Prepare a statement of cash flows for the year 2017 for Aero.

(b) Prepare the unclassified balance sheet as it would appear at December 31, 2017.

(c) Compute Aero’s free cash flow and current cash debt coverage for 2017.

(d) Use the analysis of Aero to illustrate how information in the balance sheet and statement of cash flows helps the user of the financial statements.

BE5-5 (L03) Crane Corporation has the following accounts included in its December 31, 2017, trial balance: Equity Investments (trading) \(21,000, Goodwill \)150,000, Prepaid Insurance \(12,000, Patents \)220,000, and Franchises $130,000. Prepare the intangible assets section of the balance sheet.

Where should the following items be shown on the balance sheet, if shown at all?

(a) Allowance for doubtful accounts.

(b) Merchandise held on consignment.

(c) Advances received on sales contract.

(d) Cash surrender value of life insurance.

(e) Land.

(f) Merchandise out on consignment.

(g) Franchises.

(h) Accumulated depreciation of equipment.

(i) Materials in transit—purchased f.o.b. destination.
See all solutions

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