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Chapter 13: Q9BE (page 692)

At December 31, 2017, Burr Corporation owes \(500,000 on a note payable due February 15, 2018. (a) If Burr refinances the obligation by issuing a long-term note on February 14 and using the proceeds to pay off the note due February 15,how much of the \)500,000 should be reported as a current liability at December 31, 2017? (b) If Burr pays off the note on February15, 2018, and then borrows \(1,000,000 on a long-term basis on March 1, how much of the \)500,000 should be reported as a currentliability at December 31, 2017, the end of the fiscal year?

Short Answer

Expert verified

(a) No obligations will be reported as current liability.

(b) $500,000 will be reported as current liability.

Step by step solution

01

(a) Explanation on reporting of current liability

In the given case nothing will be reported as current liability, as it satisfies both the condition of intend to refinance the obligations by long term liabilities, and demonstrate an ability to consume the refinanced funds.

02

(b) Explanation on reporting of current liability

In the given case, total $500,000 of note payable will be reported as current liability, as there is no intent of refinancing by long term debt, and also it does not exhibits the ability to use the refinanced funds for repayment.

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Most popular questions from this chapter

Define a provision, and give three examples of a provision.

If the bonds in Question 8 are classified as available-for-sale, and they have a fair value at December 31, 2017, of $3,604,000, prepare the journal entry (if any) at December 31, 2017, to record this transaction.

(Debt and Equity Investments) Cardinal Paz Corp. carries an account in its general ledger called Investments,which contained debits for investment purchases, and no credits, with the following descriptions.

Feb. 1, 2017 Sharapova Company common stock, \(100 par, 200 shares \) 37,400

April 1 U.S. government bonds, 11%, due April 1, 2027, interest payable

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purchased at 104 plus accrued interest, interest payable

annually on March 1, due March 1, 2037, 54,000

(Round all computations to the nearest dollar.)

(a) Prepare entries necessary to classify the amounts into proper accounts, assuming that the debt securities are classified

as available-for-sale.

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straight-line method.

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McGrath Company bonds 58,600

What entry or entries, if any, would you recommend be made?

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Question: E13-1 (L01) (Balance Sheet Classification of Various Liabilities) How would each of the following items be reported on the balance sheet? (a) Accrued vacation pay. (j) Premium offers outstanding. (b) Estimated taxes payable. (k) Discount on notes payable. (c) Service warranties on appliance sales. (l) Personal injury claim pending. (d) Bank overdraft. (m) Current maturities of long-term debts to be paid (e) Employee payroll deductions unremitted. from current assets. (f) Unpaid bonus to officers. (n) Cash dividends declared but unpaid. (g) Deposit received from customer to guarantee (o) Dividends in arrears on preferred stock. performance of a contract. (p) Loans from officers. (h) Sales taxes payable. (i) Gift certificates sold to customers but not yet redeemed.

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Investment Securities Cost Fair Value

Horton, Inc. common (5,000 shares) \(215,000 \)200,000

Monty, Inc. preferred (3,500 shares) 133,000 140,000

Oakwood Corp. common (1,000 shares) 180,000 179,000

On October 10, 2017, the Horton shares were sold at a price of \(54 per share. In addition, 3,000 shares of Patriot common stock

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Instructions

Prepare the journal entries to record the sale, purchase, and adjusting entries related to the equity securities in the last quarter of 2017
See all solutions

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