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Liability Classification Chapter 8

Listed below are selected items from the financial statements of a company for the year ended December 31, Year 1.

Salaries Payable 63,000
Accounts payable 35,000
Current Maturity of Long-Term Debt 25,000
Bonds payable, due December 31, Year 20 2,200,000
Premium on Bonds Payable 14,000
Estimated Warranty Liability 10,000
Note Payable, due Dec. 31, Year 4 75,000
Unearned Revenue 25,000
Note Payable, due June 1, Year 2 8,000
Discount on Note Payable due June 1, Year 2 500
  1. Determine the Total Current Liabilities to be on a classified balance sheet at December 31, Year 1.
  2. Determine the Total Long-Term Liabilities to be reported on a classified balance sheet at December 31, Year 1.

Contingent Liabilities Chapter 8

A company estimates the cost of products warranties to be 3% of sales. The beginning balance in Estimated Warranty Liability account is $15,000. Sales for the period was $795,000. During the period, $32,600 was actually paid for warranty related costs. What is the ending balance in the Warranty Liability account?

  1. $6,250
  2. $23,850
  3. $23,750
  4. $17,600
  5. $38,850

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Contingent Liabilities - Warranties Chapter 8

A company provides a warranty on its products that it sells to customers. The warranty liability account had $1,200 balance on April 1. The company had sales of $67,000 in April and estimated warranty repairs at 3% of sales. During the month, the company actually paid out $2,400 for warranty repairs.

Determine the April 30 balance in the estimated warranty liability account.

Purchasing with a Non-Interest Bearing Note Chapter 8

On January 1, Year 1, Mission Company agreed to buy some equipment from Anna Company. Mission signed a non-interest-bearing note, agreeing to pay Anna $500,000 for the equipment on December 31, Year 3. The implied rate of interest for this note was 10%.

Record the journal entry for the purchase of this equipment for Mission Company on January 1, Year 1.

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