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Chapter 1 Liabilities Exercises

Regal Company provided year-end liability account balances totaling $8,580,000 as of December 31, 2020. This includes current liabilities such as accounts payable, notes payable, and accrued expenses, as well as noncurrent liabilities including bonds payable. Regal must compute the amount of current liabilities as of December 31, 2020. G Company disclosed various liability account balances as of December 31, 2020, including accounts payable, bonds payable, and income tax payable. The total current liabilities and total noncurrent liabilities must be computed. Multiply Company provided liability information as of December 31, 2020, and had notes payable coming due in 2021. It must

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Awish Fern
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93 views

Chapter 1 Liabilities Exercises

Regal Company provided year-end liability account balances totaling $8,580,000 as of December 31, 2020. This includes current liabilities such as accounts payable, notes payable, and accrued expenses, as well as noncurrent liabilities including bonds payable. Regal must compute the amount of current liabilities as of December 31, 2020. G Company disclosed various liability account balances as of December 31, 2020, including accounts payable, bonds payable, and income tax payable. The total current liabilities and total noncurrent liabilities must be computed. Multiply Company provided liability information as of December 31, 2020, and had notes payable coming due in 2021. It must

Uploaded by

Awish Fern
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Problem 1

On December 31, 202X, Regal Company provided the following information:

Accounts payable, including deposits and advances


from customer of P500,000 1,250,000.00
Cash overdraft with XYZ Bank 80,000.00
Notes payable, including note payable to bank due on
December 31, 2022 of P250,000 1,500,000.00
Estimated warranty payable 600,000.00
Estimated premium liability 200,000.00
Credit balances in customers’ accounts 150,000.00
Serial bonds payable in semi-annual instalment
of 250,000.00 3,000,000.00
Accrued Interest on bonds payable 300,000.00
Unearned rent income 200,000.00
Share dividend payable 500,000.00
Estimated damages payable by reason of breach of contract 700,000.00
Salaries payable 400,000.00

Required:
Compute for the current liabilities on December, 2020.

Problem 2

G company disclosed the following liability account balances on December 31, 2020:

Accounts payable 1,000,000


Bonds payable 5,000,000
Premium on bonds payable 200,000
Deferred tax liability 500,000
Dividends payable 1,000,000
Income tax payable 800,000
Note payable, due January 31, 2022 900,000

Required:
1. Compute for the total current liabilities
2. Compute for the total noncurrent liabilities

Problem 3

Multiply Company provided the following information on December 31, 2020:

Accounts payable after deducting debit balances in


suppliers’ accounts of P100,000.00 500,000.00
Accrued Liabilities 50,000.00
Note payable - due march 31, 2021 1,000,000.00
Note payable - due May 1, 2021 800,000.00

ESSU-ACAD-500| Version 3
Effectivity Date: October 12, 2020
Bonds Payable – due December 31, 2022 5,000,000.00

On March 1, 2021 before the 2020 financial statements were issued, the note payable of 1,000,000.00
was replaced by an 18-month note for the same amount.
The entity is considering similar action on the P800,000 note due on May 1, 2021. The financial
statements were issued on March 31, 2021.
The entity also has the following obligation:
1. A 150,000 short term obligation due on March 1, 2021. Its maturity could be extended to
march 1, 2023, provided Multiply agrees to provide additional collateral. On February 12,
2021, an agreement is reached to extend the loan’s maturity to March 1, 2023.
2. A debt obligation of 1,000,000 maturing on December 31, 2023. The debt is callable on
demand by the lender at any time.

Required:
1. Compute for the total current liabilities
2. Compute for the total noncurrent liabilities

Problem 4

Achilles Company reported the following liability balances on December 31, 2020:

12% note payable issued on March 1, 2019, Maturing


on March 1, 2021 5,000,000
10% note payable issued on October 1, 2019, Maturing
October 1, 2021 3,000,000

The 2020 financial statement were issued on March 31, 2021.

On January 31, 2021, the entire 5,000,000 balance of the 12% note payable was refinanced through
issuance of a long term obligation payable lump sum.

Under the loan agreement for the 10% note payable, the entity has the discretion to refinance the
obligation for at least twelve months after December 31, 2020.

Required:
1. Compute for the total current liabilities
2. Compute for the total noncurrent liabilities

Problem 5

Dunn company sells equipment service contracts that cover a two year period. The sale price of each is
P600.
The entity sold 1,000 contracts evenly throughout the year.
The past experience is that, of the total peoso spent for repairs on service contracts, 40% is incurred
evenly during the first year and 60% evenly during the second year.

Required:
1. What is the contract revenue for 2020?

ESSU-ACAD-500| Version 3
Effectivity Date: October 12, 2020
2. What amount should be reported as deferred service revenue on December 31, 2020.

Problem 6

Ana Rosa, president of the APOPKA COMPANY, has bonus arrangement with the company under which
she receives 10% of the net income ( after deducting taxes and bonuses) each year. For the current year,
the net income before deducting either the provision for income taxes or bonus is P 4,650,000. The
bonus is deductible for tax purposes, and the tax rate is 30%.

Required:
1. Determine the amount Ana Rosa’s bonus
2. Compute the appropriate provision for income tax for the year.
3. Prepare the entry to record the bonus ( which will be paid in the following year )

Problem 7

Farr Company sells products with reusable and expensive containers. The customer is charged a deposit
for each container delivered and receives a refund for each container returned within two years after
the year of delivery.
Containers held by customers on January 1, 2020 from deliveries in:
2018 75,000.00
2019 215,000.00 290,000.00
Containers delivered in 2020 390,000.00

Containers returned in 2020 from deliveries in:

2018 45,000.00
2019 125,000.00
2020 143,000.00 313,000.00

Required:
1. What is the liability for deposits on December 31, 2020
2. What is the total gain for unclaimed deposits.

ESSU-ACAD-500| Version 3
Effectivity Date: October 12, 2020

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