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Long Term Liabilities Worksheet

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1). Indicate whether each of the items below should be classified on December 31, 2013, as a current liability, a long term liability, or under some other classification. Consider each one independently from all others; that is, do not assume that all of them relate to one particular business. If the classification of some of the items is doubtful, explain why in each case. Classification of Liabilities - Presented below are various account balances.
a) Bank loans payable of a winery, due March 10, 2016. (The product requires aging for 5 years before sale).
b) Unamortized premium on bonds payable, of which $3,000 will be amortized during the next year.
c) Serial bonds payable, $1,000,000, of which $250,000 are due each July 31.
d) Amounts withheld from employees' wages for income taxes.
e) Notes payable due January 15, 2015.
f) Credit balances in customers' accounts arising from returns and allowances after collection in full of account.
g) Bonds payable of $2,000,000 maturing June 30, 2014.
h) Overdraft of $1,000 in a bank account. (No other balances are carried at this bank).
i) Deposits made by customers who have ordered goods.
2). Determine Proper Amounts in Account Balances - Presented below are three independent situations.
a) Chinook Corporation incurred the following costs in connection with the issuance of bonds: (1) printing and engraving costs, $15,000; (2) legal fees, $49,000, and (3) commissions paid to underwriter, $60,000. What amount should be reported as Unamortized Bond Issue Costs, and where should this amount be reported on the balance sheet?

b) McEntire Co. sold $2,500,000 of 10%, 10-year bonds at 104 on January 1, 2012. The bonds were dated January 1, 2012 and pay interest on July 1 and January 1. If McEntire uses the straight-line method to amortize bond premium or discount, determine the amount of interest expense to be reported on July 1, 2012, and December 31, 2012.

c) Cheriel Inc. issued $600,000 of 9%, 10-year bonds on June 30, 2012, for $562,500. This price provided a yield of 10% on the bonds. Interest is payable semiannually on December 31 and June 30. If Cheriel uses the effective interest method, determine the amount of interest expense to record if financial statements are issued on October 31, 2012

3). Entries and Questions for Bond Transactions - On June 30, 2012, Mackes Company issued $5,000,000 face value of 13%, 20-year bonds at $5,376,150, a yield of 12%. Mackes uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest on June 30, and December 31.
a) Prepare the journal entries to record the following transactions:
1) The issuance of the bonds on June 30, 2012.
2) The payment of interest and the amortization of the premium on December 31, 2012.
3) The payment of interest and the amortization of the premium on June 30, 2013.
4) The payment of interest and the amortization of the premium on December 31, 2013.

b) Show the proper balance sheet presentation for the liability for bonds payable on the December 31, 2013, balance sheet.

c) Provide the answers to the following questions.
1) What amount of interest expense is reported for 2013?
2) Will the bond interest expense reported in 2013 be the same as, greater than, or less than the amount that would be reported if the straight-line method of amortization were used?
3) Determine the total cost of borrowing over the life of the bond.
4) Will the total bond interest expense for the life of the bond be greater than, the same as, or less than the total interest expense if the straight-line method of amortization were used?

4). Entries for Zero-Interest Bearing Notes - On January 1, 2013, McLean Company makes the two following acquisitions.

a) Purchases land having a fair market value of $300,000 by issuing a 5-year, zero-interest-bearing promissory note in the face amount of $505,518.
b) Purchases equipment by issuing a 6%, 8-year promissory note having a maturity value of $400,000 (interest payable annually).

The company has to pay 11% interest for funds from its bank.

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1). Indicate whether each of the items below should be classified on December 31, 2013, as a current liability, a long term liability, or under some other classification. Consider each one independently from all others; that is, do not assume that all of them relate to one particular business. If the classification of some of the items is doubtful, explain why in each case. Classification of Liabilities - Presented below are various account balances.
a) Bank loans payable of a winery, due March 10, 2016. (The product requires aging for 5 years before sale).
Classification: Current Liability as current assets are used to pay off the loans

b) Unamortized premium on bonds payable, of which $3,000 will be amortized during the next year.
Classification: Long Term Liability as premium paid is amortized over the life of the bond.

c) Serial bonds payable, $1,000,000, of which $250,000 are due each July 31.
Classification: $250,000 is current liability, remaining $800,000 is Long Term Liability

d) Amounts withheld from employees' wages for income taxes.
Classification: Current Liability as this would be paid within next 12 months

e) Notes payable due January 15, 2015.
Classification: Long Term Liability as this would be paid after the 12 months period.

f) Credit balances in customers' accounts arising from returns and allowances after collection in full of account.
Classification: Current liability as this would be set off from current customer purchases

g) Bonds payable of $2,000,000 maturing June 30, 2014.
Classification: Current liability as the bonds are maturing within next 12 months. However, this can be classified as long term liability if the firm has a roll over arrangement to refinance the bonds.

h) Overdraft of $1,000 in a bank account. (No other balances are carried at this bank).
Classification: Current liability as overdraft is part of short term finance facility

i) Deposits made by customers who have ordered ...

Solution Summary

The long term liabilities in worksheets are examined. The credit balances in customers' accounts are determined.

$2.19
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Need transaction worksheet to balance with given debits and credits

I have completed the transaction worksheet but cannot get it to balance!! The credits and debits are given. I can't figure out if i'm not substracting something or is something is in the wrong column(?)-If I can't complete the transaction workwheet correctly, then the whole assignment with common-size percentages and other calculations I have to do will be wrong and my essay will be wrong! Please help! The transaction calculator and given debits and credits are there in attachments with financial statements.

(See attached file for full problem description)

The Transaction Calculator includes all the information you need to create financial statements that reflect the actual financial activities of Red Desert Industries. The Transaction Calculator is composed of several parts (called "worksheets" in Excel),

2000 Financial Statements
This worksheet contains Red Desert's consolidated financial statements for the year 2000. You will need some of the information in these statements to set the beginning balances for the "Transaction Worksheet."

2001 Transactions & T-accounts
This worksheet contains descriptions of Red Desert's actual transactions and corresponding T-accounts for the year 2001. This information is required to complete the "Transaction Worksheet." (For more information about Transactions and T-accounts, see the

Transaction Worksheet
This worksheet is your main work area. To use this worksheet, first identify Red Desert's actual transaction amounts by studying the T-accounts listed in "2001 Transactions & T-accounts." Then enter the amounts into the appropriate cells in this worksheet

2001 Financial Statements
This worksheet contains Red Desert's consolidated financial statements for 2001. All cells in the balance sheet and income statement are blank at first, but are filled automatically as you make entries in the "Transaction Worksheet." Use the completed fin

2001 Transactions & T-Accounts, Red Desert Industries
Numbers in parentheses refer to transaction numbers in the list of 2001 Transactions to the right.
You might wish to print this page for quick reference when you enter the amounts into the Transaction Worksheet.

Asset Accounts

Cash Accounts Receivable (Net) Inventories 2001 Transactions, Red Desert Industries
BB 268 BB 12,013 BB 20,660 (in thousands)
(3) 96,366 81,999 (5) (1) 98,026 48 (2) (4) 81,585 81,713 (6)
* (14) 5,879 2,077 (7) 96,366 (3) The amounts for the first two transactions are provided for you.
(24) 11,436 1,909 (9) For the remaining transaction amounts, refer to the T-accounts
(25) 932 14,284 (11) EB 13,625 EB 20,532 to the left. (Although not necessary to understand accounting
* (26) 3 2,207 (13) principles, this will give you practice using T-accounts.)
* 1,190 (17) Land Buildings & Improvements
500 (19) BB 295 BB 4,546 1 Sales on account, $98,026
2,728 (23) (11) 547 2 Estimate of uncollectible accounts receivable, $48
3 Cash collections from credit customers
EB 295 EB 5,093 4 Purchase inventory on account
5 Cash payment for inventory purchased on account
Machinery & Equipment Accumulated Depreciation 6 Sold inventory (reduce inventory for the cost of inventory sold)
BB 31,009 9,245 BB 7 Paid for expenses in advance
EB 7,990 (11) 13,216 6,121 (12) 8 Used up prepaid
* (26) 1 9 Purchase of other assets
10 Used up other assets
EB 44,226 15,366 EB 11 Purchase buildings, construction in progress, and machinery and equipment
12 Record depreciation
13 Pay current portion of long-term debt
Other Assets Prepaid Expenses Construction in Progress 14 Issue new long-term debt
BB 96 BB 203 BB 21 15 Transfer current portion of long term debt from long-term to current
(9) 1,909 2,000 (10) (7) 2,077 2,000 (8) (11) 521 16 Accrued wage liability
17 Pay wages
18 Accrued tax expense
EB 5 EB 280 EB 542 19 Pay taxes
20 Record net tax deferral
21 Record interest expense
22 Record other expense
23 Payment of other liabilities
Liability Accounts 24 Issue stock for cash (common stock and APIC)
25 Adjusting Transaction: APIC
Notes Payable Curr. Port. of Long-term Debt Accounts Payable 26 Rounding error entry, Cash, Machinery and Equipment, Retained Earnings
- BB 2,207 BB 8,445 BB 27 Close income statements accounts to retained earnings (note that you do not have to enter this transaction in the Transaction Worksheet)
(13) 2,207 753 (15) (5) 81,999 81,585 (4)

- EB 753 EB 8,031 EB

Accrued Wages Accrued Taxes Other Current Liabilities
1,237 BB 836 BB 820 BB
(17) 1,190 1,421 (16) (19) 500 475 (18) * (23) 2,728 2,665 (21) *
40 (22) *

1,468 EB 811 EB 797 EB

Long-term Debt Repurchase Obligation Deferred Tax
24,084 BB - BB - BB
(15) 753 5,879 (14) 287 (20) *

29,210 EB - EB 287 EB

Shareholders' Equity Accounts

Common Stock Paid in Capital Retained Earnings
85 B 16,929 BB 5,223 BB
22 (24) 11,414 (24) 4 (26) *
932 (25) 1,256 (27) *

107 EB 29,275 EB 6,483 EB

Income Statement Accounts

Sales Cost of Goods Sold Selling, General, & Admin. Expense

98,026 (1) (6) 81,713 (2) 48
(12) 6,121 (8) 2,000
(10) 2,000
(16) 1,421
(27) 98,026 87,834 (27) 5,469 (27) *

- EB EB - EB -

Interest Expense Other/Net Tax expense

* (21) 2,665 * (22) 40 * (18) 475
* (20) 287

2,665 (27) * 40 (27) * 762 (27) *

EB - EB - EB -

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