What are the two categories of liabilities reported on the balance sheet? Provide
examples of each.
Liabilities are classified into current and long-term liabilities.
Liabilities are the legal obligation or debt payable by the company.
The two categories of the liabilities are current liabilities and long-term liabilities:
Current Liabilities: Current liabilities are those liabilities that become due within one year. For example- accounts payable, short-term notes payable, etc.
Long-term liabilities: Long-term liabilities are those liabilities that become due in more than one year. For example- long-term loans, bonds, notes payable, etc.
Retiring bonds payable before maturity
CoastalView Magazine issued $600,000 of 15-year, 5% callable bonds payable on July
31, 2018, at 94. On July 31, 2021, CoastalView called the bonds at 101. Assume annual
1. Without making journal entries, compute the carrying amount of the bonds payable
at July 31, 2021.
2. Assume all amortization has been recorded properly. Journalize the retirement of
the bonds on July 31, 2021. No explanation is required.
Determining bond amounts
Savvy Drive-Ins borrowed money by issuing $3,500,000 of 9% bonds payable at 99.5. Interest is paid semiannually.
1. How much cash did Savvy receive when it issued the bonds payable?
2. How much must Savvy pay back at maturity?
3. How much cash interest will Savvy pay each six months?
Reporting current and long-term liabilities
Pediatric Dispensary borrowed $390,000 on January 2, 2018, by issuing a 15% serial
bond payable that must be paid in three equal annual installments plus interest for the
year. The first payment of principal and interest comes due January 2, 2019. Complete
the missing information. Assume the bonds are issued at face value.
2018 2019 2020
Bonds Payable $ $ $
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