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Question 8

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Intermediate Accounting (Kieso)
Found in: Page 239

Short Answer

BE5-8 (L03) Included in Adams Company’s December 31, 2017, trial balance are the following accounts: Accounts Payable $220,000, Pension Liability $375,000, Discount on Bonds Payable $29,000, Unearned Rent Revenue $41,000, Bonds Payable $400,000, Salaries and Wages Payable $27,000, Interest Payable $12,000, and Income Taxes Payable $29,000. Prepare the current liabilities section of the balance sheet.

The current liabilities of the business entity total $329,000.

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Step by Step Solution

Definition of Discount on Bonds Payable

Discount on bonds payable can be defined as the difference in the value at which bonds are issued and their par value. It is reduced from the value of bonds in the balance sheet.

Current Liabilities Section

Particular

Amount $

Accounts payable

$220,000

Unearned rent revenue

41,000

Salaries and wages payable

27,000

Interest payable

12,000

Income tax payable

29,000

Current Liabilities

$329,000

Most popular questions for Business-studies Textbooks

Early in January 2018, Hopkins Company is preparing for a meeting with its bankers to discuss a loan request. Its bookkeeper provided the following accounts and balances at December 31, 2017.

Debit $

Credit $

Cash

$75,000

Accounts receivable (net)

38,500

Inventory (net)

65,300

Equipment (net)

84,000

Patent

15,000

Notes and Accounts payable

$52,000

Note payable (due 2019)

75,000

Common stock

100,000

Retained earnings

50,800

$277,800

$277,800

Except for the following items, Hopkins has recorded all adjustments in its accounts.

1. Cash includes $500 petty cash and $15,000 in a bond sinking fund.

2. Net accounts receivable is comprised of $52,000 in accounts receivable and $13,500 in allowance for doubtful accounts.

3. Equipment had a cost of $112,000 and accumulated depreciation of $28,000.

4. On January 8, 2018, one of Hopkins’ customers declared bankruptcy. At December 31, 2017, this customer owed Hopkins $9,000.

Accounting

Prepare a corrected December 31, 2017, balance sheet for Hopkins Company.

Analysis

Hopkins’ bank is considering granting an additional loan in the amount of $45,000, which will be due December 31, 2018. How can the information in the balance sheet provide useful information to the bank about Hopkins’ ability to repay the loan?

Principles

In the upcoming meeting with the bank, Hopkins plans to provide additional information about the fair value of its equipment and some internally generated intangible assets related to its customer lists. This information indicates that Hopkins has significant unrealized gains on these assets, which are not reflected on the balance sheet. What objections is the bank likely to raise about the usefulness of this information in evaluating Hopkins for the loan renewal?

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