BA 99.

2 Current Liabilities Additional Exercises

1. On 31 December 2014, the bookkeeper of North Company provided the following information:
Accounts payable, including deposits and advances from customers of Php500,000 Php2,500,000
Notes payable, including note payable to bank due on 31 December 2016 for Php1,000,000 3,000,000
Share dividends payable 800,000
Serial bonds, payable in semi-annual installments of Php1,000,000 10,000,000
Accrued interest on bonds payable 300,000
Contested BIR tax assessment 600,000
Unearned rent revenue 100,000
In the 31 December 2014 statement of financial position, how much current liabilities should be reported?

2. In November and December 2014, South Company received Php792,000 for 1,000, 3-year subscriptions at Php254
per issue per year, starting with the January 2015 issue. South Company elected to include the entire Php792,000 in
its 2014 income statement for tax purposes. What amount should South report in its 2014 statement of financial
position as unearned subscription revenue?

3. West Company sells calculators that carry a one-year warranty against manufacturer’s defects. Based on company’s
experience, warranty costs are estimated at Php300 per calculator. During 2014, West sold 24,000 calculators and
paid warranty costs of Php170,000. In its income statement for the year ending 31, December 2014, how much
should West report as warranty expense?

4. The selling price of East Company’s units is Php80,000 each. The buyers are provided with a 2-year warranty that is
expected to cost the company Php2,000 per unit in the year of sale and Php6,000 per unit in the year following the
sale. The company sold 80 units in 2014 and 100 units in 2015. Actual payments for warranty claims were Php80,000
and Php520,000 in 2014 and 2015, respectively. How much would be the warranty expense for 2014 and 2015,
respectively?

5. A new product introduced by NE Company carried a two-year warranty against defects. The estimated warranty
costs related to sales are as follows:
Year of sale 3%
Year after sale 5%

Sales and actual warranty expenditures for the years ended 31 December 2014 and 2015 are as follows:
Year Sale Actual Warranty Expenditures
2014 Php800,000 Php20,000
2015 1,000,000 70,000
What amount should Beauty report as its estimated liability as of 31 December 2014 and 2015, respectively?