Total Liabilities

Harden Company reported the following information on December 31, 2018:

Bonds payable 5,000,000

Discount on bonds payable (500,000)

Loan payable, with 500,000 payable

semi-annually starting 06/30/2019 2,500,000

Accounts payable 1,000,000

Unearned rent income 300,000

Income tax payable 250,000

Cash dividends payable 100,000

Cash surrender value of officers life insurance 75,000❌

Patent 50,000❌

Advances to employees 45,000❌

Deferred tax liability 15,000

Loan of James guaranteed by Harden (it is possible that James 500,000

will be held liable for the guarantee)

Share dividends payable 150,000❌

Bank overdraft- part of cash management 10,000

Total liabilities to be reported in the company’s December 31, 2018 statement of financial position is: P
9,175,000
Current Liabilities

An analysis of Howard Company’s liabilities on December 31, 2018 disclosed the following information:

Accounts payable, after deducting debit balances in suppliers

accounts amounting to 100,000 and postdated checks of 50,000 4,000,000

Bonds payable 1,000,000❌

Premium on bonds payable 100,000❌

Mortgage payable 850,000❌

Share dividends payable 750,000❌

Credit balances in customers’ accounts 500,000

Premiums payable 600,000

Deferred tax liability 200,000❌

Deferred revenue 175,000

Accrued expenses 150,000

The deferred tax liability is based on temporary differences that will reverse in 2019.

Total amount of current liabilities in the statement of financial position is: P 5,575,000

Refinancing

Included in Dwight Company’s liability balances on December 31, 2018 are:

10% note payable, maturing 03/31/2019 . 10,000,000✔

12% note payable, maturing 06/30/2019 6,000,000❌

7% guaranteed debentures, due 2020 2,000,000❌

Additional information:

 On January 31, 2019, the entire 10,000,000 note was refinanced through issuance of a long-term
obligation payable lump sum.
 For the 6,000,000 note, under the loan agreement, the entity has the discretion to refinance
the obligation for at least 12 months after December 31,2018.
 The 2018 financial statements were issued on March 31, 2019.

Assuming all accruing interest for 2018 were paid, the amount to be reported as current liabilities on
December 31, 2018 is 10,000,000

Refinancing

Tim Co. has a 10%, 2,000,000 loan payable as of December 31, 2018 that is maturing on July 1, 2019.
Interest on the loan is due every July 1 and December 31. On February 1, 2019, Tim Co. entered into a
refinancing agreement with a bank to refinance the loan on a long-term basis. Both parties are
financially capable of honoring the agreement’s provisions. Tim’s financial statements were authorized
for issue on March 15, 2019.

How much is presented as current liability in relation to the loan in Tim’s 2018 year-end financial
statements? P2,000,000

Refinancing

On January 1, 2018, Allen Co. availed a 3-year, 2,000,000 loan from a bank. The loan agreement requires
Allen to maintain a current ratio of 2:1. If the current ratio falls below 2:1, the loan becomes payable on
demand. As of December 31,2018, Allen’s current ratio is 1.8:1. On January 5, 2019, the bank agreed not
to collect the loan in 2019 and gave Allen 12 months to rectify the breach of loan agreement. 2,000,000

Accounts payable

Duncan Company’s accounts payable balance at December 31, 2018 was 8,000,000 before considering
the following data:

 Goods shipped to Duncan FOB shipping point on December 15, 2018 were lost in transit. The
invoice cost of 500,000 was not recorded by Duncan. On January 15, 2019, Duncan filed a
500,000 claim against the common carrier
  On December 30, 2018, a vendor authorized Duncan to return for full credit goods shipped and
billed at 200,000 on December 15, 2018. A 200,000 credit memo was received and recorded on
January 5, 2019.

What should Duncan reports as accounts payable on December 31, 2018? P 8,300,000

Accounts payable

Ray Company began operations late in 2017. For the first quarter ended March 31, 2018, Ray made
available the following information:

Total merchandise purchased through March 15, recorded at net 4,900,00

Merchandise inventory at December 31, 2017 at selling price 1,500,000

All merchandise was acquired on credit and no payments have been made on accounts payable since
the inception of the company. All merchandise is marked to sell at 50% above invoice cost before time
discount of 2/10, n/30. No sales were made in 2018. How much cash required to eliminate the current
balance in accounts payable? 6,000,000

Bonus payable

Tony Co. provides an incentive compensation plan under which its chief executive officer receives a
bonus equal to 10% of the company’s income in excess of 880,000 before bonus and income tax. If
income before bonus and income tax for 2018 amounted to 2,200,000 and income tax rate is 30% the
amount of bonus would be P 396,000

Bonus payable

After three profitable years, Parker Company decided to offer a bonus to its branch manager at 25% of
income over 1,000.000 earned by the branch during the current year. The income for the branch was
1,600,000 before tax and before bonus for the current year. The bonus is computed on income in excess
of 1,000,000 after deducting the bonus but before deducting tax. The bonus for the current year is:
120,000

Unearned Revenue
Ginobili Company sells gift certificates redeemable only when merchandise is purchased. The certificates
have an expiration date two years after issuance date. Upon redemption or expiration, Ginobili
recognizes the unearned revenue as realized. Data for 2018 are as follows:

Unearned revenue, 1/1 1,500,000

Gift certificates sold 5,000,000

Gift certificates redeemed 4,000,000

Expired gift certificates 300,000

Cost of goods sold 60%

At December 31, 2018, Ginobili Company should report unearned revenue at

Advances from Customers

Manu Company requires advance payments with special order for machinery constructed to customer
specifications. These advances are nonrefundable.

Information for the current year is:

Advances from customers- January 1 1,100,000

Advances receive with orders 1,800,000

Advances applied to orders shipped 1,600,000

Advances applicable to orders cancelled 100,000

In Manu’s December 31 balance sheet, what amount should be reported as current liability for advances
from customers?

Container’s Deposits

Garnett Co. requires deposits from customers for the containers of goods sold. The customers are
refunded for the deposits received when the containers are returned within two years from the date of
sale of the related goods. Deposits for containers not returned within the time limit are regarded as
proceeds from retirement of the containers. Information for 2018 is as follows:
Container deposits at December 31, 2017, from deliveries in:

2016 10,000

2017 90,000 100,000

Deposits for containers delivered in 2018 100,000

Deposits for containers returned in 2018 from deliveries in:

2016 10,000

2017 40,000

2018 42,000 92,000

How much is the liability for deposits on returnable containers on December 31, 2018?

VAT Payable

Kevin Company operates a retail store. All items are sold subject to a 12% value added tax which the
entity collects and records as sales revenue. The entity files quarterly sales tax returns when due by the
20th day following the end of the sales quarter. However, in accordance with state requirements, the
entity remits value added tax collected by the 20th day of the month following any month if such
collections exceed 100,000. The entity takes these payments as credits on the quarterly sales tax
returns. The value added taxes paid are charge against sales revenue. Following is a monthly summary
appearing in the first quarter of 2018 sales revue account:

Debit Credit

October - 1,120,000

November 120,000 784,000

December - 896,000

On December 31, 2018, the amount to be reported as valued added taxes payable is:

Provision: Continuous Range of Outcome

On November 5, 2018, a Sheradez Company notice on January 15, 2019, of a lawsuit for 4,000,000
damages for personal injuries suffered by Joy. Sheradez’s counsel believes it is probable that Joy will be
awarded an estimated amount in the range between 10,000 and 4,000,000, and no amount is a better
estimate of potential liability than any other amount. The accounting year ends on December 31 and the
2018 financial statements were issued on March 31, 2019. What amount of provision should Sheradez
accrue at December 31, 2018?
Warranty Liability

On April 1, 2018, Carter Company began offering a new product for sale under a one-year warranty. Of
the 5,000 units in inventory at April 1, 2018, 3,000 had been sold by June 30, 2018. Based on its
experience with similar products, the entity estimated that the average warranty cost per unit sold
would be 160. Actual warranty costs incurred from April 1 through June 30, 2018 were 140,000

On June 30, 2018 the amount to be reported as warranty liability is: