E13-1 Transaction a) Accrued vacation pay. (b) Estimated taxes payable. (c) Service warranties on appliance sales.

(d) Bank overdraft. (e) Personal injury claim pending. (f) Unpaid bonus to officers. (g) Deposit received from customer to guarantee performance of a contract. (h) Sales taxes payable. (i) Gift certificates sold to customers but not yet redeemed. (j) Premium offers outstanding. (k) Discount on notes payable. (l) Employee payroll deductions unremitted. (m) Current maturities of long-term debts to be paid from current assets. (n) Cash dividends declared but unpaid. (o) Dividends in arrears on preferred stock. (p) Loans from officers.

Account Current Liability Current Liability Current Liability or Long term depending on the terms Current Liability Footnote Current Liability Current Liability or Long term current Liability Current Liability Current Liability Contra account to notes payable Current Liability Current Liability Current Liability Footnote Current Liability or long term liability

E13-2 A. Date Sept 1 Account Purchases Accounts Payable Accounts Payable Note Payable Cash Discount on Notes Payable Note Payable DR 50000 50000 50000 50000 75000 6000 81000 CR

Oct 1

Oct 1

B. Adjusting entries at December 31 Date Dec 31 Account Interest Expense Interest Payable Interest Expense Discount on Note Payable DR 1000 1000 1500 1500 CR

Dec 31

(c) The total net liability to be reported on the December 31, balance sheet for Interest-Bearing Note: Interest Payable Notes Payable

1000 50000 51000

Zero-Interest-Bearing Note Note Payable Less: Discount on Note

81000 4500 76500

E13-8

Account Salaries and Wage Expense Federal taxes payable FICA taxes payable Union Dues Payable Cash

DR 480,000

CR 80,000 28,040 9,000 362,960

Payroll Tax Expense FICA taxes payable FUTA taxes payable (70,000 x 0.8%) SUTA taxes payable (70,000 x 1.2%)

29,440 28,040 560 840

E13-13

Maverick Inc. would report a liability of $800,000 as of December 31st 2012.The Financial Account and Standards Board requires that when an amount within the range of expected loss appears at the time to be a better extimate that any other amounts withing the range, that amount should be accrued. However when there is no amount withing the range, the dollar amount at the low end of the range is accrued and the amount at the high end of the range is disclosed.

The loss should be accrued for $6,000,000 because the potential insurance recovery is a gain contingencyit is not recorded until received. This is a contingency gain, because the amount that is anticipated to be received will be extra than the book value of the plant. Contingency gains are not recorded however and are only disclosed when the probabilities are so high that a gain will become realizable

E13-9 A (1) Current ratio.

318000 87000

(2) Inventory turnover.

820000 = 185000

(3) Receivables turnover.

1,400,000 = 95,000

(4) Earnings per share.

210,000 = 52,000

(5) Profit margin on sales.

210,000 = 1,400,000

(6) Rate of return on assets on December 31, 2012.

210,000 = 488,000

B Transaction (1) Write off an uncollectible account receivable, $2,200. (2) Repurchase common stock for cash. (3) Pay $40,000 on notes payable (short-term). (4) Collect $23,000 on accounts receivable. (5) Buy equipment on account. (6) Give an existing creditor a short-term note in settlement of account.

Effect No Effect on Current Ratio Weaken Current ratio by reducing Improve Current ratio No Effect on Current Ratio Weaken Current ratio by increasin No Effect on Current Ratio

3.66

4.43 or 82 days

14.737 0r 25 days

4.04

15.00%

43.03%

ect on Current Ratio n Current ratio by reducing Current Assets e Current ratio ect on Current Ratio n Current ratio by increasing Current Liabilities ect on Current Ratio