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Activity 1

This document contains 7 accounting problems related to liabilities, deferred revenue, and accruals. For each problem, the document provides relevant financial information and asks the recipient to calculate specific accounting amounts. The recipient is instructed to show their work, label their answers, and send a picture of their written solutions via email.

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Harold Beltran Dramayo
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598 views

Activity 1

This document contains 7 accounting problems related to liabilities, deferred revenue, and accruals. For each problem, the document provides relevant financial information and asks the recipient to calculate specific accounting amounts. The recipient is instructed to show their work, label their answers, and send a picture of their written solutions via email.

Uploaded by

Harold Beltran Dramayo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Instructions:

 Write your answers in a whole sheet of paper


 Show your solution and show label (must be understandable)
 Send a picture of your answers through email ([email protected])
 Answer independently

Problem 1
Venerable Co. has the following liabilities as of December 31, 20x1.
Trade accounts payable, net of debit balance in supplier’s accounts of 10,000, 600,000
net of unreleased checks of 8,000 and net of postdated checks of 4,000
Credit balance n customers’ accounts 4,000
Financial liability designated at FVPL 100,000
Bonds payable maturing in 10 equal annual installments of 200,000 2,000,000
12%, 5 year note payable issued on Oct 1, 20x1 200,000
Deferred tax liability 10,000
Unearned rent 8,000
Contingent liability 20,000
Reserve for contingencies 50,0000
 How much is the total current liabilities?

Problem 2
Entity A’s accounts payable on December 31, 20x1 has a balance of 1,300,000. Additional information follows:
a) Goods shipped FOB shipping point from a vendor to Entity A on December 29, 20x1 amounting to 20,000 was
recorded and included in the year-end physical count as “goods in transit”
b) Goods shipped FOB Destination from a vendor to Entity A on December 30, 20x1 amounting to 40,000 was
recorded and included in the year-end physical counts as “goods in transit”
c) On December 31, 20x1, Entity A recorded a 60,000 check drawn as payment to a supplier. The check is dated
January 7, 20x2
 Compute for the adjusted accounts payable on December 31, 20x1.

Problem 3
Elliot Corporation’s liabilities at December 31, 2005, were as follows:
Accounts payable and accrued interest 1,000,000
12% note payable issued November 2004 maturing July 2,000,000
1, 2006
10% debentures payable, next annual principal install of 7.000,000
500,000 due February 1, 2006
On March 1, 2006, Eliot consummated a non-cancelable agreement with the lender to refinance the 12% note payable
on a long-term basis, on readily determinable terms that have not yet been implemented. Eliot’s December 31, 2005
financial statements were issued on March 31, 2006.
 In its December 31, 2005 balance sheet, what amount should Eliot report as current liabilities?

Problem 4
Eliot Corporation liabilities at December 31, 2008 were as follows
Accounts payable and accrued interest 2,000,000
5-year 10% notes payable – due December 31, 2011 5,000,000
Part of the loan agreement is for Eliot to appropriate a fixed amount out of its accumulated profits and losses annually
until the amount of appropriation has equaled the face amount of the obligation. Non-compliance will render the note
as payable on demand by the lender . As of December 31, 008, Eliot Corporation has yet to comply with the loan
agreement.
 What amount of current liabilities should Eliot Corporation report in its December 31, 2008 statement of
financial position?
 Assume the lender on December 31, 2008 to provide Eliot a grace period of 12 months to rectify the breach
and within which, the lender will not demand payment. What amount of current liabilities should Eliot
Corporation report in its December 31, 2008 statement of financial position

Problem 5
Jim Company offers three payment plans on its 12-month contracts. Information on the three plans and the number of
children enrolled in each plan for September 1, 2005 through August 31, 2006 contract year follows:
Plan Initial payment per child Monthly fees per child No. of children
1 500 - 15
2 200 30 12
3 - 50 9
36

Jim received all initial payment on September 1 2005, and 3,240 of monthly fees during the period September 1 through
December 31, 2005.
 In its December 31, 2005 balance sheet, what amount should Jim report as deferred revenue?
Problem 6
Affluent Co. sells service contracts that cover a 2-year period. The sale price of each contract is 2,000. Affluent sold 1,000
contracts evenly throughout 20x1. Affluent’s past experience shows that of the total pesos spent for repairs on service
contracts, 40% is incurred evenly during the first contract year and 60% evenly during the second contract year.
 How much are the current and noncurrent portions of deferred revenue to be presented in Affluent’s
December 31, 201 statement of financial position?
 How much is the service revenue recognized in 20x2?

Problem 7
Kemp Company must determine December 31, 20x1, year-end accruals for advertising and rent expense. A 50,000
advertising bill was received on January 7, 20x2, compromising 35,000 for advertisement in December 20x1 issues of a
newspaper and 15,000 for advertisements in January 20x2. A store lease, effective October 16, 20x1, calls for fixed rent
of 120,000 per month, payable one month from the effective date and monthly thereafter. In addition, rent equal to 5%
of net sales over 6,000,000 per calendar year is payable on January 31 of the following year. Net sales for 20x1 were
9,000,000.
 How much are the accrued liabilities in the December 31, 20x1 statement of financial position?

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