Question

Smith Corporation is reviewing the following transactions for its year-ended December 31, 2015.

For each item listed, indicate the:

A. Name of the account to use.

B. Whether it is current or long-term, asset or liability.

C. The amount.

1. On December 15, 2015 the company declared a $2.00 per share dividend on 40,000 shares of

     common stock outstanding, to be paid on January 5, 2013

   2. Credit sales for year amounted to $10,000,000. Smith estimates its Allowance for Doubtful

        Accounts as 3% of credit sales.

   3. At December 31, bonds payable of $100,000,000 are outstanding. The bonds pay 12% interest

        every September 30 and mature in installments of $25,000,000 every September 30.

   4. Bonuses to key employees based on net income for 2015 are estimated to be $150,000.

   5. Included in long-term investments are 10-year U.S. Treasury bonds that mature March 31, 2016.

       The bonds were purchased November 20, 2015.

   6. The accounts receivable account includes $20,000 due in three years from employees.

   

   7. The property, plant, and equipment account is stated at cost, except that it includes a parcel of

       land purchased for investment purposes at a cost of $40,000. Because of rising land prices, the

       value of the land has been written up to $60,000. The company has an independent appraisal

        that attests to this amount.

   8. Current liabilities include $50,000 for long-term debt that is due in three months. The company

        has received a firm commitment to refinance the debt for five years and intends to do so.

9. Investments in marketable securities include $20,000 in short-term, high-grade commercial

       paper, which matures in 60 days.

Answer 1

	A. Name of the account to use.	B. Whether it is current or long-term, asset or liability.	C. The amount.
1. On December 15, 2015 the company declared a $2.00 per share dividend on 40,000 shares of common stock outstanding, to be paid on January 5, 2013.	Common Dividend Payable (40,000 shares x $2/share)	Current Liability	$          80,000.00
2. Credit sales for year amounted to $10,000,000. Smith estimates its Allowance for Doubtful Accounts as 3% of credit sales.	Allowance for doubtful accounts	Current Assets (The allowance for doubtful accounts is a valuation account (contra asset) and is deducted from accounts receivable on the balance sheet	$       3,00,000.00
3. At December 31, bonds payable of $100,000,000 are outstanding. The bonds pay 12% interest every September 30 and mature in installments of $25,000,000 every September 30.	Bond Payable	Current Liability	$ 2,50,00,000.00
	Interest Payable	Current Liability	$     30,00,000.00
	Bond Payable	Long term Liability	$ 7,50,00,000.00
4. Bonuses to key employees based on net income for 2015 are estimated to be $150,000.	Salary Payable	Current Liability	$       1,50,000.00
5. Included in long-term investments are 10-year U.S. Treasury bonds that mature March 31, 20 The bonds were purchased November 20, 2015.	Short term Investments	Current Assets
6. The accounts receivable account includes $20,000 due in three years from employee	Non trade Receivables	Long term assets	$          20,000.00
7. The property, plant, and equipment account is stated at cost, except that it includes a parcel of land purchased for investment purposes at a cost of $40,000. Because of rising land prices, the value of the land has been written up to $60,000. The company has an independent appraisal that attests to this amount.	Investments	Long term assets	$          40,000.00
8. Current liabilities include $50,000 for long-term debt that is due in three months. The company has received a firm commitment to refinance the debt for five years and intends to do so.	Debt	Long term Liability	$          50,000.00
Investments in marketable securities include $20,000 in short-term, high-grade commercial paper, which matures in 60 days.	cash and cash equivalents	Current assets	$          20,000.00