Question

Chapter 10 Bonds and Other Liabilities problems

Problem 1

The following items are of financial interest to the investors and creditors of Sunlife corporation

            

                                                                                                Bonds Payable                                    $1,000,000

                                                                                                Accounts Payable                                    100,000

                                                                                                Salaries Payable                                          20,000

                                                                                                Unfunded pension liability                        800,000

                                                                                                Installment Note Payable                          500,000

                                                                                                Unearned ticket revenue                            100,000

                                                                                                Notes Payable                                              80,000

                                                                                                Interest Payable                                           50,000

Also                            The Notes Payable are due in 3 months

                        $50,000 of the principal payment of the installment loan is due to be paid this year.

Required: Prepare the liabilities section of the Balance Sheet (separate current liabilities and long-term liabilities)

Problem 2

Smith Corporation received approval to issue $1,000,000 of 9%, 20 year Bonds.  The Bonds have interest payment dates of September 30^th and March 31^st.  The Bonds are issued at a price of 100 plus accrued interest on May 31^st, 2017. Prepare the journal entries that will be needed on (1) May 31,2017 to record the issuance of the bonds, (2) September 30^th2017 to record the first payment of interest, and December 31, 2017 to record the adjusting entry necessary related to the bonds.

May 31

Sept 30

Dec 31

Answer 1

Current Liabilities - Current Liabilites of a company consists of short term financial obligations that are due typically within one year. It could also be based on company's operating cycle.

Long Term Liabilities - Long term liabilites also refered as Non Current Liabilites. These are liabilites are not due within one year or in the operating cycle of the company

Extract of Balance Shhet of Sunlife Corporation ( For period Ended on --------)

Particulars	Amount
Non Current Liabilites(Long Term Liabilities)
Bonds Payable	10,00,000
Unfunded Pension Liabilites	8,00,000
Installment Note Payable	4,50,000
Non Current Liabilites(Long Term Liabilities)	22,50,000
Current Liabilites
Accounts Payable	1,00,000
Salaries Payable	20,000
Installement Note Payable	50,000
Unearned Ticket revenue	1,00,000
Notes Payable	80,000
Interest Payable	50,000
Total Current Liabilites	4,00,000

As per Cheeg guideline in case of multiple questions, we are allowed to answer only first question. Therefore solution of first question is provided. Hope that you find it helpful