Question

Problem:

Answer each of the following questions related to various short-term liabilities:

a.  

On September 1, 2016, a company borrowed $100,000 from its bank and signed a nine-month note with 8% interest. The principal and interest on the loan are to be paid when the note matures. What is the total amount related to this loan that should be reported under current liabilities on the company's December 31, 2016, statement of financial position?

b.  

The balance in a company's long-term mortgage payable account on December 31, 2016, is $150,000. This is to be repaid at the rate of $25,000 per year for the next six years. How should this liability be reported on the company's statement of financial position on December 31, 2016?

c.  

During the spring and summer of 2016, the Prairie Predators hockey team sold 2,000 season tickets for the 2016-2017 hockey season. Each of the season tickets was sold for $500 and covered 20 games, with 8 to be played in the fall (October to December) and 12 in the winter (January to March). What is the effect on the team's financial statements when the season tickets are sold? What amount of liability (if any) related to the season tickets should be reported on the team's December 31, 2016, statement of financial position?

d.  

Bathurst Beverages Ltd. collects cash deposits on its returnable bottles and other containers. Past experience indicates that virtually all the bottles and containers will be returned and the deposits refunded. During the current year, the company received $150,000 in such deposits and it disbursed $140,000 for bottles and other containers that were returned. How would this information be reflected in the year-end statement of financial position for Bathurst Beverages?

e.  

During the current year, a company sold 10,000 units of a product that was covered by a two-year warranty. Past experience indicates that approximately 3% of the units sold will require warranty repairs, at an average cost of $50 per unit. The actual costs incurred during the year for repairs under the warranty totalled $7,000. What amount of liability (if any) should be reported on the company's statement of financial position at the end of the current year?

Answer 1