Question

Chapter 10 Accounting for Liabilities EXERCISES-SET B E10-1B. Liabilities on the Balance Sheet For each of the following situations, indicate the amount shown LO1 39,255 ,279 as a liability on the balance sheet of Anchor, Inc., at December 31: a. Anchor's general ledger shows a credit balance of $125,000 in Long-Term Notes Payable. Of ·.. . . this amount, a $25,000 installment becomes due on June 30 of the following year Anchor estimates its unpaid income tax liability for the current year is $34,000; it plans to pay this amount in March of the following year On December 31, Anchor received a $15,000 invoice for merchandise shipped on December 28. The merchandise has not yet been received. The merchandise was shipped F.O.B. shipping point. During the year, Anchor collected $10.500 of state sales tax. At year-end, it has not yet remitted $1,400 of these taxes to the state department of revenue. On December 31, Anchor's bank approved a $5,000,90-day loan. Anchor plans to sign the note and receive the money on January 2 of the following year. b. c. d. e.

Answer 1

Answer a. long term notes payable are similar to short term interest bearing notes payable except that the term of the notes exceed one year. a long term notes may be secured by a mortgage that pledges title to specific assets as security for a loan.

companies initially record mortgage notes payable at face value. they subsequently make entries for each installment payment.

in the balance sheet the company reports the reduction in principal for the next year as current liability and it classifies the remaining unpaid principal balance as a long term liability.

for the question amount $25000 will be reported as current liability and and $ 100,000 will be long term liability.

Answer b. Income tax payable is a type of account in the current liabilities section of a company's balance sheet. It is compiled of taxes due to the government within one year, any portion of income tax payable not scheduled for payment within the next 12 months is classified as a long-term liability.

in the balancesheet the company reports the income tax liability under the head current liability.

in the question $34,000 will be reported under the head current liability in the balancesheet.

Answer c. Goods in transit means when goods are left from the seller dock but did not received by the buyer on that particular date. this concept is using to indicate who has taken the possession and who is paying freight.

freight terms are expressed as either FOB shipping point or FOB destination.

FOB shipping point means seller place the goods free on board and buyer pays the freight and ownership on the goods immediately transfers to the buyer.

in the question company records purchase transaction on 31 st dec. whether goods are received or not.

so in the balance sheet it will increase the inventory by $15000 and record creditors under current liability of $15000.

Answer d. the selling company collects the tax from the customers when the sales occur and the retailer remits the collection to the state revenue department.

the company does not report sales tax as expense. it simply forward it to the government it acts like a collection agent.

in the question amount $1400 which is not remitted to the government shows under current liability as sales tax payable.

Answer e. companies record obligation in the form of written notes as notes payable. notes payable are often used instead of accounts payable because they give the lender formal proof of the obligation. companies issue notes payable to meet short term financing needs.

notes are issued for varying periods of time. those due for payment within one year of the balancesheet date are usually classified as current liability.

in the question, notes payable is approved but company neither sign it nor collected the money.

so company will record this transaction when it will sign it and collect money.