xercise 5-8 Frederic Chopin Corporation is preparing its December 31, 2014, bala
ID: 2467946 • Letter: X
Question
xercise 5-8 Frederic Chopin Corporation is preparing its December 31, 2014, balance sheet. The following items may be reported as either a current or long-term liability
For each item above, indicate the dollar amounts to be reported as a current liability and as a long-term liability, if any.
Reported as
1. On December 15, 2014, Chopin declared a cash dividend of $2.62 per share to stockholders of record on December 31. The dividend is payable on January 15, 2015. Chopin has issued 1,000,000 shares of common stock, of which 50,000 shares are held in treasury. 2. At December 31, bonds payable of $109,650,000 are outstanding. The bonds pay 12% interest every September 30 and mature in installments of $26,761,000 every September 30, beginning September 30, 2015. 3. At December 31, 2013, customer advances were $14,792,000. During 2014, Chopin collected $31,296,000 of customer advances; advances of $27,021,000 should be recognized in income.Explanation / Answer
1.
Dividends payable of $2,489,000 will be reported as a current liability [(1,000,000 – 50,000) * $2.62].
2.
No amounts are reported as a current or long-term liability
3.
Bonds payable of $26,761,000 and interest payable of $3,289,500 ($109,650,000* 12% * 3/12) will be reported as a current liability.
Bonds payable of $82,889,000 will be reported as a long-term liability.
4.
Customer advances of $19,067,000 will be reported as a current liability ($14,792,000 + $31,296,000 - $27,021,000)
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