33:010:272 Lecture Notes - Lecture 17: Cole Williams, Accounts Payable, Promissory Note

Fridley Manufacturing's accounting records reveal the following account balances after adjusting entries are made on December 31, 2018:

* Long-term liability

Required:

Prepare the current liabilities and long-term debt portions of Fridley's statement of financial position at December 31, 2018. Provide a separate line item for each issue (do not combine separate bonds or notes payable), but some items may need to be split into more than one item.

Required:

1. Open T-accounts for the listed accounts, inserting their unadjustedJune 30, 2014, balances.

2. Post the June 30, 2014, adjusting entries to the T-accounts opened.Round all amounts to the nearest whole dollar.

3. Prepare the liability section ofShell Storage Units’ balance sheet at June 30, 2014

The general ledger of Shell Storage Units at June 30, 2014, theend of the company’s fiscal year, includes the following accountbalances before adjusting entries.

Notes Payable,Short-Term $20,000

AccountsPayable $235,620

Current Portion of Long-term Debt payable

Interest Payable

Salaries payable

Employee Income Tax Payable

Employer Payroll Costs Payable

Employee Insurance Benefits Payable

Estimated Vacation Pay Liability $12,360

Sales Tax and GSTPayable $5972

Unearned RentRevenue $18,000

Long-Term DebtPayable $250,000

The additional data needed to develop the adjusting entries atJune 30 are as follows:

A) The$20,000 short-term note payable was issued on February 28. Itmatures six months from data of issuance and bears interest at6%.

B) Thelong-term debt is payable in annual installments of $50,000 withthe next installment due on August 31. On that date, Shell StorageUnits will also pay one year’s interest at 3%. Interest was lastpaid August 31 of the preceding year.

C) GrossSalaries for the last payroll of the fiscal year were $6328. Ofthis amount, employee payroll withholdings payable were $1365 andsalary payable was $4963.

D) Employer Payroll Costs Payable was $820, and Shell Storage’sliability for employee health insurance was $991.

E) ShellStorage estimates that vacation pay expense is 6% of gross salariesof $147,500 (the $147,500 includes the last payroll of the fiscalyear).

F) On March 1, the company collected one year’s rent of $18,000 inadvance.

G) At June 30,Shell Storage is the defendant in a $200,000 lawsuit, which thecompany expects to win. However, the outcome is uncertain.

Complex Balance Sheet

Presented below is the unaudited balance sheet as of December31, 2016, prepared by Zeus Manufacturing Corporation’sbookkeeper.

Your company has been engaged to perform an audit, during whichyou discover the following information:

Checks totaling $14,000 in payment of accounts payable weremailed on December 31, 2016, but were not recorded until 2017. Latein December 2016, the bank returned a customer’s $2,000 checkmarked "NSF," but no entry was made. Cash includes $100,000restricted for building purposes.

Included in accounts receivable is a $30,000 note due onDecember 31, 2019, from Zeus’s president.

During 2016, Zeus purchased 500 shares of common stock of amajor corporation that supplies Zeus with raw materials. Total costof this stock was $51,300, and fair value on December 31, 2016, was$47,000. The decline in fair value is considered temporary. Zeusplans to hold these shares indefinitely.

Treasury stock was recorded at cost when Zeus purchased 200 ofits own shares for $32 per share in May 2016. This amount isincluded in investments.

On December 31, 2016, Zeus borrowed $500,000 from a bank inexchange for a 10% note payable, maturing December 31, 2021. Equalprincipal payments are due December 31 of each year beginning in2017. This note is collateralized by a $250,000 tract of landacquired as a potential future building site, which is included inland.

The mortgage payable requires $50,000 principal payments, plusinterest, at the end of each month. Payments were made on January31 and February 28, 2017. The balance of this mortgage was due June30, 2017. On March 1, 2017, prior to issuance of the auditedfinancial statements, Zeus consummated a noncancelable agreementwith the lender to refinance this mortgage. The new terms require$100,000 annual principal payments, plus interest, on February 28of each year, beginning in 2018. The final payment is due February28, 2025.

The lawsuit liability will be paid in 2017.

Of the total deferred tax liability, $5,000 is considered acurrent liability.

The current income tax expense reported in Zeus’s 2016 incomestatement was $61,200.

The company was authorized to issue 100,000 shares of $50 parvalue common stock.

Required:

Prepare a corrected classified balance sheet as of December 31,2016.