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ACCT 1220 Lecture Notes - Lecture 10: Sales Taxes In Canada, Accounts Payable, Contingent Liability

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School
University of Guelph
Department
Accounting
Course
ACCT 1220
Professor
Philippe Lassou

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Document Summary

Chapter 10: a further look at financial statements. Lo2: account for instalment notes payable (notes which are long-term liabilities) Lo3: identify the requirements for the financial statement presentation and analysis of liabilities: liabilities, present obligations resulting from past transactions, classified as current and non-current. Provisions and contingent liabilities: operating line of credit, pre-arranged agreement between a company and a lender to allow the company to borrow up to an agreed-upon amount, to help manage temporary cash shortfalls. . 3: cr sales rev, cr sales tax payable. . 3: when they pay back, dr sales tax payable, cr cash. Issued for varying periods of time: if due within one year of financial statement date, they are classified as current liabilities. Includes instalment notes payable, bonds payable, and finance leases: secured notes are known as mortgages if the note has property as collateral, installment notes payable, normally repayable in a series of periodic payments called installments.

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Related Questions

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

Accounts payable $ 62,500
Bonds payable (9.4%, due in 2025) 800,000
Lease liability* 41,500
Bonds payable (8.7%, due in 2021) 50,000
Deferred tax liability* 133,400
Discount on bonds payable (9.4%, due in 2025) 12,600
Income tax payable 26,900
Interest payable 38,700
Installment note payable (8% equal installments due 2019 to 2022) 120,000
Notes payable (7.8%, due in 2023) 400,000
Premium on notes payable (7.8%, due in 2023) 6,100
Zero coupon note payable, $50,000 face amount, due in 2024 (net of discount) 31,900

* 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.

Fridley Manufacturing
Liabilities Section of the Statement of Financial Position
December 31, 2018
Liabilities
Current liabilities:
Accounts payable $
Interest payable
Income tax payable
Current portion of installment note
Total current liabilities $
Long-term liabilities:
Bonds payable:
Bonds payable (8.7%, due in 2021)
Bonds payable (9.4%, due in 2025) $
Less: Discount on bonds payable
Notes payable:
Notes payable (7.8%, due in 2023) $
Add: Premium on notes payable
Installment note payable (8%)
Note payable (4%, due in 2024) $
Less: Discount on note payable
Other long-term liabilities:
Lease liability
Deferred tax liability
Total liabilities $

In addition to presenting the computed answers, please also discuss how you arrived at each answers the accounting problem asks. The accounting problem presents a company’s balance sheet and income statement. The Diamond Gem Cleaning and Maintenance Service Company is in the business of contracting its cleaning and maintenance services to office buildings. The balance sheet and income statement have blank lines. Determine the values that would be appropriate for each blank line. Provide a narrative of how you arrived at each value. In doing so, explain the account being valued and its relationship to the other financial data. For example, if the accounts payable line was missing, explain that you can derive its value based on knowing all the other values of the current liabilities section. Then explain what an account liability is, as well as why it would belong in the current liabilities section of the balance sheet

Please refer to the income statement and balance sheet of the Diamond Gem Cleaning and Maintenance Service Company available down:

Superior papers will mention and explain the following elements when responding to the assignment question:

Provide correct balances for the blank financial account lines.

Provide a narrative about how the values were determined.

Provide a definition and explanation of each account line that was completed

Balance sheet
ASSETS
CURRENT ASSETS
Cash 225,971
Contracts receivables [__A____]
Other assets 162,847
Total current assets 893,868
LONG TERM ASSETS
Equipment [___B____]
TOTAL ASSETS 1,180,660
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable [__C____]
Line of credit 85,000
Accrued expenses 72,495
Income tax payable 46,660
Current portion of notes payable 31,747
Deferred income taxes 78,460
Total current liabilities 571,697
LONG TERM LIABILITIES
Notes payable (long term) 172,467
TOTAL LIABILITIES 744,164
STOCKHOLDERS' EQUITY
Common stock 62,000
Additional paid-in capital 63,862
Retained Earnings [___D___]
Total stockholders' equity 436,496
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY [___E___]
Income sheet
Contract Revenues 5,146,862
Contract Costs [___F____]
Gross Profit 614,343
General and Administrative Expenses 322,356
Operating Income 291,987
Other Expense 25,770
Income Before Provision for Income Taxes 266,217
Provision for Income Taxes [__G____]
Net Income 150,767
Retained Earnings, Beginning Balance [__H____]
Net Income 150,767
Retained Earnings, Ending Balance 310,634

QUESTION 2 (25 Marks: 45 minutes)

2.1 Answer the following questions:

a) Define current liabilities (2 marks)

b) Define current assets (2 marks)

c) In which sequence should notes to the financial statements be presented? (2 marks)

d) Discuss the identification of financial statements as noted in IAS 1. (2 marks)

e) Discuss consistency of presentation as a general feature of financial statements. (2 marks)

f) Discuss materiality and aggregation as a general feature of financial statements.(2 marks)

2.2 You are provided with the following statement of financial position of Brabham Limited:

Statement of financial position ON 31 December 20.12

ASSETS Land and buildings 165

Vehicle 85

Furniture’s 45

Share Capital (2 000 000 authorised NPV shares) 125

Cash on hand (cash float) 5

Bank overdraft (2)

Inventory 26

Trade and other debtors 15

Shareholders for dividends 11

Total assets 475

Equity and liabilities

Retained earnings 305

Trade and other creditors 110

Long term loans 79

Accumulated depreciation 21

Income tax expense 30

Total equity and liabilities 515

Required 1. Critically evaluate the presentation of the above statement according to the requirement of IAS 1. (13 marks)