1 answer

Exercise 14-01 Presented below are various account balances of Blue Sky Inc.. Indicate whether each of...

Question:

Exercise 14-01

Presented below are various account balances of Blue Sky Inc..

Indicate whether each of the items below should be classified on December 31, 2020, as a current liability, a long-term liability, or under some other classification. Consider each one independently from all others; that is, do not assume that all of them relate to one particular business.

CLASSIFY EACH: (a-i)

(a) Unamortized premium on bonds payable, of which $3,000 will be amortized during the next year.

(b) Bank loans payable of a winery, due March 10, 2024. (The product requires aging for 5 years before sale and the loan will be paid from sales revenue.)

(c) Serial bonds payable, $1,000,000, of which $200,000 are due each July 31.

(d) Amounts withheld from employees' wages for income taxes.

(e1) Notes payable due January 15, 2023. (operating cycle is greater than one year and current assets are used)

(e2) Notes payable due January 15, 2023. (otherwise)

(f) Credit balances in customers' accounts arising from returns and allowances after collection in full of account.

(g) Bonds payable of $2,000,000 maturing June 30, 2021.

(h) Overdraft of $1,000 in a bank account. (No other balances are carried at this bank.)

(i) Deposits made by customers who have ordered goods.


Answers

Classifications of the items below

a) Long term liability- Unamortized premium on bonds payable, of which $3,000 will be amortized during the next year.

b) Current Liability- Bank loans payable of a winery, due March 10, 2024.

c) Current and long term liability- Serial bonds payable, $1,000,000, of which $200,000 are due each July 31

d) Current liability- Amounts withheld from employees' wages for income taxes.

e) Current liability- Notes payable due January 15, 2023. (operating cycle is greater than one year and current assets are used)

e(2) Long term liability- Notes payable due January 15, 2023

f) Current liability- Credit balances in customers' accounts arising from returns and allowances after collection in full of account.

g) Current liability- Bonds payable of $2,000,000 maturing June 30, 2021.

h) Current liability- Overdraft of $1,000 in a bank account.

i) Current liability- Deposits made by customers who have ordered goods

.

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