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Coltrane Company has a \(5,000 note payable that is paid in \)1,000 installments over five years. How would the portion that must be paid within the next year be reported on the balance sheet?

Short Answer

Expert verified

The current portion of notes payable would be shown under the current liability in the balance sheet.

Step by step solution

01

Current portion of long term liability

Long-term liability is the obligation that is payable for more than a year says 5 years or 10 years. But as soon as a portion of the obligation is paid off, long-term liability gradually reduces. That portion that is paid in the current year is called the current portion of long-term liability.

02

Treatment of the current portion of notes payable in the given case

The note payable is a long-term liability. In the given case long-term liability amounts to $5,000. But this liability is paid off in the annual installment of $1,000.

So next year $1,000 would be payable. This $1,000 would be the current portion of notes payable for next year. As the current portion would be payable only in that year it would be treated as a current liability.

In the given case, this current portion in the balance sheet would be reported under the current liability section, and notes payable would be shown with the reduced balance under long term liability.

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Most popular questions from this chapter

Question:The income statement for Vermont Communications follows. Assume VermontCommunications signed a 3-month, 3%, \(6,000 note on June 1, 2018, and that thiswas the only note payable for the company.

Vermont Communications

Income Statement

Year Ended July 31, 2018

Net Sales Revenue

\) 26,500

Cost of Goods Sold

12,200

Gross Profit

14,300

Operating Expenses:

Selling Expenses

\( 690

Administrative Expenses

1,550

Total Operating Expenses

2,240

Operating Income

12,060

Other Income and (Expenses):

Interest Expense

?

Total Other Income and (Expenses)

?

Net Income before Income Tax Expense

?

Income Tax Expense

2,410

Net Income

\) ?

Requirements

1. Fill in the missing information for Vermontโ€™s year ended July 31, 2018, incomestatement. Round to the nearest dollar.

2. Compute the times-interest-earned ratio for the company. Round to twodecimals.

Lucy Rose works at College of Fort Worth and is paid $12 per hour for a 40-hour workweek and time-and-a-half for hours above 40.

Requirements

1. Compute Roseโ€™s gross pay for working 60 hours during the first week of February.

2. Rose is single, and her income tax withholding is 15% of total pay. Roseโ€™s only payroll deductions are payroll taxes. Compute Roseโ€™s net (take-home) pay for the week. Assume Roseโ€™s earnings to date are less than the OASDI limit.

3. Journalize the accrual of wages expense and the payment related to the employment of Lucy Rose.

This problem continues the Canyon Canoe Company situation from Chapter 10. Amber and Zack Wilson are continuing their analysis of the companyโ€™s position and believe the company will need to borrow \(15,000 in order to expand operations. They consult Rivers Nation Bank and secure a 6%, one-year note on September 1, 2019, with interest due at maturity. Additionally, the company hires an employee, John Vance, on September 1. John will receive a salary of \)3,000 per month. Payroll deductions include federal income tax at 25%, OASDI at 6.2%, Medicare at 1.45%, and monthly health insurance premium of \(250. The company will incur matching FICA taxes, FUTA tax at 0.6%, and SUTA tax at 5.4%. Round calculations to two decimals. Omit explanations on journal entries.

Requirements

  1. Record the issuance of the \)15,000 note payable on September 1, 2019.
  2. Record the employee payroll and employer payroll tax entries on September 30, 2019.
  3. Record all payments related to Septemberโ€™s payroll. Payments are made on October 15, 2019.
  4. Record the entry to accrue interest due on the note at December 31, 2019.

Record the entry Canyon Canoe Company would make to record the payment to the bank on September 1, 2020.

The income statement for California Communications follows. Assume California Communications signed a 3-month, 9%, $3,000 note on June 1, 2018, and that this was the only note payable for the company.

Requirements

1. Fill in the missing information for Californiaโ€™s year ended July 31, 2018, income statement. Round to the nearest dollar.

2. Compute the times-interest-earned ratio for the company. Round to two decimals.

On January 1, Irving Company purchased equipment of \(280,000 with a long-term note payable. The debt is payable in annual installments of \)56,000 due on December 31 of each year. At the date of purchase, how will Irving Company report the note payable?

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