Question

2. ABC Co reported as eith The following items may be ABC Corporation is preparing its December 31, 2020, balance sheet. The following en vorted as either a current or long-term liability. i. On June 1, 2020 the company purchased equipment for $140,000 from XYZ.Com $50,000 in cash and signing a one-year 9% note for the balance (both note an due in one year). ii. On December 1, 2020, ABC declared a cash dividend of $1.50 per share to record on December 20, 2020. The dividend is payable on January 20, 20 500,000 shares of common stock, of which 90,000 shares are held in treasury. $140,000 from XYZ Company, paying te balance (both note and interest are Payable on January 20, 2021. ABC has issued Instructions For each item above, indicate the dollar amounts to be reported as term liability, if any. (6 points) current liability and as a long-

Answer 1

Non Current Liabilities are the liabilties that are to be paid not within a period of next 12 months. Current Liabilities are that the liabilities that are to be settled within a period of next 12 months Solution i. Price of Equipment Cash Paid 9% Note Payable $ $ $ 1,40,000 50,000 90,000 As both, Interest and Note is Payble within one year, it will be classified as | Current Liability of $90,000 Solution ii. Dividend on Treasury shares is not to be paid Hence, Dividend will be paid on (500000 - 90000) share = 410,000 shares Declared dividend ($1.50 x 410,000) $ 6,15,000 Dividend Declaration date Dividend Payable on Payable within 01-Dec-20 20-Jan-21 50 days As the dividend is to be paid within just 50 days it is a Current Liability Current Liability of $615,000

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