Question

Presented below are various account balances of K.D. Lang Inc.

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

b) Bank Joans payable of a winery, due March 10, 2021.(the product requires aging for 5 years before sale.)

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.

e) Notes payable due January 15, 2000

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, 2018

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.

Instructions: Indicate whether each of the items above should be classified on December 31, 2017 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. If the classification of some of the items is doubtful, explain why in each case.

Answer 1

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

should be included as Non-current liability

b) Bank Joans payable of a winery, due March 10, 2021.(the product requires aging for 5 years before sale.)

will not be included.

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

should be included

$200000 as current liability

$800000A Non-current Liability

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

should be included as current liability

e) Notes payable due January 15, 2000

doubtful as notes are due in the year 2000 and they must have been paid till now and if not then to be immediately paid otherwise we will have to give interest on that.

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

should be included as current liability

g) Bonds payable of $2,000,000 maturing June 30, 2018

should be included as non-current liability/long term liability

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

should be included as current liability

I) Deposits made by customers who have ordered goods.

should be included as current liability