Question

(Ch. 13) At the financial statement date of December 31, 2019, the liabilities outstanding of Pollard Corporation included the following: 1. Cash dividends on common stock, $70,000, payable on January 15, 2020. 2. Note payable to Wabaso State Bank, S570,000, due January 20, 2020 3. Serial bonds, $2,100,000, of which $520,000 mature during 2020, 4. Note payable to Orlando National Bank, $400,000, due January 27, 2020. Hint: review the Ch. 13 PPTs (slides 42 and 44) that give you the info you need to know on how to treat this after reading the Jan. 26 transaction info below. The following transactions occurred early in 2020: January 15: The cash dividends on common stock were paid. January 20: The note payable to Wabaso State Bank was paid. January 25: The corporation entered into a financing agreement with Wabaso State Bank, enabling it to borrow up to $500,000 at any time through the end of 2022. Amounts borrowed under the agreement would bear interest at 1% above the bank's prime rate and would mature 3 years from the date of the loan. The corporation immediately borrowed $400,000 to replace the cash used in paying its January 20 note to the bank. January 26: 40.000 shares of common stock were issued for $340,000 $300,000 of the proceeds was used to liquidate the note payable to Orlando National Bank. February 1: The financial statements for 2019 were issued. Instructions: Prepare a partial balance sheet for Pollard Corporation, showing the manner in which the above liabilities should be presented at December 31, 2019. The liabilities should be properly classified between current and long-term, and appropriate note disclosure should be included.

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Answer 1

Pollard Corporation Partial Balance Sheet as on December 31, 2019 Current Liabilities: Dividends payable Notes payable - Wabaso State Bank Current portion of Serial bonds 70,000 5,70,000 5,20,000 $ 11,60,000 Total current liabilities Long-term Liabilities: Notes payable - Orlando National bank, refinanced in January 2018 - Note 1 Serial bonds - Long-term portion Total Long-term liabilities 4,00,000 $ 15,80,000 $ 19,80,000 $ 31,40,000 TOTAL LIABILITIES Note 1: On January 26, 2020, the corporation issued 40,000 shares of common stock and received proceeds totalling $340,000, of which $300,000 was used to liquidate a note payable that matured on January 27, 2020. Accordingly, such notes payable has been classifed as a long-term liability at December 31, 2019.