The following are selected items from the accounting records of Seattle Chocolates for the year ended December 31. 2007:
Note payable to Northwest Bank | $500,000 |
Income taxes payable | 40,000 |
Accrued expenses and payroll taxes | 60,000 |
Mortgage note payable | 750,000 |
Accrued interest on mortgage note payable | 5,000 |
Trade accounts payable | 250,000 |
Unearned revenue | 15,000 |
Potential liability in pending lawsuit | 100,000 |
Other Information
1. The note payable to Northwest Bank is due in 60 days. Arrangements have been made to renew this note for an additional 12 months.
2. The mortgage requires payments of $6,000 per month. An amortization table shows thai its balance will be paid down to $739,000 by December 31. 2008.
3. Accrued interest on the mortgage note payable is paid monthly. The next payment is due near the end of the first week in January 2008.
4. Seattle Chocolates has been sued for $1000,000 in a contract dispute. It is not possible at this time, however to make a reasonable estimate of the possible loss, if any, that the company may have sustained.
Instructions
a. Using the information provided, prepare the current and long-term liability sections of the company’s balance sheet dated December 31,2007. (Within each classification, items may be listed in any order.)
b. Explain briefly how the information in each of the four numbered paragraphs above influenced your presentation of the company’s liabilities.
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