CH 8 Liabilities
CH 8 Liabilities
CH 8 Liabilities
1. D 2. D 3. B 4. C 5. A
6. C 7. B 8. A 9. C 10. A
Problem 1
Jade Corporation
A. Transaction Entries
April 1 Truck 4,000,000
Cash 1,000,000
Notes Payable 3,000,000
B. Adjusting Entries
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Solutions Chapter 8 Liabilities
Problem 2
Sierra Corporation
Current Liabilities
Accounts Payable P 650,000
Notes Payable trade 120,000
Notes Payable Bank 300,000
10% Mortgage Note Payable (with notes to FS) 600,000
Bonds Payable 2,000,000
Interest Payable 250,000
Wages and Salaries Payable 15,000
Total Current Liabilities P3,935,000
Non-Current Liabilities
Refinanced Note Payable, due in 2015 (with note to FS) P 500,000
12% Mortgage Notes Payable, due in 2023 1,500,000
Total Current Liabilities P2,000,000
Total Non-Current Liabilities P5,935,000
Notes to FS
The 10% Mortgage Note Payable was issued October 1, 2009, with a term of 10years.
Terms of the note give the holder the right to demand immediate payment if the
company fails to make a monthly interest payment within 10 days of the date the
payment is due. As of December 31, 2012, the entity is already three months behind in
paying its required interest payment. Hence, the note is reclassified as a current liability.
P500,000 Note Payable, was originally due on January 2, 2011. On December 30, 2012,
The entity negotiated a written agreement with the First Bank to replace this note with a
2-year P500,000 note, which was issued on January 2, 2013.
Problem 3
(Charity, Inc.)
Premium Expense
(2,000,000 x 30%)/10 x P5 = P300,000
Inventory of Premiums
( 36,000 28,000) x P5 = P 40,000
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Solutions Chapter 8 Liabilities
Audit Adjustment:
Problem 4
(Evergreen)
Audit Adjustments:
Loss on Damages 1,200,000
Provision for Construction Damages 1,200,000
Problem 5
SM Department Store
Adjusting entry
3
Solutions Chapter 8 Liabilities
Problem 6
National Finance Company
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Solutions Chapter 8 Liabilities
Problem 7
(Lucky Corporation)
Land 8,000,000
Discount on Notes Payable 2,535,500
Notes Payable (2,633,875 x 4) 10,535,500
Problem 8
(Burnham Smelting Company)
Audit Adjustments
5
Solutions Chapter 8 Liabilities
Problem 9
Timex Company
MULTIPLE CHOICE
1. D
2. D
3. A
4. C
5. A
6. D
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Solutions Chapter 8 Liabilities
7. B
8. D
9. C
10. B
11. B
12. C
13. C
14. B
15. B
16. D
17. D
18. B
19. B
20. B
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Solutions Chapter 8 Liabilities
Items 8 through 11
Items 15 through 20
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Solutions Chapter 8 Liabilities
19. B P240,000
21 25
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Solutions Chapter 8 Liabilities
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