Mantuhac, Anthony BSA-3

QUESTION: Interest payable as of December 31, 2016 is?

SOLUTION:

300,000 note payable to bank (300,000 x 8% x 4/12) 8,000

Mortgage note payable, 10% (600,000 x 10% x 3/12) 15,000
Mortgage note payable, 12% (1,500,000 x 12% x 8/12) 120,000
Total Interest payable, 12/31/16 143,000

QUESTION: Compute the estimated warranty liability as of 12/31/2015.

SOLUTION:

Estimated liability from warranties,1/1/15 136,000

Add: 2014 warranty expense 108,000
Total 244,000
Less: Actual warranty costs during 2015 164,000
Estimated liability from warranties, 12/31/15 80,000

QUESTION: Total current liabilities as of December 31, 2016 is?

SOLUTION:

Accounts payable 650,000

Notes payable-trade 190,000
Notes payable-bank 300,000
Wages and salaries payable 15,000
Interest payable 143,000
Mortgage note payable, 10% 600,000
Mortgage note payable, 12% 40,000
Bonds payable 2,000,000
Total current liabilities, 12/31/16 3,938,000

QUESTION: The portion of the Note Payable-bank to be reported under current liabilities as of
December 31, 2016 is ?
SOLUTION:

Note payable to bank- payable on demand 300,000

QUESTION: Total non-current liabilities as of December 31, 2016 is
SOLUTION:

Notes payable- bank 500,000

Mortgage payable- 12% 1,460,000
Total non-current liabilities, 12/31/16 1,960,000

QUESTION: Compute the warranty provision for 2015.

SOLUTION:

Sales of musical instruments and sound

reproduction equipment 54,000,000
Estimated warranty cost x2
Warranty expense for 2015 108,000

QUESTION: Compute the estimated premium liability as of 12/31/2015.

SOLUTION:

Estimated premium claims outstanding, Jan. 1,2015 44,800

Add: 2014 premium expense 75,600
Total 120,400
Less: 2014 actual redemptions
(1,200,000/200 = 6,000 x P140) 84,000
Estimated premium claims outstanding, Dec 31, 2015 36,400

QUESTION: Liability under finance lease as of December 31, 2015.

SOLUTION:

Liability under finance leases 430,000

Less: principal payment
Total payment 100,00
Applicable for interest (430,000 x 14%) (60,200 (39,800)
Liability under finance lease, 12/31/15 390,200
QUESTION: Current portion of long-term liabilities as of December 31, 2015
SOLUTION:

Notes payable – bank 1,400,000

Finance lease liability – principal amount 45,372
Current portion of long-term liabilities, 12/31/15 1,445,372

QUESTION: Accrued interest payable as of December 31, 2015,

SOLUTION:

Notes payable- bank (4,200,000 x 12% x 9/12) 378,000

Bonds payable (2,000,000 x 10% x 6/12) 100,000
Accrued interest payable 478,000

QUESTION: Total interest expense for the year 2015.

SOLUTION:

1/1 to 3/31 (5,600,000 x 12% x 3/12) 168,000

4/1 to 12/31 (4,200,00 x 12% x 9/12) 378,000 546,000
Liability under finance lease 60,200
Bonds payable (1,774,00 x 12% x 6/12) 106,440
Total interest expense for the year 2015 712,640