TEST BANK FOR INTERMEDIATE ACCOUNTING 2

[TESTBANK] Intermediate Accounting 2 Valix
(Solution Manual)PROBLEM SOLVING WELL
SOLVED AND VERIFIED

,INTERMEDIATE ACCOUNTING 2
Problem 1-1
Accounts Payable including deposits and advance 1,250,000
Notes Payable (1,500,000 – 500,000) 1,000,000
Credit balance in customer’s accounts 200,000
Serial bonds payable semiannual 500,000 1,000,000
Accrued interest on bonds payable 150,000
Unearned rent income 100,000
TOTAL CURRENT LIABILITIES 3,700,000

Problem 1-2
Notes Payable 5,500,000
Accounts Payable-Trade 4,000,000
Bank overdraft 300,000
Dividends Payable 1,000,000
Withholding Tax Payable 100,000
Income Tax Payable 800,000
Estimated Warranty Liability 600,000
Estimated damages payable breach of contract 700,000
Accrued Liabilities 900,000
Estimated Premium Liability 200,000
TOTAL CURRENT LIABILITIES 14,100,000

Problem 1-3
Income taxes withheld from employees 900,000
Cash overdraft 1,300,000
Accounts Receivable with credit balance 750,000
Estimated expenses of warranties 500,000
Estimated damages 1,500,000
Accounts Payable 3,000,000
Accrued interest (5,000,000 x 12% x 3/12) 150,000
TOTAL CURRENT LIABILITIES 8,100,000

Problem 1-4
Accounts Payable 600,000
Accrued Liabilities 50,000
Note Payable – due March 31, 2021 1,000,000
Note Payable – due May 1, 2021 800,000
TOTAL CURRENT LIABILITIES 2,450,000

TOTAL NONCURRENT LIABILITIES 2,000,000

,CURRENT LIABILITIES:
Note Payable – 9% - 3,000,000 (noncancelable)
Note Payable – 8% - 6,000,000 (requirement is to reclassify even if it is not
expected to be called)
Note Payable – 11% - 5,000,000 (refinancing happens after the reporting period)

NONCURRENT LIABILITIES
Note Payable – 10% - 4,000,000 (corrected within the grace period)

Problem 1-6
CURRENT LIABILITIES:
Accounts Payable 7,000,000
Note Payable – bank 12,000,000
Accrued Expenses 4,000,000 23,000,000

NONCURRENT LIABILITIES
Mortgage Payable 4,000,000
Note Payable – due in 2022 3,000,000 7,000,000
TOTAL LIABILITIES 30,000,000

Financial statement disclosures:
The note payable is paid from the proceeds of the issuance of share capital of 4,000,000
on January 31, 2021 and the availment of a financing agreement on February 15, 2021
with a financially capable commercial bank on April 1, 2021 in the amount of 3,000,000.
Nevertheless, the note payable should continue to be classified as current.

Problem 1-7
Accounts Payable 6,500,000
Notes Payable – bank 3,000,000
Interest Payable 150,000
Mortgage Note Payable – 10% 2,000,000
Bonds Payable 4,000,000
TOTAL CURRENT LIABILITIE S 15,650,000

Problem 1-8
Accounts Payable 4,100,000
Accrued Expenses 1,500,000
Credit balances of customers’ accounts 500,000
Estimated expenses 600,000
CURRENT LIABILITIES (A) 6,700,000

, Problem 1-9
Accounts Payable 1,900,000
Dividends Payable 500,000
Income Tax Payable 900,000
Note Payable, due January 31, 2021 600,000
CURRENT LIABILITIES (C) 3,900,000

Problem 1-10
14% note, due 2021 30,000
8% note payable maturing December 31, 2021 (1,100,) 100,000
CURRENT LIABILITIES (D) 130,000

Problem 1-11

Current Liabilities (B) 5,000,000
Problem 1-12
Accounts Payable 1,000,000
Debentures Payable 500,000
CURRENT LIABILITIES (C) 1,500,000

Problem 1-13

Current Liabilities (A) (due to be settled in one year regardless of issuance of bonds)
750,000
Problem 1-14
Note Payable 2,000,000
Value of the collateral x 80% 1,200,000
CURRENT LIABILITIES (C) 800,000

Problem 1-15

Accounts Payable 750,000
Short-term borrowings 400,000
Mortgage Payable – current 100,000
Bank Loan Payable 1,000,000
CURRENT LIABILITIES (B) 2,250,000

Problem 1-16

Unearned Revenue, beg 650,000
Gift certificates sold 2,250,000
Gift certificates redeemed (1,950,000)
Gift certificates unredeemed (100,000)
Unearned Revenue, end (C) 850,000