Q18E_2
Question
Accounting for long-term notes payable transactions
Consider the following note payable transactions of Caleb Video Productions.
2018
Oct. 1 Purchased equipment costing \(80,000 by issuing a five-year, 8% note
payable. The note requires annual principal payments of \)16,000 plus
interest each October 1.
Dec. 31 Accrued interest on the note payable.
2019
Oct. 1 Paid the first installment on the note.
Dec. 31 Accrued interest on the note payable.
Requirements
1. Journalize the transactions for the company.
2. Considering the given transactions only, what are Caleb Video Productions’ total
liabilities on December 31, 2019?
Step-by-Step Solution
VerifiedThe total liabilities of the company are $65,280
The interest payable is the short-term liabilities which arises due to unpaid amount of the interest in the books of accounts.
Caleb Video Productions | ||
Balance Sheet | ||
As of December 31, 2019 | ||
Current Liabilities |
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Interest Payable | $1,280 |
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Non-Current Liabilities |
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8% Notes Payable ($80,000 - $16,000) | $64,000 |
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Total Liabilities |
| $65,280 |