Q28E - Horngren'S Financial And Managerial Accounting

Question

Reporting liabilities

At December 31, MediStat Precision Instruments owes \(52,000 on Accounts

Payable, Salaries Payable of \)12,000, and Income Tax Payable of \(10,000. MediStat

also has \)300,000 of Bonds Payable that were issued at face value that require

payment of a \(35,000 installment next year and the remainder in later years. The

bonds payable require an annual interest payment of \)4,000, and MediStat still

owes this interest for the current year. Report MediStat’s liabilities on its classified

balance sheet on December 31, 2018.

Step-by-Step Solution

Answer

The total liabilities of the company are $378,000.

Step 1: Definition of current liabilities

The current liabilities are type of the liabilities which become due after the period of the 12 months or operating cycle.

Step 2: Calculation of the total liabilities

Medi Stat Precision
Balance Sheet
At December 31
Current Liabilities:
Accounts Payable	$52,000
Current Portion of bonds Payable	$35,000
Salaries Payable	$12,000
Income Taxes Payable	$10,000
Interest Payable	$4,000
Total Current Liabilities		$113,000
Long Term Liabilities:
Bonds Payable	$265,000
Total Long-term liabilities		$265,000
Total Liabilities		$378,000