Q36PGA_1 - Horngren'S Financial And Managerial Accounting

Question

Reporting liabilities on the balance sheet and computing debt to equity ratio. The accounting records of Pack Leader Wireless include the following as of December 31, 2018:

Accounts Payable \( 77,000 Salaries Payable \) 7,500

Mortgages Payable (long-term) 73,000 Bonds Payable (current portion) 25,000

Interest Payable 18,000 Premium on Bonds Payable 10,000

Bonds Payable (long-term) 63,000 Unearned Revenue (short-term) 2,700

Total Stockholders’ Equity 140,000

Requirements

1. Report these liabilities on the Pack Leader Wireless balance sheet, including headings and totals for current liabilities and long-term liabilities.

2. Compute Pack Leader Wireless’s debt to equity ratio at December 31, 2018.

Step-by-Step Solution

Answer

The total of the liabilities side is $343, 200.

Step 1: Definition of the interest payable

The interest payable is those interest amount that are due and not paid by the company.

Step 2: Balance Sheet

Pack Leader Wireless
Balance Sheet
As of December 31, 2018
Current Liabilities:
Accounts Payable	$77,000
Salaries Payable	$7,500
Bonds Payable (Current Portion)	$25,000
Interest Payable	$18,000
Unearned Revenue	$2,700
Total Current Liabilities		$130,200
Long-term Liabilities:
Bonds Payable	$63,000
Add: Premium on Bonds Payable	$10,000
Shareholder’s Equity	$140,000
Total Long-term Liabilities		$213,000
Total Liabilities		$343,200