ABC Company provided the following account balance on December 31, 2020: Accounts payable and accruals 700,000 Bonds payable 3,500,000 Stock dividends payable, issuance in 2021 250,000 Provisions 700,000 Further analysis of ABC Company’s accounts revealed the following: Accounts payable and accruals included the following: Bank overdraft – BPI account, ₱40,000; ABC Company does not have any other account in BPI. Accrued expenses for utilities, ₱90,000. Bonds payable included the following: 6% term – bonds, maturity date January 1, 2021. 8% serial bonds, ₱2,000,000 of which 250,000 matures every December 31. 10%, term – bonds, maturity date January 1, 2026, recorded at face amount of ₱1,000,000; the bonds were issued on December 31, 2020 at a discount of ₱120,000 giving it a yield rate of 12% and was recorded as expense. PRELIM – ACT17 | M. MANAYAO,CPA 3 Provisions included the following: ₱500,000 representing the estimated cost to clean up a small lake due to contamination caused by a leak in ABC Company’s plant. ₱200,000 was expected to be incurred in 2021 and ₱300,000 in 2022. ₱200,000 the estimated amount provided by ABC Company’s legal counsel in relation to a court case being faced by the Company in which ABC Company is reasonably possible to lose. 1. What amount should be reported as total current liabilities? 2. What amount should be reported as total noncurrent liabilities?
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
ABC Company provided the following account balance on December 31, 2020:
Accounts payable and accruals 700,000
Bonds payable 3,500,000
Stock dividends payable, issuance in 2021 250,000
Provisions 700,000
Further analysis of ABC Company’s accounts revealed the following:
Accounts payable and accruals included the following:
Bank overdraft – BPI account, ₱40,000; ABC Company does not have any other account in BPI.
Accrued expenses for utilities, ₱90,000.
Bonds payable included the following:
6% term – bonds, maturity date January 1, 2021.
8% serial bonds, ₱2,000,000 of which 250,000 matures every December 31.
10%, term – bonds, maturity date January 1, 2026, recorded at face amount of ₱1,000,000; the bonds
were issued on December 31, 2020 at a discount of ₱120,000 giving it a yield rate of 12% and was
recorded as expense.
PRELIM – ACT17 | M. MANAYAO,CPA 3
Provisions included the following:
₱500,000 representing the estimated cost to clean up a small lake due to contamination caused by a
leak in ABC Company’s plant. ₱200,000 was expected to be incurred in 2021 and ₱300,000 in 2022.
₱200,000 the estimated amount provided by ABC Company’s legal counsel in relation to a court case
being faced by the Company in which ABC Company is reasonably possible to lose.
1. What amount should be reported as total current liabilities?
2. What amount should be reported as total noncurrent liabilities?
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