Problem 1-7 (IAA)Cavalier Company provided the following information onDecember 31, 2020:Accounts payableNotes payable -bankInterest payableMortgage note payable – 10%Bonds payable6,500,0008,000,000150,0002,000,0004,000,000Bank notes payable include two separate notes payable toFirst Bank.A P3,000,000, 10% note issued March 1, 2019, payable ondemand. Interest is payable every six months.A one-year, P5,000,000, 11% note issued January 2, 2020.On December 31, 2020, the entity negotiated a writtenagreement with First Bank to replace the note with a2-year, P5,000,000, 10% note to be issued January 2, 2021.The 10% mortgage note was issued October 1, 2019 with aterm of 10 years.Terms of the note give the holder the right to demandimmediate payment if the entity fails to make a monthlyinterest payment within 10 days of the date the payment isdue.On December 31, 2020, the entity is three months behind inpaying the required interest payment.The bonds payable are 10-year, 8% bonds, issued June 30,2011. Interest is payable semiannually on June 30 andDecember 31.Required:Compute the total current liabilities on December 31, 2020.

Current liabilities can be defined as the current financial obligation of the business entity. It is…

Answered: Compute the total current liabilities…

Business

Accounting

Compute the total current liabilities on December 31, 2020.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Problem 1-7 (IAA)
Cavalier Company provided the following information on
December 31, 2020:
Accounts payable
Notes payable -bank
Interest payable
Mortgage note payable – 10%
Bonds payable
6,500,000
8,000,000
150,000
2,000,000
4,000,000
Bank notes payable include two separate notes payable to
First Bank.
A P3,000,000, 10% note issued March 1, 2019, payable on
demand. Interest is payable every six months.
A one-year, P5,000,000, 11% note issued January 2, 2020.
On December 31, 2020, the entity negotiated a written
agreement with First Bank to replace the note with a
2-year, P5,000,000, 10% note to be issued January 2, 2021.
The 10% mortgage note was issued October 1, 2019 with a
term of 10 years.
Terms of the note give the holder the right to demand
immediate payment if the entity fails to make a monthly
interest payment within 10 days of the date the payment is
due.
On December 31, 2020, the entity is three months behind in
paying the required interest payment.
The bonds payable are 10-year, 8% bonds, issued June 30,
2011. Interest is payable semiannually on June 30 and
December 31.
Required:
Compute the total current liabilities on December 31, 2020.

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