Current liabilities: Current liabilities are obligations of a company. The company liquidates the current liabilities by using its current assets or by creating other current liabilities. To determine: To determine the amount of current liability to be reported in the balance sheet . (a) Solution: No amount will be reported on the balance sheet as current liability. Explanation: For a liability to get reported on balance sheet the amount should be probable and the amount of payment should be reasonably estimable. In this case, the above mentioned criteria are not met, no accrual is required. Conclusion: No accrual is required. (b) Solution: The amount of current liability to be recorded in the balance sheet is $150,000. Explanation: The amount is probable and estimable and hence should be recorded under current liability. Conclusion: The balance sheet will show an amount of $150,000 as bonus to employees under the current liability section. (c) Solution: Accrued interest of $4,000 will be reported as current liability. Formula: Accrued interest = $4,000 ($600,000 × 8% × 1/12) Explanation: Interest is paid quarterly at 8% per year. Hence it is a short-term liability and should be included under current liabilities. The amount of $600,000 borrowed is assumed to be for more than 1 year and hence will be a long-term liability. If the liability is payable within a year then it can be considered as current liability. Conclusion: Accrued interest of $4,000 will be reported as current liability. (d) Solution: No amount will be reported on the balance sheet as current liability. Explanation: Bad debt expense of $300,000 (10,000,000 × 0.03) is reduced or adjusted from accounts receivable and it is a current asset. But, it does not result in a liability since it is a contra asset. Conclusion: No amount will be reported on the balance sheet as current liability. (e) Solution: A current liability of $80,000 should be reported on the balance sheet. Formula: Dividend payable = Dividend per share declared × number of shares = $2.00 × 40,000 = $80,000 Explanation: Dividends payable of $80,000 will be reported under the current liability section of balance sheet. (f) Solution: Current liability of $110,000 will be reported on the balance sheet. Explanation: Customer advances of $160,000 will be reduced to the extent of $50,000 which was earned in December 31, 2017. Conclusion: Current liability of $110,000 will be reported on the balance sheet.

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