Question

2. For each of the following, indicate the liability, if any, which would be shown on a balance sheet of Snead Company as of December 31, 2021. 1.     Snead received an invoice for supplies it ordered at the end of December totaling $5,000, but the supplies have not been received as of December 31. 2.     Snead received an invoice for advertising services received in December, in the amount of $10,000. 3.     Snead will receive a $10,000 loan from its bank on January 1, 2022.

Answer 1

Ans:

Recording of liability in the balance sheet.

1.

Invoice of $5,000 received but goods are not yet received till Dec 31 2021. In such a case liability on account payable should be booked and inventory to be shown as (Goods in transit).

2.

Liability for advertising expense should also be booked in Dec as services have been received.

3.

No liability of loan in the books should be considered as loan has not disbursed yet.

So total amount of liability to be recorded in balance sheet will be : $5,000 + $10,000 = $15,000

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