Question

lota Inc, an electronics retailer, just finished its first year of operations and is in the process of preparing its December 31, 2018 balance sheet. indicate that the account names and dollar amount If any) that lota would report within the current and long-term liabilities sections of its balance sheet at December 31, 2018 as a result of each transaction described below. If no liability should be recorded leave the item blank.

Question 1.

1a) On October 1, 2018 lota issued $ 8,000,000 of notes payable. The notes pay 6% interest each September 30^th and mature is installments. The first $1,000,000 installment is due September 30, 2019. List the current liability associated with this transaction.

Question 2.

1b). On October 1, 2018 lota issued $ 8,000,000 of notes payable. The notes pay 6% interest each September 30^th and mature is installments. The first $1,000,000 installment is due September 30, 2019. List long-term liabilities associated with this transaction.

Question 3.

2a) On December 31, 2018, lota issued a $ 1,400,000 short term note payable with a 5% rate of interest that due on May 31, 2019. Lota intends to refinance the note using a $900,000 long term loan from an existing line of credit that it will repay in three years. List the current liability associated with this transaction.

Question 4.

2b) On December 31, 2018, lota issued a $ 1,400,000 short term note payable with a 5% rate of interest that due on May 31, 2019. Lota intends to refinance the note using a $900,000 long term loan from an existing line of credit that it will repay in three years. List long-term liabilities associated with this transaction.

Question 5.

3. Lota sold $ 10,000 of gift cards during the first quarter of 2018 and an additional $5,000 of gift cards during the fourth quarter of 2018. By December 31, 2018, $7,000 of the gift cards sold during the first quarter had been redeemed and $3,000 of gift cards sold during the fourth quarter had been redeemed. Lota considers its gift cards to be broken after 6 months.

List the current liability associated with this transaction.

Question 6.

4. During 2018, lota sold 600 laptops for $500 each. All laptops comes with a 1-year original warranty. Lota estimated warranty costs will be 3% of sales. By December 31, 2018 lota had spent $2,00 to fix or replace computer cover warranty. Lota collects a 5% sales tax on all laptops sold. Which will be remitted to the government in 2019?

List the current liability associated with this transaction.

Answer 1

Answer :

(1.a)

Interest payable ($8,000,000 * 6% * 3/12)	$120,000
Current portion of notes payable	1,000,000

(1.b)

Long term liability	-
Non - Current portion of notes payable	$7,000,000

(2.a)

Current liability	-
Short term notes payable	$1,400,000

(2.b) No long term liability needs to be recorded at this point

(3).

Current Liability	-
Unearned revenue	$2,000

(4).

Current Liability	-
Estimated warranty liability (600*$500*3%) - $2,000	$7,000
Sales tax payable	15,000