Question

Norma Smith is the controller of Bridgeport Corporation and is responsible for the preparation of the year-end financial statements.

For each of the following transactions that occurred during the year, indicate the dollar amount to be reported as a current liability as of December 31, 2020. (Enter 0 for amounts if no current liability is to be reported. Do not leave any answer field blank.)

						Reported as
(a)		On December 20, 2020, a former employee filed a legal action against Bridgeport for $103,810 for wrongful dismissal. Management believes the action to be frivolous and without merit. The likelihood of payment to the employee is remote.		$		Current LiabilityNot a Current Liability
(b)		Bonuses to key employees based on net income for 2020 are estimated to be $180,700.		$		Not a Current LiabilityCurrent Liability
(c)		On December 1, 2020, the company borrowed $960,000 at 8% per year. Interest is paid quarterly.		$		Not a Current LiabilityCurrent Liability
(d)		Accounts receivable at December 31, 2020, is $10,301,200. An aging analysis indicates that Bridgeport’s expense provision for doubtful accounts is estimated to be 3% of the receivables balance.		$		Current LiabilityNot a Current Liability
(e)		On December 15, 2020, the company declared a $3.20 per share dividend on the 40,840 shares of common stock outstanding, to be paid on January 5, 2021.		$		Current LiabilityNot a Current Liability
(f)		During the year, customer advances of $171,800 were received; $56,700 of this amount was earned by December 31, 2020.		$

please show work and explain

Answer 1

a) $ Zero (0)

It is not a current liability.It is a contingent liability which needs neither provision nor disclosure as the possibility of it happening is remote.

b) $ 180,700  (CURRENT LIABILITY)

estimated bonus is to be recorded as current liability.

c) $ 6,400  (CURRENT LIABILITY)

Interest on loan for one month (960000*8%*1/12) to be recorded as current liability.

d) $ Zero (0)

Amount of provision for doubtful debts $309,036 should be reduced from the total accounts receivable to show the net receivable balance in current assets section.

e) $ 130,688 (CURRENT LIABILITY)

Proposed Dividend to be shown as current liability(40840shares* $ 3.20)

f) $ 115,100  (CURRENT LIABILITY)

Customer advances of $ 115,100 is to be reported after deducting the amount of $ 56,700 earned in the current year.

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