Intermediate Accounting II, ACCT-2164
Chapter 13 Practice Problem Solutions
Brief Exercise 13–1
Cash ...............................................................
Notes payable..............................................
60,000,000
Interest expense ($60,000,000 x 12% x 3/12) .......
Interest payable ..........................................
1,800,000
60,000,000
1,800,000
Brief Exercise 13–4
Cash (difference) ..........................................................
Discount on notes payable ($12,000,000 x 9% x 9/12) ....
Notes payable (face amount) ....................................
11,190,000
810,000
Interest expense ........................................................
Discount on notes payable ...........................................
810,000
Notes payable (face amount) ........................................
Cash .......................................................................
12,000,000
12,000,000
810,000
12,000,000
Exercise 13–8
Requirement 1
Cash .......................................................................
Liability—customer advance ...........................
7,500
7,500
Requirement 2
Cash .......................................................................
Liability—refundable deposits .........................
25,500
25,500
Requirement 3
Accounts receivable ..............................................
Sales revenue ....................................................
Sales taxes payable ([5% + 2%] x $800,000) .........
Solutions Manual, Vol.2, Chapter 13
856,000
800,000
56,000
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13–1
Exercise 13–13
1. Current liability: $10 million
The requirement to classify currently maturing debt as a current liability
includes debt that is callable by the creditor in the upcoming year—even if the
debt is not expected to be called.
2. Noncurrent liability: $14 million
The current liability classification includes (a) situations in which the creditor
has the right to demand payment because an existing violation of a provision
of the debt agreement makes it callable and (b) situations in which debt is not
yet callable, but will be callable within the year if an existing violation is not
corrected within a specified grace period—unless it's probable the violation
will be corrected within the grace period. In this case, the existing violation is
expected to be corrected within six months.
3. Current liability: $7 million
The debt should be reported as a current liability because it is payable in the
upcoming year, will not be refinanced with long-term obligations, and will not
be paid with a bond sinking fund.
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13–2
Intermediate Accounting, 7e
Exercise 13–18
Requirement 1
This is a loss contingency. Some loss contingencies don’t involve liabilities at
all. Some contingencies when resolved cause a noncash asset to be impaired, so
accruing it means reducing the related asset rather than recording a liability. The
most common loss contingency of this type is an uncollectible receivable, as
described in this situation.
Requirement 2
Bad debt expense: 3% x $2,400,000 = $72,000
Requirement 3
Bad debt expense (3% x $2,400,000) .................................
Allowance for uncollectible accounts ..................
72,000
72,000
Requirement 4
Allowance for uncollectible accounts:
Beginning of 2013
Write off of bad debts*
Credit balance before accrual
Year-end accrual (Req. 3)
End of 2013
$75,000
73,000
2,000
72,000
$74,000
* Allowance for uncollectible accounts ........................
Accounts receivable .........................................
Net realizable value:
Accounts receivable
Less: Allowance for uncollectible accounts
Net realizable value
Solutions Manual, Vol.2, Chapter 13
73,000
73,000
$490,000
(74,000)
$416,000
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13–3