Question

Selected information taken from the December 31, 2014, financial statements for Mesa Company is shown below for the year just ended:
Current assets ........................... $120,000
Property, plant and equipment... 840,000
Intangibles................................ 50,000
Current liabilities....................... 72,000
Long-term liabilities ................... $660,000
Equity ........................................ 278,000
Revenues................................... 960,000
Expenses................................... 890,000

Mesa Company purchased $34,000 of merchandise inventory that was recorded as a debit to Merchandise Inventory and a credit to Accounts Payable on December 28; it was shipped FOB destination on December 28 and received on January 5. Because this liability was not due until 2015, it was listed as a long-term liability on the December 31, 2014, balance sheet. $50,000 of revenue earned but not recorded as of December 31, 2014, was recorded as a debit to Accounts Receivable and a credit to Revenue on December 31, 2014. $80,000 was collected on December 15 for services to be provided in February and March of 2015; this amount was recorded on December 15 as a debit to Cash and a credit to Revenue. $5,000 of interest accrued on a note payable during December and was recorded when it was paid on January 5, 2015, as a debit to Interest Expense and a credit to Interest Payable. $40,000 of payroll liabilities had accrued as of December 31, 2014, but had not been recorded. $430,000 of the long-term liabilities were due after December 31, 2015; the balance was current.

Required
Using the elements of critical thinking described on the inside front cover, comment.



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  • CreatedJanuary 08, 2015
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