Samson Corporation is preparing its December 31, 2014 statement of financial position. The following items may be reported as either
1. On December 15, 2014, Samson declared a cash dividend of $2.50 per share to shareholders of record on December 31. The dividend is payable on January 15, 2015. San1son has issued one million common shares.
2. Also on December 31, Samson declared a 10% stock dividend to shareholders of record on January 15, 2015. The dividend will be distributed on January 31, 2015. Samson\; common shares have a market value of $54 per share.
3. At December 31, bonds payable of $ 100 million is outstanding. The bonds pay 7% interest every September 30 and mature in installments of $25 million every September 30, beginning on September 30, 2015.
4. At December 31, 2013, customer advances were $12 million. During 2014, Samson collected $40 million of customer advances, and advances of $25 million were earned.
5. At December 31, 2014, retained earnings set aside for future inventory losses is $22 million.
6. At December 31, 2014, Samson has an operating line of credit with a balance of $3.5 million. For several years now, Samson has successfully met all the conditions of this bank loan. If Samson defaults on any of the Joan conditions in any way, the bank has the right to demand payment of the loan.
(a) For each item above, indicate the dollar amounts to be reported as a current liability and as a long-term liability, if any.
(b) Referring to the definition of a liability, explain the accounting treatment of item 4 above.
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their... Line of Credit
A line of credit (LOC) is a preset borrowing limit that can be used at any time. The borrower can take money out as needed until the limit is reached, and as money is repaid, it can be borrowed again in the case of an open line of credit. A LOC is...
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Question Posted: September 18, 2015 11:50:51