The following information relates to the obligations of Sutter Co. as of December 31, Year 6: Sutter
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Question:
The following information relates to the obligations of Sutter Co. as of December 31, Year 6:
Sutter Co.
Balance Sheet-Liabilities Section
December 31, Year 6
Amount | |
1. Accounts payable | |
2. Accrued interest payable | |
3. Income taxes payable | |
4. Dividends payable | |
5. Current portion, long-term debt | |
6. Total current liabilities | |
7. Capital lease payable, minus current portion | |
8. Bonds payable | |
9. Deferred tax liability | |
10. Total liabilities |
- Accounts payable for goods and services purchased on open account amount to $35,000 at December 31, Year 6.
- On December 15, Year 6, Sutter declared a cash dividend of $.05 per common share, payable on January 12, Year 7, to shareholders of record as of December 31, Year 6. Sutter had 1 million shares of common stock issued and outstanding throughout Year 6.
- On December 30, Year 6, Sutter entered a 6-year capital lease on a warehouse and made the first annual lease payment of $100,000. Sutter's incremental borrowing rate was 12%, and the interest rate implicit in the lease, which was known to Sutter, was 10%. The rounded present value factors for an annuity due for 6 years are 4.6 at 12% and 4.8 at 10%.
- On July 1, Year 6, Sutter issued $500,000, 8% bonds for $440,000 to yield 10%. The bonds mature on June 30, Year 12, and pay interest annually every June 30. At December 31, Year 6, the bonds were trading on the open market at 86 to yield 12%. Sutter uses the effective-interest method.
- Sutter's Year 6 pretax financial income was $850,000 and its taxable income was $600,000. The difference is due to $100,000 of permanent differences and $150,000 of temporary differences related to noncurrent assets. At December 31, Year 6, Sutter had cumulative taxable differences of $300,000 related to noncurrent assets. Sutter's effective tax rate is 30%. Sutter made no estimated tax payments during the year.
- Contingency information:
- Sutter has been named a liable party for toxic waste cleanup on its land and must pay an as-yet-undetermined amount for environmental remediation activities.
- An adjoining landowner, Firebone Co., sold its property because of possible toxic contamination of the water supply and resulting potential adverse public reaction toward its product. Firebone sued Sutter for damages. There is a reasonable possibility that Firebone will prevail and be awarded between $250,000 and $600,000.
- As a result of comprehensive risk assessment, Sutter has discontinued rockslide insurance for its warehouse, which is located at the base of a mountain. The warehouse has never sustained rockslide damage, and the probability of sustaining future damage is only slight.
Enter the liability amounts of Sutter's December 31, Year 6, balance sheet in the schedule provided. Enter the appropriate amounts in the designated cells below. Enter all amounts as positive values.
Related Book For
Advanced Accounting
ISBN: 978-0538480284
11th edition
Authors: Paul M. Fischer, William J. Tayler, Rita H. Cheng
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