The accounting records of Toronto Financial Services include the following items at December 31, 2017:

Premium on bonds payable (all long-term)........................................................... $ 13,000

Interest payable.......................................................................................................... 3,900

Operating income................................................................................................... 104,000

Interest expense....................................................................................................... 39,000

Bonds payable, current portion................................................................................ 50,000

Accumulated depreciation, building........................................................................ 70,000

Mortgage note payable, long-term......................................................................... 215,000

Bonds payable, long-term...................................................................................... 250,000

Building................................................................................................................. 160,000

Requirements

1. Show how each relevant item would be reported on Toronto Financial Services's classified balance sheet. Include headings and totals for current liabilities and long-term liabilities.

2. Answer the following questions about the financial position of Toronto Financial Services at December 31, 2017:

a. What is the carrying amount of the bonds payable? (Combine the current and long-term amounts.)

b. Why is the interest payable amount so much less than the amount of interest expense?

(Challenge)

3. How many times did Toronto cover its interest expense during 2017?