Financial statement reporting of long-term liabilities

Long-term liabilities are reported in a separate section of the balance sheet, as shown below.
 

Christopher Corporation
Balance Sheet
February 28

Assets

 

 

Current Assets

 

 

  Cash and Cash Equivalents

 

$13,000

  Accounts Receivable

$60,000

 

  Less: Allowance for Uncollectible Accounts

6,000

54,000

  Merchandise Inventory

 

240,000

Total Current Assets

 

$307,000

Property, Plant, and Equipment

 

 

  Land

 

$40,000

  Buildings

$250,000

 

  Accumulated Depreciation, Buildings

11,000

239,000

  Machinery and Equipment

$210,000

 

  Accumulated Depreciation, Machinery and Equipment

43,000

167,000

Total Property, Plant, and Equipment

 

$446,000

Other Assets

 

7,000

Total Assets

 

$760,000

 

 

 

Liabilities and Stockholders' Equity

 

 

Liabilities

 

 

Current Liabilities

 

 

  Accounts Payable

 

$114,000

  Income Taxes Payable

 

26,000

  Salaries and Wages Payable

 

10,000

Total Current Liabilities

 

$150,000

Long-term Liabilities

 

 

  Bonds Payable

$250,000

 

  Unamortized Premium on Bonds Payable

20,000

270,000

Total Long-term Liabilities

 

$270,000

Total Liabilities

 

$420,000

 

 

 

Stockholders' Equity

 

 

Common Stock

 

$260,000

Retained Earnings

 

80,000

Total Stockholders' Equity

 

$340,000

Total Liabilities and Stockholders' Equity

 

$760,000

The effects of transactions that result in long-term liabilities appear in various accounts on the income statement. For example, interest expense is part of other revenues and expenses, as are most gains or losses on early retirement of debt.
 

Christopher Corporation
Income Statement
For the Month Ended February 28

Sales

$520,000

Cost of Goods Sold

312,000

Gross Profit

$208,000

Operating Expenses

 

  Supplies Expense

$8,000

  Salaries and Wages Expense

110,000

  Depreciation Expense, Buildings

1,000

  Depreciation Expense, Machinery and Equipment

3,000

  Insurance Expense

15,000

  Rent Expense

24,000

  Uncollectible Accounts Expense

10,000

Total Operating Expenses

$171,000

Operating Income

$37,000

Other Revenues and (Expenses)

(4,000)

Income Before Taxes

$33,000

Income Taxes Expense

11,000

Net Income

$22,000


 

** You now have the background to do text problems 11.1 and 11.2.
 

Financial Reporting Summary

The following table summarizes the relationships among the major topics examined in this and previous chapters. The numbers in parentheses refer to the chapters in which the topics were discussed.
 

Resources

=

Sources of Resources

Assets

=

Liabilities

+

Stockholders' Equity

Current Assets
  Cash and cash equivalents (6)
  Accounts receivable (7)
  Allowance for uncollectible 
accounts (7)
  Merchandise inventory (8)
Property, plant, & equipment
  Land (9)
  Buildings (9)
  Accumulated depreciation, 
buildings (9)
  Equipment (9)
  Accumulated depreciation, 
equipment (9)
  Autos & trucks (9)
  Accumulated depreciation, 
autos & trucks (9)

 

 Current Liabilities
  Notes payable (10)
  Accounts payable (10)
  Taxes payable (10)
  Current portion of long-term debt (10)
Long-term Liabilities (11)
  Bonds Payable (11)
  Deferred Taxes (11)
  Obligations Under Capital Leases (11)

 

Revenues
  Sales (7)
  Sales returns and 
allowances (7)
Cost of goods sold (8)
Operating Expenses
  Bank service expense (6)
  Uncollectible accounts expense (7)
  Depreciation expense (9)
  Salaries & wages 
expense (10)
  Payroll taxes expense (10)
Other Revenues & Expenses
  Interest revenue (6)
  Interest expense (6) & (11)
  Gain or loss on disposal 
of property, plant, and equipment (9)
  Gains or losses on early retirement of debt (11)
Income taxes expense (10)

 


 

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