Question

Stellar Corporation is preparing its December 31, 2020, balance sheet. The following items may be reported as either a current or long-term liability.

1. On December 15, 2020, Stellar declared a cash dividend of $2.70 per share to stockholders of record on December 31. The dividend is payable on January 15, 2021. Stellar has issued 1,000,000 shares of common stock, of which 50,000 shares are held in treasury.
2. At December 31, bonds payable of $107,729,000 are outstanding. The bonds pay 12% interest every September 30 and mature in installments of $26,932,250 every September 30, beginning September 30, 2021.
3. At December 31, 2019, customer advances were $14,426,000. During 2020, Stellar collected $30,455,000 of customer advances; advances of $25,976,000 should be recognized in income.

Answer 1

Stellar Corporation has current and long-term liabilities including cash dividends, bonds payable, and customer advances.

Step-by-step explanation:

Stellar Corporation has several items that may be reported as either a current or long-term liability. Let's analyze each of them:

1. The cash dividend declared on December 15, 2020, is reported as a current liability because it is payable on January 15, 2021. The dividend is determined by multiplying the declared amount ($2.70 per share) by the number of shares held by stockholders of record on December 31, 2020 (1,000,000 shares - 50,000 treasury shares).
2. The bonds payable of $107,729,000 that are outstanding at December 31, 2020, are reported as a long-term liability. These bonds pay 12% interest every September 30 and mature in installments of $26,932,250 every September 30, starting in 2021.
3. The customer advances of $14,426,000 as of December 31, 2019, are reported as a current liability. During 2020, Stellar collected $30,455,000 of customer advances, but only $25,976,000 should be recognized in income based on customer obligations.