Question

Blue Corporation is preparing its December 31, 2017, balance sheet. The following items may be reported as either a current or long-term liability.

1. On December 15, 2017, Blue declared a cash dividend of $4.00 per share to stockholders of record on December 31. The dividend is payable on January 15, 2018. Blue 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 $111,437,000 are outstanding. The bonds pay 12% interest every September 30 and mature in installments of $27,859,250 every September 30, beginning September 30, 2018.
3. At December 31, 2016, customer advances were $14,726,000. During 2017, Blue collected $30,502,000 of customer advances; advances of $26,172,000 should be recognized in income.

For each item above, indicate the dollar amounts to be reported as a current liability and as a long-term liability, if any.

Reported as

1. Dividends payable $


Current LiabilityLong-term Liability

2. Bonds payable (September 30, 2018 installment) $


Current LiabilityLong-term Liability

Bonds payable (Other than September 30, 2018 installment) $


Current LiabilityLong-term Liability

Interest payable $


Current LiabilityLong-term Liability

3. Customer advances $


Current LiabilityLong-term Liability

Answer 1

Current Liabilities are obligations that a company owes that will be paid or settled within a year.

1. Dividends Payable - Current Liabilities

= (Issued stock - treasury stock) * Dividend per share

= (1,000,000 - 50,000) * 4

= $38,000,000

2. Bonds payable (September 30, 2018 instalment) - Current Liabilities

= $27,859,250

Bonds payable (Other than September 30, 2018 instalment) - Long-term Liability

This debt is not to be paid within a year so is a long-term liability.

= Amount outstanding - Annual instalment

= 111,437,000 - 27,859,250

= $‭83,577,750‬

Interest Payable - Current Liabilities

Last paid interest in September so by December 3 months would have elapsed.

= 111,437,000 * 3/12 * 12%

= $‭3,343,110‬

3. Customer Advances = Current Liabilities

Advances are liabilities as they represent services owed to customers.

= Beginning Advances + Advances - Advances recognized

= 14,726,000 + 30,502,000 - 26,172,000

= $‭19,056,000‬