Current vs. Long-term Liabilities
Need a little help with my homework... I was especially confused with #3. Please help... Thank you very much.
(Current vs. Long-term Liabilities)
Frederic Chopin Corporation is preparing its December 31, 2007, balance sheet. The following items may be reported as either a current or long-term liability.
Instructions
For each item above indicate the dollar amounts to be reported as a current liability and as a long-term liability, if any.
1. On December 15, 2007, Chopin declared a cash dividend of $2.50 per share to stockholders of record on December 31. The dividend is payable on January 15, 2008. Chopin has issued 1,000,000 shares of common stock, of which 50,000 shares are held in treasury.
Long-Term Liability
Dividends payable 2,375,000
2. At December 31, bonds payable of $100,000,000 are outstanding. The bonds pay 12% interest every September 30 and mature in installments of $25,000,000 every September 30, beginning September 30, 2008.
Long-Term Liability
Bonds Payble 75,000,000
3. At December 31, 2006, customer advances were $12,000,000. During 2007, Chopin collected $30,000,000 of customer advances, and advances of $25,000,000 were earned.
Because it is no longer an obligation, it will not be reported as a long-term nor a current liability but will have 17,000,000 in the account.
