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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Reporting Liabilities

Morton Electronics had the following obligations:

a. A legally enforceable claim against the business to be paid in 3 months.

b. A guarantee given by a seller to a purchaser to repair or replace defective goods during the first 6 months following a sale.

c. An amount payable to Bank One in 10 years.

d. An amount to be paid next year to Citibank on a long-term note payable.

Required:

CONCEPTIJAL CONNECTION Describe how each of these items should be reported in the balance sheet.

To determine

Concept introduction:

Liabilities:

Liabilities are the obligation of the business or amount payable by the business. Liabilities can current or long term. Current liabilities are liabilities payable within the short term or business cycle of the company, for example Accounts payable for purchases and utilities payable. Long term liabilities are liabilities payable in a long period/ years, for example long term loan.

To indicate:

The recording of items on the balance sheet.

Explanation

The recording of items on the balance sheet is explained as follows:

Item # Reporting on Balance Sheet
a. Current Liability The legal liability should be reported as current liability on the balance sheet.
b...

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