At the financial statement date of December 31, 2014, the liabilities outstanding of ABC Corporation included the following:
1. Cash dividends on common stock, $40,000, payable on January 15, 2015.
2. Note payable to WWW State Bank, $470,000, due January 20, 2015.
3. Serial bonds, $1,400,000, of which $350,000 mature during 2015.
4. Note payable to ZZZ National Bank, $300,000, due January 27, 2015.
The following transactions occurred early in 2015:
January 15: The cash dividends on common stock were paid.
January 20: The note payable to WWW State Bank was paid.
January 25: The corporation entered into a financing agreement with WWW State Bank, enabling the company to borrow up to $500,000 at any time through the end of 2017. Amounts borrowed under the agreement would bear interest at 1% above the bank’s prime rate and would mature 3 years from the date of the loan. The corporation immediately borrowed $400,000 to replace the cash used in paying its January 20 note to the bank.
January 26: 40,000 shares of common stock were issued for $350,000. $300,000 of the proceeds was used to liquidate the note payable to ZZZ National Bank.
February 1: The financial statements for 2014 were issued.
Using the attached T-account template, record the balances at 12/31/14, labeling each “BAL” and then prepare the 2015 entries to recognize the above transactions.
Prepare a partial balance sheet for ABC Corporation, showing the manner in which the above liabilities should be presented at December 31, 2014.
- The liabilities should be properly classified between current and long-term
- Appropriate note disclosure should be included
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