Reference no: EM132681752

Questions -

(a) Sak Company disclosed the following liability account balances on December 31, 2020: Accounts payable = $1,900; Bonds payable = $3,400; Premium on bonds payable = $200; Deferred tax liability = $400; Dividends payable =$500; Income tax payable = $900; Note payable, due January 31, 2021 = $600. On December 31, 2020, what total amount should be reported as current liabilities?

(b) Lutch Company has a $2,000 note payable due June 30, 2021. On December 31, 2020, the entity signed an agreement to borrow up to $2,000 to refinance the note payable on a long-term basis. The financing agreement called for borrowing not to exceed 80% of the value of the collateral the entity was providing. On December 31, 2020, the value of the collateral was $1,500. On December 31, 2020, what amount of the note payable should be reported as current liability?

(c) In November 2020, Folgers Company began including one coupon in each package of candy that it sold and offering a toy in exchange for $50 and five coupons. The toys cost $80 each. Eventually, 60% of the coupons will be redeemed. During November, the entity sold 110,000 packages of candy and no coupons were redeemed. On November 31, 2020, what amount should be reported as estimated liability for coupons?

(d) During the current year, White Company sold 80,000 reversible belts under a new sales promotional program. Each belt carried one coupon which entitled the customer to a $50 cash rebate. The entity estimated that 70% of the coupons will be redeemed, even though only 35,000 coupons had been processed during the current year. At year-end, what amount should be reported as estimated rebate liability?

(e) Harden Company operates a customer loyalty program. The entity grants program members loyalty points when they spend a specified amount on purchases. Program members can redeem the points for further purchases. The points have no expiry date. During 2020, the customer earned 60,000 points. Management expects that 100% of these points will be redeemed. The stand-alone selling price of each loyalty point is estimated at $20. The sales during 2020 amounted to $6,800,000 based on stand-alone selling price. On December 31, 2020, 28,800 points have been redeemed in exchange for purchases. In 2021, the management revised expectations and now expects 90% of the points to be redeemed. In 2021, the entity redeemed 9,000 points. What amount of the transaction price should be allocated to the points?

(f) Haydee Company had a warranty liability of $350 at the beginning of current year and $310 at end of current year. Warranty expense is based on 4% of sales which amounted to P50,000 for the year. What amount of warranty expenditures was incurred for the current year?

(g) CLI Company sells electrical goods covered by a one-year warranty for any defects. Of the sales of $70,000 for the year, the entity estimated that 3% will have major defect, 5% will have minor defect and 92% will have no defect. The cost of repairs would be $5,000 if all the products sold had major defect and $3,000 if all had minor defect. What amount should be recognized as a warranty provision?

(h) During 2021, Fear Company became involved in a tax dispute with the IRS. On December 31, 2021, the entity's tax advisor believed that an unfavorable outcome was probable and the best estimate of additional tax was $500 but could be as much as $650. After the 2020 financial statements were issued, the entity received and accepted a IRS settlement offer of $550. What amount of accrued liability should be reported on December 31, 2021?

What are the best steps to be undertaken? What are the best answers for each situations?