Short Problems
1.On July 1, Falcon Company borrowed $2,000 in return for a one-year note payable with a maturity value of $2,200. Calculate the balance sheet value of the note on December 31.
2.On October 1, Accurate Company borrowed $2,000 in return for a nine-month note payable with a maturity value of $2,600. Calculate the amount of interest expense and the balance sheet value for the year ending December 31.
3.On October 1, 2009, Brooks Company borrowed $6,000 in return for a nine-month note payable with a maturity value of $6,600. Fill in the partial balance sheet that appears below as of December 31, 2009.
4.On July 1, Gordon Company borrowed $10,000 in return for an eight-month note payable with a maturity value of $10,600. Calculate the amount of interest expense for the current year.
5.Bradley Incorporated owns a chain of retail stores. During December of 2009, a customer slipped in a doorway of its Missouri store and broke his ribs. He is suing Bradley for $200,000 for negligence. Bradley’s legal counsel believes that it is only reasonably probable that Bradley will lose its defense of the lawsuit because, although the doorway was icy due to an ice storm that was occurring at the time of the fall, a sign on the door warned customers that the doorway was slippery when icy. On December 30, 2009, before considering the effects of this lawsuit, Bradley’s current assets, total assets, current liabilities, and total liabilities were $420,000, $840,000, $100,000, and $300,000, respectively. After this event is properly accounted for, calculate Bradley’s debt/equity ratio on December 31, 2009.
6.Pitts Incorporated owns a chain of retail stores. During December of 2009, a customer slipped in a doorway of its Nebraska store and broke his ribs. He is suing Pitts for $200,000 for negligence. The legal counsel of Pitts believes that it is remote that Pitts will lose its defense of the lawsuit because the doorway recently was rebuilt with all-weather traction stripping and a sign on the door warned customers that the doorway was slippery when icy. On December 30, 2009, before considering the effects of this lawsuit, The company’s current assets, total assets, current liabilities, and total liabilities were $420,000, $840,000, $100,000, and $300,000, respectively. After this event is properly accounted for, calculate the company’s debt/equity ratio on December 31, 2009.