Answer:
Current liability refers to the short term obligations of the firm which need to be settled down within a period of one year or within a normal operating cycle.
(a) $0 would be reported as current liability, as it is not a current liability. It is a contingent liability.
(b) The amount of current liability is $192,900 because it is a liability of a firm to pay bonuses to the employees.
(c) The amount of current liability is as follows:
= $900,000 × 0.08 × (1/12)
= $6,000
Payment of interest on loan is a liability of the firm.
(d) $0 would be indicated in current liability, because provision for doubtful accounts is subtracted from the total accounts receivable to determine the net account receivables.
(e) Proposed dividend is a part of current liability and the amount of dividend to be shown as current liability is as follows:
= Dividend per share × No. of shares outstanding
= $3.50 per share × 41,810
= $146,335
(f) Customer advances is a current liability and the amount of customer advances to be reported in current liability is calculated as follows:
= Customer advances - Amount earned this year
= $193,100 - $57,900
= $135,200
