As of December 31 of the current year, Chernin Corporation has prepared the following information regarding its

Question:

As of December 31 of the current year, Chernin Corporation has prepared the following information regarding its liabilities and other obligations:

Notes payable, of which $10,000 will be repaid within the

next 12 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 80,000

Interest expense that will result from existing liabilities over

the next 12 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125,000

Lawsuit pending against the company, in which $500,000

is claimed in damages. Legal counsel can make no reasonable

estimate of the company’s ultimate liability at this time . . . . . . . . . . . . . . . . . . . . 500,000

20-year bond issue that matures in two years. The entire

amount will be repaid from a bond sinking fund . . . . . . . . . . . . . . . . . . . . . . . . . . 900,000

Accrued interest on the 20-year bond issue as of the balance

sheet date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,000

Three-year commitment to John Higgins as chief financial

officer at a salary of $250,000 per year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 750,000

Note payable due within 90 days (but that is expected to

be extended for an additional 18 months) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,000

Cash deposits from customers for goods and services to

be delivered over the next nine months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000

Income taxes, of which $100,000 are currently payable

and the remainder deferred indefinitely . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185,000

Instructions

a. Prepare a listing of the company’s current and long-term liabilities as they should be presented in the company’s December 31 balance sheet.

b. Briefly explain why you have excluded any of the listed items in your listing of current and long-term liabilities

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...