P9-70A. (Learning Objective 1: Measuring current liabilities) Deep Waters Marine experienced these events during the current year:

a. Its December revenue totaled $140,000, and Deep Waters collected sales tax of 5%. The tax amount will be sent to the Hanoi Municipality early in January.

b. On August 31, Deep Waters signed a six-month, 4% note payable to purchase a boat costing $87,000. The note requires payment of principal and interest at maturity.

c. On August 31, Deep Waters received cash of $2,700 in advance for service revenue.

This revenue will be earned evenly over six months.

d. Revenues of $860,000 were covered by Deep Waters’s service warranty. At January 1, provision for warranty repairs was $11,800. During the year, Deep Waters recorded warranty expense of $34,400 and paid warranty claims of $34,800.

e. Deep Waters owes $60,000 on a long-term note payable. At December 31, 12% interest for the year plus $30,000 of this principal are payable within one year.

Requirement 1. For each item, indicate the account and the related amount to be reported as a current liability on the Deep Waters Marine Balance Sheet at December 31.

VP9-71A. (Learning Objective 1: Recording liability-related transactions) The following transactions of Sweet Ensemble Music Company occurred during 20X0 and 20X1:

Requirement 1. Record the transactions in Sweet Ensemble’s journal. Explanations are not required.

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20X0 May 3 May 31 Sep 3 Dec 31 20X1 31 May 31 Purchased a piano (inventory) for $72,000, signing a six-month, 4% note payable. Borrowed $75,000 on a 5% note payable that calls for annual installment payments of $15,000 principal plus interest. Recorded the short-term note payable in a separate account from the long-term note payable. Paid the six-month, 4% note at maturity. Accrued warranty expense, which is estimated at 3.0% of sales of $192,000. Accrued interest on the outstanding note payable. Paid the first installment and interest for one year on the outstanding note payable.