Purpose: Reinforce understanding of amounts reported on the financial statements for curren and noncurrent liabilities. BALANCE SHEET ACCOUNTS-Dec 31, Year 5 Accounts payable Warranty liability Income taxes payable Current portion of long-term debt ($ in millions) $ 6,245 510 389 271 7,415 Total current liabilities 51 Deferred income taxes Post-retirement benefit liabilities 2,390 Bonds payable, 8%, mature in 2030 2,500 (156) Bond discount 2,344 631 Long-term debt INCOME STATEMENT ACCOUNTS-Year 5 $ 50,000 Sales revenue 698 275 Warranty expense 220 Post-retirement benefit expense Interest expense (related to the bond payable) Refer to the information presented above to answer the following questions. Q1 (Current / Noncurrent) liabilities are obligations due within one year or within the company's normal operating cycle if longer. Obligations due beyond that time are classified as (current / noncurrent) liabilities. Q2 The purchase of inventory will usually increase the (accounts/notes/mortgage) payable account. Warranty costs related to Year 5 sales total ($275 / $510 / $785) million and warranty costs expected to be incurred in the future total ($275/$510/$785) million. These amounts are (known Q3 20 Q4 / estimated). There is ($271 / $631 / $902) million of total debt outstanding (not including bonds). Of this amount, the company plans to pay ($271 / $631/$902) million during the following year and pay ($271/$631/$902) million in later years. Q5 When bonds payable are issued, they are recorded at their (face / present) value. After issuance, they are reported at their (present / fair market / amortized) value. The above bond has a current carrying value of $ million that will continue to (increase/decrease) until maturity. At million to the holder of the bond. Q6 Q7 maturity, the issuing corporation will pay $ The bond payable was issued at a discount because the market interest rates were (higher than/ equal to / lower than) 8%, and therefore, the actual cost of borrowing is (greater than / equal to/ less than) 8%. This year's interest payment totaled ($156/$200/$220/$250) million while this year's cost of borrowing totaled ($156/$200/$220/$250) million. Post-retirement benefits are expensed and recorded as a liability in the year of (employment/ retirement). This is an application of the (matching / cost/reliability) principle