The accounting records of Toronto Financial Services include the following items at December 31, 2014:
Premium on bonds payable (all long-term)............................................ $ 13,000
Interest payable .......................................................................................... 3,900
Operating income .................................................................................. 104,000
Interest expense...................................................................................... 39,000
Bonds payable, current portion ............................................................... 50,000
Accumulated depreciation, building........................................................ 70,000
Mortgage note payable, long-term ......................................................... 215,000
Bonds payable, long-term ...................................................................... 250,000
Building ................................................................................................. 160,000
Requirements
1. Show how each relevant item would be reported on Toronto Financial Services' classified balance sheet. Include headings and totals for current liabilities and long-term liabilities.
2. Answer the following questions about the financial position of Toronto Financial Services at December 31, 2014:
a. What is the carrying amount of the bonds payable? (Combine the current and long-term amounts.)
b. Why is the interest payable amount so much less than the amount of interest expense?
3. How many times did Toronto cover its interest expense during 2014?