EX 11-1 Current liabilities

Bon Nebo Co. sold 25,000 annual subscriptions of Bjorn 20XX for $85 during December 2014. These new subscribers will receive monthly issues, beginning in January 2015. In addition, the business had taxable income of $840,000 during the first calendar quarter of 2015. The federal tax rate is 40%. A quarterly tax payment will be made on April 12, 2015.

Prepare the Current Liabilities section of the balance sheet for Bon Nebo Co. on March 31, 2015.


Answer:


Current liabilities:
Federal income taxes payable*……………………………………………………… $ 336,000
Advances on magazine subscriptions**…………………………………………… 1,593,750
Total current liabilities……………………………………………………………… $1,929,750
* $840,000 × 40%
** 25,000 × $85 × 9/12 = $1,593,750
The nine months of unfilled subscriptions are a current liability because Bon Nebo
received payment prior to providing the magazines.