Module 5 Assignment: Liabilities

For this assignment, you will apply the concepts learned in Module 5 to analyze and record various liabilities, including current, long-term, and leases. You will perform calculations, journal entries, and analysis to demonstrate your understanding of these topics. You can continue using the accounting simulator from our website, MS Excel, or an inexpensive accounting software if you have access to it.

Assignment Tasks

1. Current Liabilities:
   • Using the data provided, record the following transactions related to current liabilities:
     • Purchase of inventory on credit: $25,000
     • Short-term loan received: $10,000
     • Accrual of wages for the period: $5,000
   • Prepare the journal entries for the above transactions.
   • Calculate the current ratio and quick ratio using the following balance sheet data:
     • Current Assets: $50,000
     • Inventory: $15,000
     • Current Liabilities: $30,000
   • Provide a brief analysis of the company’s liquidity based on the calculated ratios.
2. Long-term Liabilities:
   • Assume the company issued bonds payable with the following terms:
     • Face Value: $100,000
     • Coupon Rate: 5%
     • Market Rate: 6%
     • Term: 10 years
   • Calculate the issue price of the bonds payable.
   • Prepare the journal entry for the issuance of the bonds payable.
   • Using the effective interest method, calculate the interest expense and the amortization of the bond discount for the first year.
   • Prepare the journal entry for the first year’s interest payment and amortization.
3. Leases:
   • Assume the company entered into a finance lease for equipment with the following terms:
     • Lease Term: 5 years
     • Annual Lease Payment: $10,000
     • Interest Rate: 4%
   • Calculate the present value of the lease payments.
   • Prepare the journal entry for the initial recognition of the right-of-use asset and lease liability.
   • Calculate the interest expense and the reduction of the lease liability for the first year.
   • Prepare the journal entry for the first year’s lease payment.

Submission Instructions

Compile your calculations, journal entries, and analysis into a single document. Submit your document in PDF format via the course submission portal.

Additional Activities

• Discussion Post: Share your experience in the course forum, detailing any challenges you faced during the assignment and how you overcame them. Provide feedback on your classmates’ posts.
• Peer Review: Review at least two of your classmates’ submissions and provide constructive feedback. Focus on the calculations’ accuracy and the journal entries’ clarity.

Due Date: One week after completing this module.

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