(Learning Objective 5: Reporting liabilities on the balance sheet; times interest earned ratio) The accounting records of Pacer Foods, Inc., include the following items at December 31, 20X8:
|
Mortgage note payable, current |
$ 50,000 |
Accumulated depreciation, equipment |
$219,000 |
|
Accumulated pension benefit obligation |
463,000 |
Discount on bonds payable (all long term) |
7,000 |
|
Bonds payable, long term |
490,000 |
Operating income |
291,000 |
|
Mortgage note payable, long term |
150,000 |
Equipment |
487,000 |
|
Bonds payable, current portion |
70,000 |
Pension plan assets (market value) |
382,000 |
|
Interest expense |
67,000 |
Interest payable |
9,000 |
Required
1. Show how each relevant item would be reported on the Pacer Foods, Inc., classified balance sheet, including headings and totals for current liabilities and long term liabilities.
2. Answer the following questions about Pacer’s financial position at December 31, 20X8:
a. What is the carrying amount of the bonds payable (combine the current and longterm amounts)?
b. Why is the interest payable amount so much less than the amount of interest expense? (Challenge)
How many times did Pacer cover its interest expense during 20X8?