(Learning Objective 5: Reporting liabilities on the balance sheet, times interest earned ratio) The accounting records of Hartford Financial Services include the following items at December 31, 20X6:
|
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 |
|
Premium on bonds payable(all long term) |
$ 13,000 |
|
Interest payable |
3,900 |
|
Pension plan assets(market value) |
402,000 |
|
Operating income |
104,000 |
|
Accumulated pension benefit obligation |
436,000 |
Required
1. Show how each relevant item would be reported on Hartford 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 Hartford Financial Services at December 31, 20X6:
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? (Challenge)
How many times did Hartford cover its interest expense during 20X6?