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Hrudka Corp. has manufactured a broad range of quality productssince 1988. The following information

Hrudka Corp. has manufactured a broad range of quality productssince 1988. The following information is available for thecompany’s fiscal year ended February 28, 2014. Hrudka followsASPE. 1. The company has $4 million of bonds payable outstanding atFebruary 28, 2014, that were issued at par in 2003. The bonds carryan interest rate of 7%, payable semi-annually each June 1 andDecember 1. 2. Hrudka has several notes payable outstanding withits primary banking institution at February 28, 2014. In each case,the annual interest is due on the anniversary date of the note eachyear (same as the due dates listed). The notes are as follows: DueDate Amount Due Interest Rate Apr. 1, 2014 $150,000 8% Jan. 31,2015 200,000 9% Mar. 15, 2015 500,000 7% Oct. 30, 2016 250,000 8%3. Hrudka uses the expense approach to account for warranties. Thecompany has a two-year warranty on selected products, with anestimated cost of 1% of sales being returned in the 12 monthsfollowing the sale, and a cost of 1.5% of sales being returned inmonths 13 to 24 following sale. The warranty liability outstandingat February 28, 2013, was $5,700. Sales of warrantied products inthe year ended February 28, 2014, were $154,000. Actual warrantycosts incurred during the current fiscal year are as follows:Warranty claims honoured on 2012–2013 sales $4,900 Warrantyclaims honoured on 2013–2014 sales 1,100 $6,000 4. Regular tradepayables for supplies and purchases of goods and services on openaccount are $414,000 at February 28, 2014. Included in this amountis a loan of $23,000 owing to an affiliated company. 5. Thefollowing information relates to Hrudka’s payroll for the monthof February 2014. The company’s required contribution for EI is1.4 times that of the employee contribution; for CPP it is 1.0times that of the employee contribution. Salaries and wagesoutstanding at February 28, 2014 $220,000 EI withheld fromemployees 9,500 CPP withheld from employees 16,900 Income taxeswithheld from employees 48,700 Union dues withheld from employees21,500 6. Hrudka regularly pays GST owing to the government on the15th of the month. Hrudka’s GST transactions include the GST thatit charges to customers and the GST that it is charged bysuppliers. During February 2014, purchases attracted $28,000 ofGST, while the GST charged on invoices to customers totalled$39,900. At January 31, 2014, the balances in the GST Receivableand GST Payable accounts were $34,000 and $60,000, respectively. 7.Other miscellaneous liabilities included $50,000 of dividendspayable on March 15, 2014; $25,000 of bonuses payable to companyexecutives (75% payable in September 2014, and 25% payable thefollowing March); and $75,000 in accrued audit fees covering theyear ended February 28, 2014. 8. Hrudka sells gift cards to itscustomers. The company does not set a redemption date and customerscan use their cards at any time. At March 1, 2013, Hrudka had abalance outstanding of $950,000 in its Unearned Revenues—GiftCards account. The company received $225,000 in cash for gift cardspurchased during the current year and $375,000 in redemptions tookplace during the year. Based on past experience, 15% of customergift card balances never get redeemed. At the end of each year,Hrudka recognizes 15% of the opening balance of Unearned Revenuesas earned during the year. Instruction (a) Prepare the currentliability section of the February 28, 2014 balance sheet of HrudkaCorp. Identify any amounts that require separate presentation ordisclosure under ASPE. . . .

 

Apr 08 2020 View more View Less

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