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Hrudka Corp. has manufactured a broad range of quality products since 1988. The following information is available for the company's fiscal year...
Hrudka Corp. has manufactured a broad range of quality products since 1988. The following information is available for the company’s fiscal year ended February 28, 2014. Hrudka follows ASPE.
1. The company has $4 million of bonds payable outstanding at February 28, 2014, that were issued at par in 2003. The bonds carry an interest rate of 7%, payable semi-annually each June 1 and December 1.
2. Hrudka has several notes payable outstanding with its primary banking institution at February 28, 2014. In each case, the annual interest is due on the anniversary date of the note each year (same as the due dates listed). The notes are as follows:
Due Date Amount DueInterest Rate
Apr. 1, 2014$150,0008%
Jan. 31, 2015200,0009%
Mar. 15, 2015500,0007%
Oct. 30, 2016250,0008%
3. Hrudka uses the expense approach to account for warranties. The company has a two-year warranty on selected products, with an estimated cost of 1% of sales being returned in the 12 months following the sale, and a cost of 1.5% of sales being returned in months 13 to 24 following sale. The warranty liability outstanding at February 28, 2013, was $5,700. Sales of warrantied products in the year ended February 28, 2014, were $154,000. Actual warranty costs incurred during the current fiscal year are as follows:
Warranty claims honoured on 2012–2013 sales $4,900
Warranty claims honoured on 2013–2014 sales 1,100
$6,000
4. Regular trade payables for supplies and purchases of goods and services on open account are $414,000 at February 28, 2014. Included in this amount is a loan of $23,000 owing to an affiliated company.
5. The following information relates to Hrudka’s payroll for the month of February 2014. The company’s required contribution for EI is 1.4 times that of the employee contribution; for CPP it is 1.0 times that of the employee contribution.
Salaries and wages outstanding at February 28, 2014$220,000
EI withheld from employees9,500
CPP withheld from employees16,900
Income taxes withheld from employees48,700
Union dues withheld from employees21,500
6. Hrudka regularly pays GST owing to the government on the 15th of the month. Hrudka’s GST transactions include the GST that it charges to customers and the GST that it is charged by suppliers. During February 2014, purchases attracted $28,000 of GST, while the GST charged on invoices to customers totalled $39,900. At January 31, 2014, the balances in the GST Receivable and GST Payable accounts were $34,000 and $60,000, respectively.
7. Other miscellaneous liabilities included $50,000 of dividends payable on March 15, 2014; $25,000 of bonuses payable to company executives (75% payable in September 2014, and 25% payable the following March); and $75,000 in accrued audit fees covering the year ended February 28, 2014.
8. Hrudka sells gift cards to its customers. The company does not set a redemption date and customers can use their cards at any time. At March 1, 2013, Hrudka had a balance outstanding of $950,000 in its Unearned Revenues—Gift Cards account. The company received $225,000 in cash for gift cards purchased during the current year and $375,000 in redemptions took place during the year. Based on past experience, 15% of customer gift card balances never get redeemed. At the end of each year, Hrudka recognizes 15% of the opening balance of Unearned Revenues as earned during the year.
Instructions
(a) Prepare the current liability section of the February 28, 2014 balance sheet of Hrudka Corp. Identify any amounts that require separate presentation or disclosure under ASPE
