A company reported $212,000 of accounts payable and $36,000 of unearned revenue

Question

A company reported $212,000 of accounts payable and $36,000 of unearned revenue on its Oct. 31, 2017 balance sheet. During November, the following transactions occurred: Nov. 1 Signed a 9-month 5% note for $100,000 Nov. 3 Paid suppliers $130,000 of what was owed on account Nov. 15 A neighboring firm filed a lawsuit against the company seeking $80,000 in damages for alleged pollution of a local water source. The case will not go to trial until June, 2018, and the company attorney feels the suit doesn’t have merit, but it’s reasonably possible that the company will have to pay the plaintiff. Nov. 30 Accrued salaries and benefits earned by employees during the last week of the month and payable on Dec. 2 were $15,000. Nov. 30 It was determined that $13,500 of unearned revenue had been earned by the end of the month. Determine total current liabilities on Nov. 30, 2017  

A.

$299,917

B.

$220,333

C.

$219,917

D.

$219,500

E.

$299,500

Explanation / Answer

Account payable=212000-130000=82000

Unearned revenue=36000-13500=22500

Notes payable=100000+100000*5%*1/12=100417

Accrued salaries and benefits=15000

Total current liabilities =219917

( Trial has not started yet for law suit damages and the company can't estimate the amount of liability. If it is possible for the company to estimate the future liability of law suit damages then it will show the amount as contingent liabilities)

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