Problem
As of December 31 of the current year, Petersen Corporation has prepared the following information regarding its liabilities and other obligations.
Notes payable, of which $12,000 will be repaid within the next 12 months $80,000
Interest expense that will result from existing liabilities over the next 12 months 125,000
Lawsuit pending against Petersen, in which $600,000 is claimed in damages. Legal counsel can make no reasonable estimate of the company's ultimate liability at this time 600,000
20-year bond issue that matures in two years. The entire amount will be repaid from a bond sinking fund 900,000
Accrued interest on the 20-year bond issue as of the balance sheet date 36,000
Three-year commitment to John Hoskins as chief financial officer at a salary of $275,000 per year 825,000
Note payable due within 90 days (but that is approved to be extended for an additional 18 months) 75,000
Cash deposits from customers for goods and services to be delivered over the next nine months 300,000
Income taxes, of which $100,000 are currently payable and the remainder deferred indefinitely 185,000
Task
• Prepare a listing of the Petersen Corporation's current and long-term liabilities as they should be presented in the company's December 31 balance sheet.
• Briefly explain why you have excluded any of the listed items in your listing of current and long-term liabilities.