ch. 10 - Chapter 10 Study Objectives After studying this...

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Financial Accounting - Chapter 10 1 Chapter 10 - Study Objectives After studying this chapter, you should be able to: 1. Explain a current liability and identify the major types of  current liabilities. 1. Describe the accounting for notes payable. 1. Explain the accounting for other current liabilities. 2. Identify the types of bonds. 1. Prepare the entries for the issuance of bonds and  interest expense. 1. Describe the entries when bonds are redeemed. 1. Identify the requirements for the financial statement  presentation and analysis of long-term liabilities.
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Financial Accounting - Chapter 10 2 Liabilities Current  liability  is  a  debt  that  is  expected  to  be  paid  (1)  from existing current assets or through the creation of other liabilities, and  (2)  within  one  year  or  one  operating  cycle,  whichever  is longer.    Examples  include  accounts  payable,  wages  payable, short-term notes payable, current maturities of long-term debt, and income taxes payable. A long-term liability  is a liability that is expected to be paid in  more than one year or operating cycle.  Examples include long- term notes payable, mortgages payable, lease liabilities, and  bonds payable.
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Financial Accounting - Chapter 10 3 Notes Payable Notes payable –  obligations in the form of  written notes.  Notes payable usually require  the borrower to pay interest, and they are  issued to meet short-term financing needs.   Notes due for payment within 1 year of the  balance sheet are usually classified as  current liabilities.
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Financial Accounting - Chapter 10 4 An Example Cairo Company on June 1 borrows $50,000 from the First Bank on a 6-month,  $50,000, 12% note. Required: a) Prepare the entry on June 1. a) Prepare the adjusting entry on June 30. a) Prepare the entry at maturity (December 1), assuming monthly adjusting  entries have been made through November 30. a) What was the total financing cost (interest expense)?   
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Financial Accounting - Chapter 10 5 Sales Tax Payable Sales tax payable -  is a tax levied by state and city governments  to the final consumer.  It is a tax collected by the seller and  remitted to the government.  There is a liability created but there  is not expense to the seller.  For example, a store in San Diego  sells merchandise for $89.95.  Sales tax in San Diego County is  7.75%.  The journal entry to record this sale is:
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Financial Accounting - Chapter 10 6 Salary or Wage Expense There are two types of expenses: 1. Gross salary or wage expense, and  1. Payroll tax expense There are three types of liabilities: 1. Net salary liability that must be paid to the employee directly. 1.
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This note was uploaded on 04/14/2008 for the course ACCT 201 taught by Professor Romney during the Fall '06 term at San Diego.

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ch. 10 - Chapter 10 Study Objectives After studying this...

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