Chapter 10 Notes

Chapter 10 Notes - Chapter 10 Reporting and Analyzing...

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Chapter 10 Reporting and Analyzing Liabilities Current Liabilities o Current Liabilities are debts which can reasonably be expected to be paid o From existing current assets or through the creation of other current liabilities, and o Within 1 year or the operating cycle, whichever is longer o Debts that do not meet both criteria are Long-Term Liabilities Types of Current Liabilities o Notes payable o Accounts payable o Unearned revenues o Accrued liabilities o Taxes o Salaries and wages o Interest Notes Payable o Notes payable are: o Obligations in the form of written notes o Often used instead of accounts payable; they give written documentation if needed for legal remedies o Used for short-term and long-term financing needs o Most often interest-bearing, requiring the borrower to pay interest Journal On 9/1/07 First National Bank lends $100,000 to Cole Williams Co. on a four-month, 12% note maturing 1/1/08. Sept 1 Cash 100,000 Notes Payable 100,000 (To record issuance of 12%, 4-month note to bank) Dec 31 Interest Expense 4,000 Interest Payable 4,000
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(To accrue interest for 4 months on note. Interest accrues over life of the note and must be recorded periodically.) $100,000 x .12 x 4\12 months Jan 1 Notes Payable 100,000 Interest Payable 4,000 Cash 104,000 (To record payment of 1st National Bank interest-bearing note and accrued interest at maturity.) Sales Taxes Payable o Are collected from customers o Are expressed as a % of sales price o Are required by state law o Remitted to the state monthly o Usually rung separately from sales on the cash register Journal Mar 25Cash 10,600 Sales 10,000 Sales Taxes Payable 600 (To record daily sales and sales taxes). Payroll Deductions Payroll Taxes o Various payroll taxes are required by law to be withheld from employees’ gross pay o Social Security (FICA) taxes withheld, employer and employee make equal contributions o Federal income taxes o State income taxes (if applicable) Journal Mar 7
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Chapter 10 Notes - Chapter 10 Reporting and Analyzing...

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