Chap9MAF3e

Chap9MAF3e - Financial and Managerial Accounting Current...

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Financial and Managerial Accounting Current Liabilities McGraw-Hill/Irwin         
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Past Present Future Defining Liabilities Because of a past event . . . The company has a present obligation . . . For future sacrifices 9-2
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Expected to be paid within one year or the company’s operating cycle , whichever is longer. Classifying Liabilities Current Liabilities Expected not to be paid within one year or the company’s operating cycle , whichever is longer. Long-Term Liabilities 9-3
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Uncertainty in Liabilities Uncertainty in Whom to Pay Uncertainty in When to Pay Uncertainty in How Much to Pay 9-4
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Accounts Payable Sales Taxes Payable Unearned Revenues Short-Term Notes Payable Known Liabilities Payroll Liabilities Multi-Period Known Liabilities 9-5
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On May 15, 2009, Max Hardware sold building materials for $7,500 that are subject to a 6% sales tax. Sales Taxes Payable DR CR May 15 Cash 7,950 Sales 7,500 Sales Taxes Payable 450 To record cash sales and 6% sales tax. $7,500 × 6% = $450 9-6
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On May 1, 2009, A-1 Catering received $3,000 in advance for catering a wedding party to take place on July 12, 2009. Unearned Revenues DR CR May 1 Cash 3,000 Unearned Revenue - Catering 3,000 To record advance payment. DR CR Jul 12 Unearned Revenue - Catering 3,000 Revenue - Catering 3,000 To recognize revenue received in advance 9-7
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On August 1, 2009, Matrix, Inc. asked Carter, Co. to accept a 90-day, 12% note to replace its existing $5,000 account payable to Carter. Matrix would make the following entry: Note Given to Extend Credit Period DR CR Aug 1 Accounts Payable - Carter 5,000 Notes Payable - Carter 5,000 To replace customer account with note 9-8
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On October 30, 2009, Matrix, Inc. pays the note plus interest to Carter. Note Given to Extend Credit Period Oct 30 Notes payable - Carter 5,000 Interest expense 150 Cash 5,150 To record payment of note and interest Interest expense = $5,000 × 12% × (90 ÷ 360) = $150 9-9
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PROMISSORY NOTE Face Value Date after date promise to pay to the order of American Bank Nashville, TN  Dollars plus interest at the annual rate of . $20,000 Sept. 1, 2009 Ninety days I Twenty thousand and no/100 - - - - - - - - - - - - - - - - - 6% Jackson Smith Note Given to Borrow from Bank 9-10
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Face Value Equals Amount Borrowed On September 1, 2009, Jackson Smith borrows $20,000 from American Bank. The note bears interest at 6% per year. Principal and interest are due in 90 days (November 30, 2009).
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Chap9MAF3e - Financial and Managerial Accounting Current...

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