chapter 11

chapter 11 - Objectives: CHAPTER 11 CURRENT AND LONG-TERM...

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1 CHAPTER 11 CURRENT AND LONG-TERM LIABILITIES Professor Dominica Lee September 2005 2 ACY1111 D. Lee 2005-2006 Objectives: 1. Current liabilities 2. Long-term liabilities: Bonds payable: a. Issuing bonds b. Interest expense c. Early retirement d. Convertible bonds 3 ACY1111 D. Lee 2005-2006 Current Liabilities A current liability is a liability due within one year or within the company’s normal operating cycle, whichever is longer. It is expected to be paid from existing current assets or through the creation of other current liabilities. Two Types: (A) Liabilities of a known amount (B) Liabilities that must be estimated . 4 ACY1111 D. Lee 2005-2006 Current liabilities of Known Amount: 1. Accounts payable : amounts owed for purchases on account. 2. Short-term notes payable : are notes due within 1 year and have the interest paid at maturity. (a) on issuing a note: Inventory (or Cash) xx Note Payable xx (b) If the maturity date of the note occurs in the next accounting period, have to accrue interest expense at year end: Interest Expense xx Interest Payable xx (c) On maturity date: Note Payable xx Interest Expense xx Interest Payable xx Cash xx 5 ACY1111 D. Lee 2005-2006 Current liabilities of Known Amount: (Cont’d) 3. Sales tax payable: Sales taxes are collected by retailers and remitted periodically to the tax authority. Accounts Receivable (or Cash) xx Sales xx Sales Tax Payable xx 4. Current portion of long-term debt: the principal portion of a long-term installment debt that is payable within one year. 5. Accrued expenses (accrued liabilities) 6. Payroll liabilities (not in syllabus) 7. Unearned revenues (deferred revenues ): cash is received before the revenue is earned. 6 ACY1111 D. Lee 2005-2006 Current Liabilities that Must Be Estimated Warranty Payable : The warranty expense relating to sales in a period has to be estimated and deducted from the sales revenue.
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This note was uploaded on 11/26/2010 for the course BA ACY1111/2 taught by Professor C during the Spring '09 term at CUHK.

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chapter 11 - Objectives: CHAPTER 11 CURRENT AND LONG-TERM...

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