MGA FINAL REVIEW

MGA FINAL REVIEW - 1) proper accounting for common current...

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1) proper accounting for common current liabilities (accounts payable, accrued liabilities, etc.), notes payable, and bonds payable Current Liabilities - Liabilities due within a one year or less Accounts Payable - -Increased (credited) when a company receives goods or services on credit. -Decreased (debited) when the company pays on its account. Accrued Liabilities- Liabilities for expenses that have been incurred but not paid at the end of the accounting period. Relates to various unpaid expenses, -Advertising, Electricity, Corporate Income Tax, Interest, Payroll Tax, Warranties. Accrued Payroll- In addition to Wages Payable, companies record liabilities for other aspects of payroll. Two significant payroll liabilities Payroll deductions- Amounts subtracted from employees' gross earnings to determine their net pay. Either required by law or voluntarily requested by employees. EXAMPLE… Adam Palmer earned gross pay of $600 in the current payroll period. General Mills withheld $58 in Federal income taxes, $48.80 for FICA, and $10 for United Way, resulting in net pay of $483.20. Employer Payroll Taxes - Employers have other liabilities related to payroll. 1. FICA tax (a “matching” contribution) 2. Federal unemployment tax 3. State unemployment tax EXAMPLE…. Assume General Mills was required to contribute $16,400 for FICA, $250 for federal unemployment tax, and $1,350 for state unemployment tax. Accrued Income Taxes- Corporations pay taxes not only on payroll but also on income they earn. Its calculated by taxable income times tax rate. EXAMPLE… General Mill calculated taxable income to be $1,000,000, and is subject to a 35% tax rate, so income taxes owed are $350,000. ($1,000,000 x 35%) Unearned Revenue - Cash received in advance of providing services creates a liability of services due to the customer 1. Receive cash and create a liability. (on October 1) 2. Fulfill part of the liability and earn revenue (on October 31) dr Wages and Salaries Expense (+E, -SE) 600.00 cr Withheld Income Taxes Payable (+L) 58.00 cr FICA Payable (+L) 48.80 cr United Way Payable (+L) 10.00 cr Cash (-A) 483.20 dr Payroll Tax Expense (+E, -SE) 18,000 cr FICA Tax Payable (+L) 16,400 cr Federal Unemployment Tax Payable (+L) 250 cr State Unemployment Tax Payable (+L) 1,350 dr Income Tax Expense (+E,-SE) 350,000 cr Income Tax Payable (+L) 350,000 dr Cash (+A) xxxx cr Unearned Revenue (+L) xxxx dr Unearned Revenue (-L) xxxx cr Revenue (+R, +SE) xxxx
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Notes Payable- represents the amount the company owes to others as a result of issuing promissory notes. Four key events occur with any note payable: establishing the note, accruing interest incurred but not paid, recording interest paid, and recording principal paid. EXAMPLE… General Mills borrowed $100,000 cash on a one-year note that required General Mills to pay 6 percent interest and $100,000 principal, both on October 31, 2010. 1. Establish the note payable. The $100,000 loan that created the note payable has the following accounting equation effect, record using the following journal entry. ..
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This note was uploaded on 02/03/2011 for the course MGA 201 taught by Professor Anderson during the Fall '08 term at SUNY Buffalo.

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MGA FINAL REVIEW - 1) proper accounting for common current...

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