Unformatted text preview: Chapter 11 Chapter 11 Announcements Announcements I am still grading the exam. I hope to have them the next class period. Below is a listing of the problems that we will potentially work through for chapters 13 &14. There are a lot of these examples. As a result, if we do not cover them in class I will post the answers. If we cover them in class I will not post the solutions. Chapter 13: Ex 138, 10, 13, 16, and 18 Chapter 14:Ex 145,6,8, 11, 14, 16, 20, and 22 Announcements, cont. Announcements, cont. We will be covering appendix 1 &2 Chapter 14 and it is difficult. Final schedule – per your student handbook (each section will take the exam separately) Quizzes The next quiz will be over chapter 13. The final quiz will be over chapter 14 Office hours tomorrow are by appointment only I will likely take at least one of the work out problems directly off of midterms 1 and 2 for the final exam (some switching of numbers). Agenda for Today Agenda for Today Highlight the most important aspects of Chapter 11. We will go light on the payroll sections (concept 2 &3 according to your text) of your chapter Please pay most attention to what is covered in class for these items. Part 2 is likely interesting to those of you who have worked or will work in the US. We will start Chapter 13 if there is time Chapter 11 Chapter 11 The focus of this chapter is current liabilities. Some of the current liabilities that we have discussed previously include: A/P, N/P, unearned revenue, interest payable, and wages payable The cutoff period for current versus long term liabilities is one year. N/P N/P There are short term N/P. We discussed N/R quite a bit in Chapter 9. The same principles apply here There is interest expense that is associated with notes Two of the ways that N/P will come into existence will be based on purchases on account or because the company borrows money N/P and other ST liabilities N/P and other ST liabilities N/P may also be long term in nature (meaning that they will not mature within in the next year) In addition, companies will likely have other longterm debt. An example of this comes with debt that is due in installments. Even with long term debt that is due in installments, there is likely some amounts that show up as a current liability that relate to longterm liabilities Think about current installment of long term We will get to see a lot more long term liabilities in Chapter 14 By the way, have I mentioned that Chapter 14 is really difficult? Discounted notes Discounted notes Sometimes a discounted note is issued rather than an interestbearing note. A discounted note has the following characteristics: The creditor (lender) requires an interest rate, called the discount rate Interest (called the discount) is calculated on the face amount of the note The debtor (borrower) receives the face amount of the note less the discount, called the proceeds. The debtor pays the face amount of the note on the due date. Payroll Payroll The things that I want you to be able to know from the payroll portions of this chapter will be discussed today Gross versus net pay Withholding versus the employer’s payroll tax expense Whose ultimate tax liability makes a difference on the entry is recorded Ex 1112 – note, I will tell you on the exam whose tax liability it is (employer versus employee) Internal Controls for Payroll Internal Controls for Payroll Systems IF a checksigning machine is used, blank payroll checks and access to the machine should be restricted The hiring and firing of employees should be properly authorized and approved in writing All changes in pay rates should be properly authorized and approved in writing Employees should be observed when arriving for work to verify that employees are checking in for work once (and only for themselves). Employees might check in for work by using a time card or by swiping their ID card Payroll checks should be distributed by someone other than employee supervisors A special payroll bank account should be used Fringe Benefits Fringe Benefits Most employees receive benefits beyond their normal salaries These additional benefits can be very costly Companies will need to accrue for these costs in accounting records Vacation Pension Medical Dental Benefits, cont. Benefits, cont. Vacation pay Often times accrued for as an adjusting entry at the end of the year (but many companies would accrue every pay period) Would show a vacation pay expense account/vacation pay payable Whether the vacation pay payable is a current liability depends upon whether it is anticipated that the employees will take the vacation within in the next year. Benefits, etc. Benefits, etc. Pensions Two different types in the US Defined contributions versus defined benefits Pension Expense dr Cash cr. Defined benefit plans pose some very complicated accounting issues I want you to understand that both exist But you only need to know the JE for defined contributions Contingent Liabilities Contingent Liabilities
• Some liabilities may arise from past transactions if certain events occur in the future. These potential obligations are called contingent liabilities. The accounting for contingent liabilities depends on the following two factors:
• • Likelihood of occurring: Probable, reasonably possible, or remote Measurement: Estimable or not Estimable • Contingent Liabilities Contingent Liabilities ...
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- Spring '11
- Accounting, LIABILITIES CONTINGENT LIABILITIES, long term liabilities