Chapter 11_Lecture_Summer_2010

Chapter 11_Lecture_Summer_2010 - Chapter 11 Study...

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1. Explain a current liability, and identify the major types of current liabilities. 2. Describe the accounting for notes payable. 3. Explain the accounting for other current liabilities. 4. Explain why bonds are issued, and identify the types of bonds. 5. Prepare the entries for the issuance of bonds and interest expense. 6. Describe the entries when bonds are redeemed or converted. 7. Describe the accounting for long-term notes payable. 8. Identify the methods for the presentation and analysis of long-term liabilities. Chapter 11 Study Objectives Chapter 11 Study Objectives
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Liabilities Current Liabilities Long-Term Liabilities Notes payable Sales taxes payable Payroll and payroll taxes Unearned revenues Current maturities of long-term debt Statement presentation and analysis Bond basics Accounting for bond issues Accounting for bond retirements Accounting for long- term notes payable Statement presentation and analysis
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Current liability is debt with two key features: 1. Company expects to pay the debt from existing current assets or through the creation of other current liabilities . 2. Company will pay the debt within one year or the operating cycle, whichever is longer. What is a Current Liability What is a Current Liability Current liabilities include notes payable , accounts payable , unearned revenues , and accrued liabilities such as taxes , salaries and wages , and interest payable .
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To be classified as a current liability, a debt must be expected to be paid: a. out of existing current assets. b. by creating other current liabilities. c. within 2 years. d. both (a) and (b). Question What is a Current Liability What is a Current Liability
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Notes Payable Written promissory note. Require the borrower to pay interest. What is a Current Liability What is a Current Liability
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E11-2 E11-2 On June 1, Melendez Company borrows $90,000 from First Bank on a 6-month, $90,000, 12% note. Instructions a) Prepare the entry on June 1. b) Prepare the adjusting entry on June 30. c) Prepare the entry at maturity (December 1), assuming monthly adjusting entries have been made through November 30. d) What was the total financing cost (interest expense)? What is a Current Liability What is a Current Liability
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E11-2 E11-2 On June 1, Melendez Company borrows $90,000 from First Bank on a 6-month, $90,000, 12% note. a) Prepare the entry on June 1. Notes payable 90,000 Cash 90,000 Interest payable 900 Interest expense 900 $90,000 x 12% x 1/12 = $900 b) Prepare the adjusting entry on June 30. What is a Current Liability What is a Current Liability
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E11-2 E11-2 On June 1, Melendez Company borrows $90,000 from First Bank on a 6-month, $90,000, 12% note. c) Prepare the entry at maturity (December 1), assuming monthly adjusting entries have been made through November 30. Interest payable
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This note was uploaded on 02/08/2011 for the course ACCOUNTING 272 taught by Professor Stein during the Spring '11 term at Rutgers.

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Chapter 11_Lecture_Summer_2010 - Chapter 11 Study...

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