Chapter
13-1
C H A P T E R
C H A P T E R
13
13
CURRENT LIABILITIES AND
CURRENT LIABILITIES AND
CONTINGENCIES
CONTINGENCIES
Intermediate Accounting
13th Edition
Kieso, Weygandt, and Warfield

Chapter
13-2
What is a Liability?
What is a Liability?
FASB, defines liabilities as:
“
Probable Future Sacrifices of Economic Benefits
arising from present
obligations of a particular entity to transfer assets or provideservices to
other entities in thefutureas a result of past transactions or events.”

Chapter
13-3
What is a Current Liability?
What is a Current Liability?
Current liabilities
are“obligations whoseliquidation is reasonably expected to
requireuseof existing resources properly classified as current assets, or the
creation of other current liabilities.”
Typical Current Liabilities:
Accounts payable.
Notes payable.
Current maturities of long-term debt.
Short-term obligations expected to be
refinanced.
Dividends payable.
Customer advances and deposits.
Unearned revenues.
Sales taxes payable.
Incometaxes payable.
Employee-related liabilities.
LO 1 Describethenature, type, and valuation of current liabilities.

Chapter
13-4
Balances owed to others for goods, supplies, or services purchased on
open account.
Accounts Payable(tradeaccounts payable)
What is a Current Liability?
What is a Current Liability?
LO 1 Describethenature, type, and valuation of current liabilities.
Arise becauseof timelag between receipt of goods or services and
the payment for them.
Theterms of thesale (e.g., 2/10, n/30) stateperiod of extended
credit.

Chapter
13-5
Written promises to pay a certain sum of money on a specified future
date.
Notes Payable
What is a Current Liability?
What is a Current Liability?
LO 1 Describethenature, type, and valuation of current liabilities.
Arise from purchases, financing, or other transactions.
Notes classified as short-term or long-term.
Notes may be interest-bearing or zero-interest-bearing.

Chapter
13-6
Illustration (Interest-Bearing Note):
CastleNational Bank agrees to lend
$100,000 on March 1, 2010, to LandscapeCo. if Landscapesigns a
$100,000, 6 percent, four-month note.
Landscaperecords the cash
received on March 1 as follows:
What is a Current Liability?
What is a Current Liability?
LO 1 Describethenature, type, and valuation of current liabilities.
Cash
100,000
Notes Payable
100,000

Chapter
13-7
Illustration (Interest-Bearing Note):
If Landscape prepares financial
statements semiannually, it makes the following adjusting entry to
recognizeinterest expense and interest payable at June30:
What is a Current Liability?
What is a Current Liability?
LO 1 Describethenature, type, and valuation of current liabilities.
Interest expense
2,000
Interest payable
2,000
($100,000 x
6% x 4/12) =
$2,000
Interest calculation =

Chapter
13-8
Illustration (Interest-Bearing Note):
At maturity (July 1), Landscape
records payment of the noteand accrued interest as follows.


You've reached the end of your free preview.
Want to read all 56 pages?
- Spring '08
- HOLLIE,DANA
- Accounting, Trigraph, Diffe nt Type, curre liabilitie