Kieso_Inter_13e_Ch13 - CHAPTER 13 13 CURRENT LIABILITIES...

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 provide services to
other entities in the future as a result of past transactions or events.”

Chapter
13-3
What is a Current Liability?
What is a Current Liability?
Current liabilities
are “obligations whose liquidation is reasonably expected to
require use of 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.
Income taxes payable.
Employee-related liabilities.
LO 1 Describe the nature, type, and valuation of current liabilities.

Chapter
13-4
Balances owed to others for goods, supplies, or services purchased on
open account.
Accounts Payable (trade accounts payable)
What is a Current Liability?
What is a Current Liability?
LO 1 Describe the nature, type, and valuation of current liabilities.
Arise because of time lag between receipt of goods or services and
the payment for them.
The terms of the sale (e.g., 2/10, n/30) state period 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 Describe the nature, 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): Castle National Bank agrees to lend
$100,000 on March 1, 2010, to Landscape Co. if Landscape signs a
$100,000, 6 percent, four-month note. Landscape records the cash
received on March 1 as follows:
What is a Current Liability?
What is a Current Liability?
LO 1 Describe the nature, type, and valuation of current liabilities.
Cash 100,000
Notes Payable 100,000

13-7
Illustration (Interest-Bearing Note): If Landscape prepares financial
statements semiannually, it makes the following adjusting entry to
recognize interest expense and interest payable at June 30:
What is a Current Liability?
What is a Current Liability?
LO 1 Describe the nature, type, and valuation of current liabilities.
Interest expense