"M351 Notes-Day 2 Cur Liab

"M351 Notes-Day 2 Cur Liab - M351 Notes, Class 2:...

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M351 Notes, Class 2: Current Liabilities, pp. 636-651 A. Liability definition: probable future outflow arising from a present obligation resulting from past transactions 1. Current Liability definition: a liability that will likely require an outflow within the longer of one year or one operating cycle and the outflow will probably use existing resources (Current Assets). 2. A list of Current Liabilities appears on page 639. 3. Interest on a Current (short term) Note Payable with a maturity of one year or less: Interest Expense = p x t x i Where p = amount borrowed, t = time in years, i = annual interest rate For example: assume ABC Company borrowed $150,000 cash on February 1 on a four-month 6% note. The 2/1 journal entry is: February 1 Cash. ................................................................... 150,000 Notes Payable. ............................................. 150,000 The 5/31 payment entry is: May 31 Interest Expense*. .............................................. 3,000
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"M351 Notes-Day 2 Cur Liab - M351 Notes, Class 2:...

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