ch10handout - Chapter 10 Chapter 10 Reporting and Analyzing...

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1 1 REPORTING AND ANALYZING LIABILITIES Chapter 10 2 Chapter 10 Reporting and Analyzing Liabilities After studying this chapter, you should be able to: 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. Identify the types of bonds. 3 After studying this chapter, you should be able to: 5. Prepare the entries for the issuance of bonds and interest expense. 6. Describe the entries when bonds are redeemed. 7. Identify the requirements for the financial statement presentation and analysis of liabilities. Chapter 10 Reporting and Analyzing Liabilities 4 Current Liabilities ± Current liabilities are debts which can reasonably be expected to be paid • From existing current assets or through the creation of other current liabilities, and • Within 1 year or the operating cycle, whichever is longer ± Debts that do not meet both criteria are Long-Term Liabilities 11 1 5 Types of Current Liabilities ± Notes Payable ± Accounts Payable ± Unearned Revenues ± Accrued Liabilities •Taxes • Salaries and Wages • Interest 6 Review Question The time period for classifying a liability as current is one year or the operating cycle, whichever is? a. Probable. b. Shorter. c. Possible. d. Longer.
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2 7 Review Question The time period for classifying a liability as current is one year or the operating cycle, whichever is? a. Probable. b. Shorter. c. Possible. d. Longer. 8 Notes Payable Notes payable are ± Obligations in the form of written notes ± Often used instead of accounts payable; they give written documentation if needed for legal remedies ± Used for short-term and long-term financing needs ± Most often interest-bearing, requiring the borrower to pay interest 11 2 9 Note Payable 10 Journal On 9/1/07 First National Bank lends $100,000 to Cole Williams Co. on a four-month, 12% note maturing 1/1/08. Sept 1 Cash 100,000 Notes Payable 100,000 (To record issuance of 12%, 4-month note to bank) Dec 31 Interest Expense 4,000 Interest Payable 4,000 (To accrue interest for 4 months on note. Interest accrues over life of the note and must be recorded periodically.) $100,000 x .12 x 4\12 months 11 Journal Jan 1 Notes Payable 100,000 Interest Payable 4,000 Cash 104,000 (To record payment of 1st National Bank interest-bearing note and accrued interest at maturity.) 12 Sales Taxes Payable ± Are collected from customers ± Are expressed as a % of sales price ± Are required by state law. ± Remitted to the state monthly ± Usually rung separately from sales on the cash register. 11 3
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3 13 Journal Mar 25 Cash 10,600 Sales 10,000 Sales Taxes Payable 600 (To record daily sales and sales taxes). 14
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This note was uploaded on 04/12/2011 for the course ACCT 1310 taught by Professor Vickivorrell during the Spring '07 term at Cuyahoga CC.

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ch10handout - Chapter 10 Chapter 10 Reporting and Analyzing...

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