ch11 - PREVIEW OF CHAPTER 11 LIABILITIES Current...

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Long-Term Liabilities Bond basics Accounting for bond issues Accounting for bond retirements Accounting for long-term note payable Current Liabilities Notes payable Sales taxes payable Payroll and payroll taxes Unearned revenues Current maturities of long-term debt PREVIEW OF CHAPTER 11 LIABILITIES
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A Current Liability is a debt that can reasonably be expected to be paid: 1 from existing current assets or in creation of other current liabilities and 2 within one year or the operating cycle, whichever is longer. Current liabilities may include: 1 Notes Payable 2 Accounts Payable 3 Unearned Revenues 4 Accrued Liabilities CURRENT LIABILITIES
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Notes Payable are obligations in form of written promissory notes that usually require the borrower to pay interest. Notes payable may be used instead of accounts payable. Notes due for payment within one year of the balance sheet date are usually classified as current liabilities. NOTES PAYABLE
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First National Bank agrees to lend $100,000 on March 1, 2002 if the borrower signs a $100,000 , 12% , 4-month note . 100,000 100,000 NOTES PAYABLE
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NOTES PAYABLE 4,000 4,000 If financial statements are prepared semiannually, an adjusting entry is made at June 30 to recognize interest expense and interest payable of $4,000 .
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At maturity, Notes Payable is debited for face value of the note , Interest Payable is debited for accrued interest , and Cash is credited for maturity value of the note . NOTES PAYABLE 100,000 4,000
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SALES TAXES PAYABLE Sales tax is a stated percentage of the sales price on goods sold to customers by a retailer. A retailer (or selling company) collects sales tax from customers when sales occur, and periodically remits the collections to government. Thus, the retailer serves as a collection agent for the taxing authority.
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On March 25, cash register readings for Cooley Grocery show sales of $10,000 and sales taxes of $600 (sales tax rate is 6% ). SALES TAXES PAYABLE 10,600 10,000
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The term payroll pertains to all wages and salaries payable owed to employees. The employer withholds taxes from employees’ gross pay and remits the withholding taxes to the government. At the same time, the employer may also bear certain taxes relating to payroll. PAYROLL AND PAYROLL TAXES PAYABLE
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Unearned Revenues (cash advances from customers) occur when a company receives cash before a service is rendered or goods are sold. E.g., when an airline sells a ticket for future flights or when an attorney (lawyer) receives legal fees before work is done. UNEARNED REVENUES
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10,000 season football tickets at $50 each for its five-game home schedule . UNEARNED REVENUES
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This note was uploaded on 05/21/2011 for the course ACY 1111 taught by Professor Km during the Spring '10 term at CUHK.

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ch11 - PREVIEW OF CHAPTER 11 LIABILITIES Current...

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