Ch.10 exam 3 - Chapter 10 Click to edit MasterInterpreting...

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Click to edit Master subtitle style Chapter 10 Reporting and Interpreting Liabilities
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Learning Objective 1 Explain how the reporting of liabilities assists decision-makers.
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Decisions Related To Liabilities Before extending credit, a credit manager for a company must assess: 1. What is the borrower’s current level of debt? That is: how much does the borrower owe to others? 2. What was the reason for the past borrowings? 3. Will the company be able to repay the amount borrowed on time?
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Current Liabilities Due within one year or the company’s operating cycle, whichever is longer. Long-Term Liabilities Due after one year or the company’s operating cycle, whichever is longer. Reporting Liabilities
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Learning Objective 2 Explain how to account for common types of current liabilities.
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Exh . 9.2 Current and Long-Term Liabilities 2,007 Liabilities Current Liabilities Accounts payable 31,157 $ Income and other taxes 10,866 Accrued liabilities 56,466 Current portion of long-term debt 8,700 Total Current Liabilities 107,189 Long-term Debt 134,006 Other Liabilities 33,719 Total Liabilities 274,914 $ Papa John's International, Inc. (In Thousands)
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Measurement of Liabilities The dollar amount reported for liabilities results from: 1. The initial amount of the liabilities the amount that a creditor would accept if the liability were settled immediately. 2. Additional amounts owed to the creditor. Liabilities are increased whenever additional obligations arise. 3. Payments or services provided to the creditor. Liabilities are reduced whenever the company makes payments or provides services to the creditor.
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Accounts Payable – Purchase of goods or services on credit. Accrued Liabilities – An expense is incurred in one accounting period, the cash payment in a later period. Sales Tax Payable – Liability resulting when a company collects sales tax for the state. Notes Payable – Occurs when one company borrows money from another. Current Liabilities Unearned Revenue – The receipt of cash before goods or services are provided.
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Accrued Payroll Taxes Employers incur several expenses and liabilities from having employees.
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Accrued Payroll Taxes n Many amounts are deducted from an employee’s gross pay to determine net pay . n These amounts include: q FICA Taxes (Social Security and Medicare; required by Federal Insurance Contributions Act) q Federal Income Taxes q State and Local Income taxes q Voluntary Deductions (payment to a pension plan, for example)
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Social Security Taxes Medicare Taxes 2009: 6.2% of the first $106,800 earned in the year. 2009:
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This note was uploaded on 08/15/2011 for the course ACIS 2115 taught by Professor Jayardley during the Spring '07 term at Virginia Tech.

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Ch.10 exam 3 - Chapter 10 Click to edit MasterInterpreting...

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