07 ch 10 - Chapter 10 Reporting and Analyzing...

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Chapter 10 – Reporting and Analyzing Liabilities (Pages 472-501) I. Types of Current Liabilities a. Notes Payable i. These are like Notes Receivables, but from the opposite perspective ii. Therefore, they hold more power than accounts payable, backed by written documentation, and generally require the borrower to pay interest (calculated the same way) iii. Interest Payable on the note is also a current liability and Interest Expense goes on the income statement under ‘Other expenses and losses’ iv. Journal entries 1. To record issuance Debit: Cash Credit: Notes Payable 2. To accrue interest Debit: Interest Expense Credit: Interest Payable 3. To record payment at maturity Debit: Notes Payable Debit: Interest Payable Credit: Cash b. Sales Taxes Payable i. Percentage of sales price ii. Seller periodically sends in the amounts collected from customers to the state’s department of revenue iii. Journal entries 1. To record sale Debit: Cash Credit: Sales Credit: Sales Taxes Payable 2. To record payment to state Debit: Sales Taxes Payable Credit: Cash iv. NO EXPENSE ASSOCIATED WITH SALES TAX c. Payroll and Payroll Taxes Payable i. Similar to sales tax payable, company must withhold payroll taxes from employees’ paychecks and pay them to the appropriate government departments ii. Companies also often have to pay their shares of these taxes iii. Journal entries
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d. Unearned Revenues i. You have seen these before, but as a refresher: Unearned revenues occur when companies receive payment for a good or service, but have not yet provided the entire good or service to the customer. ii. Example: airlines, ski hills, hotels, magazine publisher iii. Journal entries 1. To record sale/collection of advance Debit: Cash Credit: Unearned Revenue 2. To record earning of revenues/full delivery of good or service Debit: Unearned Revenue Credit: Revenue e. Current Maturities of Long-Term Debt i. Sometimes called Long-Term Debt Due within One Year ii. No journal entry is necessary to reclassify current portion of long-term debt to
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07 ch 10 - Chapter 10 Reporting and Analyzing...

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