C1 Chapter 09

C1 Chapter 09 - 9-1Chapter 9Current...

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Unformatted text preview: 9-1Chapter 9Current Liabilities,Contingencies, and the Time Value of MoneyFinancial Accounting 1st Canadian ed. by PNCS-B9-2CN 2004 Balance Sheet (excerpt)Current liabilities:Accounts payable andaccrued charges$ 1,605Current portion of long-term debt578Other 76Total current liabilities$ 2,259(in millions)Require paymentwithinone yearListed in order of liquidity123456789101112131415161718192021222324252628293031279-3Accounts PayablePurchase of inventory, goods or services on credit2/10,n30Discount payment terms offered to encourage early payment9-4NoteS.J.DevonaI promise to pay $1,000 plus 12% annualinterest on December 31, 2006.Date: January 1, 2006Signed:_________Lamanski Co.Total repayment = $1,120$1,000 + ($1,000 x 12%)9-5Discounted NoteIn exchange for $880 received today, I promise to pay $1,000 on December 31, 2006. Date: January 1, 2006Signed:_________Lamanski Co.Effective interest rate on note = 13.6% ($120 interest / $880 proceeds)9-61/1/0612/31/06Notes Payable$ 1,000$ 1,000Less: Discount on Notes Payable120- 0 - Net Liability$ 880$ 1,000Balance Sheet Presentation of Discounted NotesDiscount transferred to interest expense over life of note9-78Current Portion of Long-Term DebtPrincipal repayment on borrowings due within one year of balance sheet dateDue in upcoming year1234567891011121314151617181920212223242526282930312712345678910111213141516171819202122232425262829303127123456789101112131415161718192021222324252628293031279-8Taxes PayableRecord expense when incurred; not when paidRecord 2006 taxexpenseTaxes Paid12/31/063/15/079-9Current Liabilities on the Statement of Cash FlowsOperating ActivitiesNet incomexxxIncrease in current liability+Decrease in current liability-Investing ActivitiesFinancing ActivitiesIncrease in notes payable+Decrease in notes payable-9-10Payroll DeductionsEmployers deduct Income TaxesCPPEIOthers The deductions are remitted later9-11Payroll Deductions - ExampleSalary expense100,000Salary payable65,100Income tax payable20,000CPP payable4,950EI payable1,950United Way payable5,000Union dues payable3,000Liability 9-1211Contingent LiabilityObligation involving existing conditionOutcome not known with certaintyDependent upon some future eventActual amount is estimated9-13Accrue estimated amount if:liability is probableamount can be reasonably estimatedRecording Contingent LiabilityIn year criteria are met:Expense (loss)XXXLiabilityXXX9-14Disclosing Contingent LiabilitiesIF not probable but reasonably possibleORamount not estimableDisclose in footnotes9-1513→Warranties→Premium or coupon offers→LawsuitsTypical Contingent Liabilities9-16...
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This note was uploaded on 10/19/2011 for the course ACCT 2242 taught by Professor Cumming during the Spring '11 term at Dalhousie.

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C1 Chapter 09 - 9-1Chapter 9Current...

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