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Unformatted text preview: 1 Explain a current liability, and identify the major types of current liabilities. A current liability is a debt that can reasonably be expected to be paid (1) from existing current assets or through the creation of other current liabilities, and (2) within one year or the operating cycle, whichever is longer. The major types of current liabilities are notes payable, accounts payable, sales taxes payable, unearned revenues, and accrued liabilities such as taxes, salaries and wages, and interest payable. 2 Describe the accounting for notes payable. When a promissory note is interest-bearing, the amount of assets received upon the issuance of the note is generally equal to the face value of the note. Interest expense is accrued over the life of the note. At maturity, the amount paid is equal to the face value of the note plus accrued interest. 3 Explain the accounting for other current liabilities. Sales taxes payable are recorded at the time the related sales occur. The company serves as a collection agent for the taxing authority. Sales taxes are not an related sales occur....
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This note was uploaded on 10/21/2011 for the course ACCT 272 taught by Professor Mensah during the Fall '08 term at Rutgers.
- Fall '08
- Financial Accounting