13 - Chapter 13 Accounting for Current Liabilities and...

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Chapter 13 Accounting for Current Liabilities and Contingencies 1
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Recommended problems from the text E13-1, 2, 6, 7, 10, 13, 14, 17, 22 CPA exam questions 1, 3, 6 P13-1 2
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At the beginning… Liabilities represent obligations that will result in probable future economic sacrifices related to events that have occurred. The two basic rules for recording a 3
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Liabilities are classified as “current” on the Balance Sheet if they are expected to be paid in cash, using other current assets, or by incurring other current liabilities 4
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As a practical expedient, current liabilities are not discounted from future value to present value since the difference between future and present value is generally 5
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Part 1 Non-contingent Liabilities For these liabilities there is no mystery that they exist or the amount required to settle them Examples: 1. Accounts payable 6
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Accounts Payable The account title “Accounts Payable” is usually used to identify liabilities that 7
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Question You buy inventor y for resale JE at purchase: Inventory 10,000 Accounts payable 10,000 JE if payment made within discount period Accounts payable 10,000 Purchase discounts / Inventory 200 Cash 9,800 Note: purchase discounts are closed inventory, i.e., reduce, inventory 8
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Question At what annual interest rate would the company by indifferent between paying on the 10th day after purchase and taking the 20 day interest rate = 200/9800 = . 020408163 20 day interest rate “annualized” 9
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Question (similar to what you did when discussing statement of cash flows in 1st course) Assume a company had beginning balance of A/P of $54,000, ending balance of $86,000, beginning inventory of $210,000, ending inventory of $230,000, and cost of goods sold was $450,000: What were total purchases? Hint
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13 - Chapter 13 Accounting for Current Liabilities and...

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