BMGT 220 Chapter 10

BMGT 220 Chapter 10 - Slide 10-1 Liabilities Financial...

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Unformatted text preview: Slide 10-1 Liabilities Financial Accounting, Seventh Edition Chapter 10 Slide 10-2 Current Liabilities Long-Term Liabilities Liabilities Slide 10-3 Current liability is debt with two key features: 1. Company expects to pay the debt from existing current assets or through the creation of other current liabilities . 2. Company will pay the debt within one year or the operating cycle, whichever is longer. What is a Current Liability? Current liabilities include notes payable , accounts payable , unearned revenues , and accrued liabilities such as taxes payable , salaries payable , and interest payable . Section 1 Current Liabilities Slide 10-4 Notes Payable Written promissory note. Require the borrower to pay interest. Issued for varying periods. What is a Note Payable? Slide 10-5 PROMISSORY NOTE Face Value Date after date promise to pay to the order of Bank of Maryland Dollars plus interest at the annual rate of . $10,000 Dec 1, 2011 Ninety days I Ten thousand and no/100 - - - - - - - - - - - - - - - - - 6% R H S Company Illustration Note Issued to Borrow Funds from a Bank Slide 10-6 On December 1, 2011, R H Smith Company borrows $10,000 from Bank of Maryland by signing a 90-day, 6% note. Principal and interest are due on March 1, 2012. Record Journal entry to Borrow Funds from a Bank Slide 10-7 Note Date End of Period Maturity Date An adjusting entry is required to record Interest Expense incurred to date. Record End of Period Adjustment to Note Slide 10-8 On Dec 31, 2011, RHS Company would record On March 1, 2012, RHS Company would record: Record End of Period Adjustment to Note Record Payment of Note at maturity: Slide 10-9 Knowledge Check Question : On November 1, 2011, Brown Company signed a $12,000, 90 day, 8% note to a supplier for purchase of merchandise. If Brown Companys accounting period ends on December 31, and the note is paid on February 1, 2012, which one of the following statements will be TRUE for Brown Company? 1. On February 1, 2012, they will debit Interest Payable for $80 2. On December 31, 2011, they will credit Interest Payable for $160 3. On February 1, 2012, they will credit Interest Payable for $160 4. On December 31, 2011, they will debit Interest Expense for $80 Slide 10-10 Sales Tax Payable Sales taxes are expressed as a stated percentage of the sales price. Either rung up separately or included in total receipts. Retailer collects tax from the customer. Retailer remits the collections to the states department of revenue. Sales Tax Payable Slide 10-11 Best Buy Company sold merchandise to a customer for $700 that are subject to a 6% sales tax....
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BMGT 220 Chapter 10 - Slide 10-1 Liabilities Financial...

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