Chapter 10 - Current liability - debt that a company...

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Current liability - debt that a company reasonably expects to pay from existing current assets or thourhg creation of other current liabilities and within one year of operating cycle, whichever is longer. - A company with more current l than current assets lack liquidity or short term debt paying ability Notes Payable - obligation in the form of written notes. - Companies will use NP over AP because NP gives the lender written documentation of the obligation in case legal remedies are needed to collect the debt - Notes due for payment within one year of balance sheet date are usually classified as current liabilities Sales Tax Payable - to find sales tax payable, do cash – sales revenue - to find cash, do sales revenue * ( 1+ the tax rate) or sales revenue + sales tax payable. - Companies do not record sales taxes as expense, they just forward amount paid by customer to the government. Current Maturities of Long Term Debt - if you issue an interest bearing 5 year note payable worth 25,000, you should pay 5,000 of the note each year. - Ex: after 1 st year, report 5,000 as current liability and 20,000 as long term lability. - Current maturities of long term debt usually are classified on balance sheet as longterm debt due in a year - Not necessary to prepare adjusting entrues to recognize current maturities of long term debt Payroll and payroll tax payable - deductions are made to paychecks like social security, state income taxes, federal income tax, ect. - Also, you must pay vatiours payroll taxies like employers share of S.S. and state and federal unemployment taxes. - Payroll and payroll tax liabilities are current liabilities because they must be paid to employees or remitted to taxing authorities periodically and in the near term. If not paid on time, there are huge tax penalties. Bonds - long-term liabilities are obligations that a company expects to pay more than one year in future. - bonds: form of interest bearing notes payable issued by corporations, universities, government agencies - secured bonds have specific assets of the issuer pledged as collateral for bonds
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- unsecured bonds are issued against the general credit of the borrower. -
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Chapter 10 - Current liability - debt that a company...

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