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Chap11 Class Notes 2010

Chap11 Class Notes 2010 - CHAPTER 11 Liabilities I A...

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Victor Leung 1 ACCT2111 (2010) Chapter 11 CHAPTER 11 Liabilities I. A current liability is a debt that can reasonably be expected to be paid (1) from existing current assets or in the creation of other current liabilities, and (2) within one year or the operating cycle whichever is longer. Current Liabilities (Illustration 11-5, page 480) 1. Short-term notes payable 2. Accounts payable 3. Sales tax payable 4. Accrued expenses (liabilities) -- e.g., Salaries Payable. 5. Unearned revenues e.g., Unearned Ticket Revenue. 6. Long-term debt due within one year (Current portion of long-term debt) 7. Presentation in Balance Sheet (Illustration 11-5, page 480) II. Notes Payable 1. Notes payable are obligations in the form of written promissory notes. 2. Interest-bearing note The borrower required paying interest when the note matures. Interest must also be accrued at the end of each accounting period. Example 1 Leung’s Company, whose fiscal year ends December 31, 2009, completed the following transactions involving notes payable. 2008 01/10 Purchased a truck by issuing a 4-month, 12% note for $100,000.
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