ch9_stu_sp08

ch9_stu_sp08 - ACG 2021 Accounting for Decisions Ch9...

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1 ACG 2021 Accounting for Decisions Ch9 - Reporting and Interpreting Liabilities Yunhao Chen [email protected]
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2 What do we hope to learn? Current Liability Long-term liability Estimated Liability Ratios on Liquidity Time value of money
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3 Liabilities Current Liabilities : short-term obligations that will be paid within the current operating cycle or a year, whichever is longer. Non-current liabilities (long-term liabilities) : all other liabilities.
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4 1. Accounts Payable 2. Short-term Notes payable (1 year or shorter maturity period) 3. Current Portion of Long-term debt Current Liabilities (Examples)
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5 Accrued Liabilities: 4. Salary Payable 5. Income taxes payable 6. Payroll taxes payable (employee income tax withheld, FICA taxed employee share) 7. Unearned Revenue Current Liabilities (Examples)
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6 Contingent Liabilities Contingent Liabilities: A potential liability that arises as the result of a past event; not an effective liability until some future event occurs. The probabilities of occurrence: 1. Probable (record on B/S if amount estimable; disclose if not.) 2. Reasonably possible (disclose in notes) 3. Remote (do not need to disclose)
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7 Warranty Liabilities 1. Warranty is a type of contingent liability that are recorded on the B/S. (why?) 2. Warranty expense and payable are estimated and recorded at the time of sales of warranty. (Matching principle) Example : In December 2005, Bestbuy sold XBOX 360 for $100,000. Along with the sale, a two-year warranty is included. The warranty expense is estimated to be 2% of the sale. In March, 2006, a repair within the warranty costing $160. Provide appropriate journal entries.
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8 Warranty Liabilities (cont.) In December 2005: Warranty Expense $2,000 Warranty Payable $2,000 In March 2006: Warranty Payable $160 Cash $160
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This note was uploaded on 04/07/2008 for the course ENG 2021 taught by Professor Yunhaochen during the Spring '08 term at FIU.

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ch9_stu_sp08 - ACG 2021 Accounting for Decisions Ch9...

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