Chapter_11 - Current Liabilities and Payroll 11 Student...

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Unformatted text preview: Current Liabilities and Payroll 11 Student Version 11-2 Describe and illustrate current liabilities related to accounts payable, current portion of long-term debt, and notes payable. 1 11-2 11-3 Liabilities that are to be paid out of current assets and are due within a short time, usually within one year, are called current liabilities . Accounts payable Current portion of long-term debt Notes payable 1 11-4 Accounts payable arise from purchasing goods or services for use in a companys operations or for purchasing merchandise for resale. 1 11-5 A firm issues a 90-day, 12% note for $1,000, dated August 1, 2008 to Murray Co. for a $1,000 overdue account. Short-Term Notes Payable 1 11-6 On October 30, when the note matures, the firm pays the $1,000 principal plus $30 interest ($1,000 12% 90/360). 1 Interest Expense appears on the income statement as an Other Expense. 11-7 On May 1, Bowden Co. (borrower) purchased merchandise on account from Coker Co. (creditor), $10,000, 2/10, n/30. The merchandise cost Coker Co. $7,500. 1 11-8 Description Debit Credit Bowden Co. (Borrower) Mdse. Inventory 10,000 Accounts Payable 10,000 Coker Co. (Creditor) Description Debit Credit Accounts Receivable 10,000 Sales 10,000 Cost of Mdse. Sold 7,500 Mdse. Inventory 7,500 1 11-9 On May 31, Bowden Co. issued a 60-day, 12% note for $10,000 to Coker Co. on account . Accounts Payable 10,000 Notes Payable 10,000 Description Debit Credit Bowden Co. (Borrower) Notes Receivable 10,000 Accounts Receivable 10,000 Coker Co. (Creditor) Description Debit Credit 1 11-10 On July 30, Bowden Co. paid Coker Co. the amount due on the note of May 31. Interest: $10,000 12% 60/360. Notes Payable 10,000 Interest Expense 200 Cash 10,200 Description Debit Credit Bowden Co. (Borrower) Cash 10,200 Interest Revenue 200 Notes Receivable 10,000 Coker Co. (Creditor) Description Debit Credit 1 11-11 On September 19, Iceburg Company issues a $4,000, 90-day, 15% note to First National Bank....
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Chapter_11 - Current Liabilities and Payroll 11 Student...

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