ACCT Exam 3 Study Guide - ACCT Exam 3 Chapter 10 Reporting...

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ACCT Exam 3 Chapter 10- Reporting and Analyzing LiabilitiesWhat is a Current liability? Two key features:Company expects to pay the debt from existing current assetsor through the creation of other current liabilities. Company will pay the debt within one yearor the operating cycle, whichever is longer.Current liabilities include notes payable, accounts payable, unearned revenues, and accrued liabilities such as taxes, salaries and wages, and interest payable.Notes PayableoWritten promissory note.oRequire the borrower to pay interest.oThose due within one year of the balance sheet date are usually classified as current liabilities.Tax Payable oSales taxes are expressed as a stated percentage of the sales price. oRetailer collects tax from the customer.oRetailer remits the collections to the state’s department of revenue.Unearned Revenue- Revenues that are received beforethe company delivers goods or provides services. oCompany odebits Cash, credits a current liabilityaccount (unearned revenue).oWhen the company earns the revenue, it debits the Unearned Revenueaccount, credits a revenueaccount.Current Maturities of Long- Term DebtoPortion of long-term debt that comes due in the current year.oNo adjusting entry required.Payroll and Payroll Taxes PayableoThe term “payroll” pertains to both: oSalaries- managerial, administrative, and sales personnel (monthly or yearly rate).oWages- store clerks, factory employees, and manual laborers (rate per hour).oDetermining the payroll involves computing three amounts: (1) gross earnings, (2) payroll deductions, and (3) net pay.Payroll tax expenseresults from three taxes that governmental agencies levy on employers. These taxes are: oFICA taxoFederal unemployment taxoState unemployment taxBonds
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