00 5800 4880 1000 48320 10 11 12 notes payable four

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Unformatted text preview: 12 Notes Payable Four key events occur with any note payable: 1.establishing the note, 2.accruing interest incurred but not paid, 3.recording interest paid, and 4.recording principal paid. 13 14 15 16 17 18 Additional Current Liabilities Sales Tax Payable Payments collected from customers at time of sale create a liability that is due to the state government. Unearned Revenue Cash received in advance of providing services creates a liability of services due to the customer . 19 20 21 22 23 24 25 26 27 28 29 Interest on Bonds Issued at a Premium Cash proceeds > Face value Cash proceeds Face value = Premium Interest expense < Cash interest paid Interest expense = Cash interest paid Premium amortization 30 Interest on Bonds Issued at a Discount Cash proceeds < Face value Face value Cash proceeds = Discount Interest expense > Cash interest paid Interest expense = Cash interest paid+ Discount amortization 31 32 33 34 35 36 37 38 39 40 41 42 Contingent Liabilities Contingent liabilities are potential liabilities that arise from past transactions or events, but their ultimate resolution depends (is contingent) on a future event. 43 44 45 46 Summary You should be able to: Define classify and explain the nature of liability and its role in financing a company Account for common type of current liabilities Understand Bond valuation and Account for Bond transactions Understand Contingent liabilities Compute Quick ratios and times interest earned 47...
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