Chapter 8：Liabilities负债

Current LiabilitБайду номын сангаасes
• Amounts that must be estimated
– Estimated Warranty Payable – Contingent Liabilities
Notes Payable
On Jan. 30, 20X5 the company issued a one year $8,000 note payable at 10% interest to purchase inventory. Jan 30 Cash Note Payable, Short-term 8,000 8,000
600
200 8,800
Payment of a note payable and interest at maturity
Sales Tax Payable
To record sales of $200,000 plus 5% sales tax: Cash (200,000 x 1.05) 210,000
EXERCISE-True/False
• The presence of an Unearned Revenue account on a company’s balance sheet indicates that the company received cash from customers prior to providing goods and services. • (true) • When recording interest accrued on very short-term notes, the interest can be added to the Notes Payable account. • (false)
Sales Revenue
Sales Tax Payable (200,000 x .05) To record cash sales and related sales tax
200,000
10,000
Payroll Liabilities
• Types of Compensation
– Salary – Wage – Commission – Bonus
EXERCISE-Choice
• Monthly sales were $200,000. It was estimated that 4% of the units sold would have to be replaced under warranty. On the date of sale the company should record a debit to: • a. Warranty Expense for $8,000 • b. Warranty Payable for $8,000 • c. Sales for $8,000 • d. No entry is required since the actual liability amount is not known. • (a)
FICA Tax Payable Salary Payable to Employees To record salary expense
1,200
800 8,000
Unearned Revenues
To record collection of cash in payment for future services:
EXERCISE-True/False
• Warranty expense is recognized in the same period that the sales revenue is recognized because of the conservatism principle. • (false) • A contingent liability is an estimated liability, with the dollar amount of the liability dependent on a future event arising out of a past transaction. • (False)
EXERCISE-True/False
• Current liabilities are obligations due within one year or within the company’s normal operating cycle if it is longer than one year. • (true) • The amount of an obligation must be known in advance to be considered a current liability. • (false)
EXERCISE-Choice
• Failure to record an accrued liability causes a company to: • a. overstate assets • b. overstate expenses • c. overstate liabilities • d. overstate owners’ equity • (d)
EXERCISE-True/False
• An accrued expense is an expense incurred in the current period that will be paid in a future period. • (true) • Sales tax payable is an estimated liability arising out of sales revenue that has been reported on the income statement. • (false)
Unearned Ticket Revenue Ticket Revenue
600
600
Earned revenue that was collected in advance
Estimated Warranty Payable
Warranty expense should be recognized in the year the product is sold. For example, a company made sales of $100,000 subject to product warranties. They estimate that 3% of the products will require repair or replacement. Warranty Expense Estimated Warranty Payable To accrue warranty expense When $2,800 of products are replaced under the warranty: Estimated Warranty Payable Inventory 2,800 2,800 3,000
Chapter 8 Liabilities
Learning Objectives
• Account for current liabilities and contingent liabilities • Account for bonds-payable transactions • Measure interest expense • Understand the advantages and disadvantages of borrowing • Report liabilities on the balance sheet
Jan 30
Cash Unearned Ticket Revenue
1,200
1,200
Received cash in advance for ticket sales To record revenue after 50% of services have been performed.
Apr 30
Current Liabilities
• Liabilities due within 1 year or the company’s operating cycle if longer
– Known amounts
• • • • • • • Accounts Payable Short-term Notes Payable Sales Tax Payable Current Installment of Long-Term Debt Accrued Expenses Payroll Liabilities Unearned Revenues
EXERCISE-Choice
• Warranty expense should be recorded in the period: • a. that the product sold is repaired or replaced • b. the product is sold • c. immediately following the period in which the product is sold • d. that the product is paid for by the customer • (b)
Adjusting entry to accrue interest expense
Notes Payable
To record repayment at maturity: Jan. 1 Note Payable, short-term 8,000
Interest Payable
Interest Expense ($8,000 x .10 x 3/12) Cash [($8,000 x .10) + 8,000]