Slide AKT 102 Pertemuan 4

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Slide 10-2

Chapter

10

Liabilities

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Slide 10-3

1. Explain a current liability, and identify the major types of current liabilities.

2. Describe the accounting for notes payable.

3. Explain the accounting for other current liabilities.

4. Explain why bonds are issued, and identify the types of bonds.

5. Prepare the entries for the issuance of bonds and interest expense.

6. Describe the entries when bonds are redeemed.

7. Describe the accounting for long-term notes payable.

8. Identify the methods for the presentation and analysis of non-current liabilities.

Study Objectives

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Slide 10-4

Current Liabilities Current LiabilitiesCurrent Liabilities Current Liabilities

Notes payable

Sales taxes payable

Unearned revenues

Current maturities of

long-term debt term debt Statement presentation Statement presentation and analysis and analysis Bond basics Bond basics

Accounting for bond issues

Accounting for bond

retirements

Accounting for long-term

notes payable

Statement presentation and

analysis

Non-Current Liabilities Non-Current LiabilitiesNon-Current Liabilities Non-Current Liabilities

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Slide 10-5

Current liability

is debt with two key features:

1. Company expects to pay the debt from existing

current assets or through the creation of other current liabilities.

2. Company will pay the debt within one year or the operating cycle, whichever is longer.

What is a Current Liability?

SO 1 Explain a current liability, and identify the SO 1 Explain a current liability, and identify the

major types of current liabilities. major types of current liabilities.

Current liabilities include notes payable, accounts payable, unearned revenues, and accrued liabilities such as taxes payable, salaries payable, and interest payable.

Section 1

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Slide 10-6

To be classified as a current liability, a debt must be

expected to be paid:

a.

out of existing current assets.

b.

by creating other current liabilities.

c.

within 2 years.

d.

both (a) and (b).

Question

SO 1 Explain a current liability, and identify the SO 1 Explain a current liability, and identify the

major types of current liabilities. major types of current liabilities.

What is a Current Liability?

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Slide

10-7 SO 2 Describe the accounting for notes payable.SO 2 Describe the accounting for notes payable.

Notes Payable

Written promissory note.

Require the borrower to pay interest.

Issued for varying periods.

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Slide 10-8

Illustration: On March 1, 2011, Cole Williams borrows

$100,000 from First National Bank on a 4-month, 12% note.

Instructions

a) Prepare the entry on March 1.

b) Prepare the adjusting entry on June 30, assuming

monthly adjusting entries have not been made.

c) Prepare the entry at maturity (July 1).

SO 2 Describe the accounting for notes payable. SO 2 Describe the accounting for notes payable.

What is a Current Liability?

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Slide 10-9

a) Prepare the entry on March 1.

Notes payable 100,000

Cash 100,000

Interest payable 4,000

Interest expense 4,000

$100,000 x 12% x 4/12 = $4,000

b) Prepare the adjusting entry on June 30.

SO 2 Describe the accounting for notes payable. SO 2 Describe the accounting for notes payable.

What is a Current Liability?

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Slide 10-10

c) Prepare the entry at maturity (July 1).

Interest payable 4,000 Notes payable 100,000

Cash 104,000

SO 2 Describe the accounting for notes payable. SO 2 Describe the accounting for notes payable.

What is a Current Liability?

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Slide

10-11 SO 3 Explain the accounting for other current liabilities.SO 3 Explain the accounting for other current liabilities.

Sales Tax Payable

Sales taxes are expressed as a stated percentage of the sales price.

Either rung up separately or included in total receipts.

Retailer collects tax from the customer.

Retailer remits the collections to the state’s department of revenue.

What is a Current Liability?

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Slide 10-12

Illustration: The March 25 cash register reading for Cooley Grocery shows sales of $10,000 and sales taxes of $600 (sales tax rate of 6%), the journal entry is:

Sales 10,000

Cash 10,600

Sales tax payable 600

SO 3 Explain the accounting for other current liabilities. SO 3 Explain the accounting for other current liabilities.

What is a Current Liability?

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Slide

Unearned Revenue

Revenues that are received before the company delivers

goods or provides services.

1. Company debits Cash, and credits

a current liability account (unearned revenue).

2. When the company earns the

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Slide 10-14

Illustration: Assume that Superior University sells 10,000 season football tickets at $50 each for its five-game home

schedule. The university makes the following entry for the sale of season tickets:

SO 3 Explain the accounting for other current liabilities. SO 3 Explain the accounting for other current liabilities.

Unearned revenue

500,000

Cash 500,000

Aug. 6

Ticket revenue

100,000

Unearned revenue 100,000 Sept. 7

As the school completes each of the five home games, it would record the revenue earned.

What is a Current Liability?

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Slide

What is a Current Liability?

Illustration 10-2

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Slide 10-16

Current Maturities of Long-Term Debt

Portion of long-term debt that comes due in the

current year.

No adjusting entry required.

SO 3 Explain the accounting for other current liabilities. SO 3 Explain the accounting for other current liabilities.

What is a Current Liability?

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Slide 10-17

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