ACCT207 Lecture Notes - Lecture 4: Accounts Payable, Current Liability, Promissory Note

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violetmuskrat44

7 Aug 2018

School

University of Delaware

Department

Accounting

Course

ACCT207

Professor

Vin Mar

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Document Summary

What is current liability: a debt that a company expects to pay. From existing current assets or through the creation of other current liabilities and. Within one year or the operating cycle, whichever is long. Include notes, payable, accounts payable, unearned revenues, and accrued liabilities such as taxes, salaries and wages and interest. Unearned revenues: revenues that are received before goods are delivered or services are performed. Company increases (debits) cash and increases (debits) a current liability account, unearned revenue. When the company recognizes revenue, it decreases (debits) the unearned revenue account and increases (credits) a revenue account. Type of business: airline, magazine publisher, hotel. Current maturities of long term debt: portion of long term debt that comes due in the current year, no adjusting entry required. Payroll and payroll taxes payable: the term payroll pertains to both. Salaries - managerial, administrative, and sales personnel (monthly, or yearly rate) Wages - store clerks, factory employees, and manual laborers.

Related Questions

Listed below are several terms and phrases associated with current liabilities. Mach each List A to B

List A

1, Cash, current investments, and A/R all divided by current liabilities.

2, Payment is probable and can be reasonably estimated.

3, Gift cards

4, Long-term debt maturing within one year

5, Social Security and Medicare

6, Interest expense is recorded in the period interest is incurred rather than in the period interest is paid.

7, payment is reasonably possible and can be reasonably estimated.

8, Incurred on a notes payable.

9, Unsecured notes sold in minimum denominations of $25,000 with up to 270 days.

10, Classifying liabilities as either current or long-term helps inverstors and creditors assets this.

List B

a, Recoding a contingentliability

b, disclosure of a contingent liability

c, Interest expense

d, FICA

e, Commercial paper

f, The riskiness of a business's obligations

g, Current portion of Long-term debt

h, Unearned revenue

i, Acid=test ratio

j, Accual Accounting

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Balance Sheet Preparation

The following is a December 31, 2015, post-closing trial balancefor the Happy Valley Corporation.

Account Title	Debits	Credits
Cash	25100
Accounts Receivable	53600
Inventories	82000
Interest Payable		8420
Marketable Securities	41600
Land	105000
Buildings	304000
Accumulated Depreciation -- Building		100000
Equipment	76000
Accumulated Depreciation -- Equipment		25600
Copyright (net of Amortization)	9760
Prepaid Expenses	32700
Accounts Payable		60200
Unearned Revenues		17300
Notes Payable		256000
Allowance for Uncollectible Accounts		4950
Common Stock		?
Retained Earnings		69900

Additional Information:

1. The $105000 balance in the landaccount consists of $87600 for the cost of land where the plant andoffice buildings are located. The remaining amount represents thecost of land being held for speculation.

2. The $41600 in the marketablesecurities account represents an investment in the common stock ofanother corporation. Valley intends to sell one-half of the stockwithin the next year.

3. The notes payable account consistsof a note due in six months and a $187000 note due in three equalannual installments, with the first payment due in August of2015.

Required: Calculate the following balance sheet totals for theValley Pump Corporation at December 31, 2014.

Common Stock

Current Assets

Property, Plant and Equipment (net)

Intangible and Other Assets

Total Assets

Short-term Note Payable

Current Liabilities

Long-term Liabilities

Total Equity

Total Liabilities and Equity

Please include a detailed answer for the accounts you includedto find the balance of each.

Identification of Current Liabilities, Contingencies, andCommitments LO3 P 1. Listed below are common types of currentliabilities, contingencies, and commitments:

a. Accounts payable

b. Bank loans and commercial paper

c. Notes payable
d. Dividends payable

e. Sales and excise taxes payable

f. Current portion of long-term debt

g. Payroll liabilities

h. Unearned revenues

i. Income taxes payable

j. Property taxes payable

k. Promotional costs

l. Product warranty liability

m. Vacation pay liability

n. Contingent liability

o. Commitment

Required

1. For each of the following statements, identify the categoryabove to which it gives rise or with which it is most closelyassociated:

1. A company agrees to replace parts of a product ifthey fail.

2. An employee earns one day off for each monthworked.

3. A company signs a contract to lease a buildingfor five years.

4. A company puts discount coupons in thenewspaper.

5. A company agrees to pay insurance costs foremployees.

6. A portion of a mortgage on a building is due thisyear.

7. The board of directors declares a dividend.

8. A company has trade payables.

9. A company has a pending lawsuit against it.

10. A company arranges for a line of credit.

11. A company signs a note due in 60 days.

12. A company operates in a state that has a sales tax.

13. A company earns a profit that is taxable.

14. A company owns buildings that are subject to propertytaxes.

2. Of the items listed from a to o above, which oneswould you not expect to see listed on the balance sheet with adollar amount? Of those items that would be listed on the balancesheet with a dollar amount, which ones would you con- sider toinvolve the most judgment or discretion on the part ofmanagement?

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ACCT207 Lecture Notes - Lecture 4: Accounts Payable, Current Liability, Promissory Note

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