ADM 1340 Chapter Notes - Chapter 10: Sales Taxes In Canada, Accounts Payable, Promissory Note

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22 Apr 2016

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Current liabilities: bank indebtedness, accounts payable, accrued liabilities(tax- es, salaries, interest), unearned revenue, notes or loans payable, current portion of non-current debt. Pre-authorization by the bank that allows companies to borrow money up to a pre-set limit, when is needed. Interest is usually charged at a floating/variable interest rate on any amounts used from the line of credit. Security(called collateral) is usually required by the bank as the protection in the event of default on the loan. A bank indebtedness is a negative or credit bank balance(debit to the bank) which is reported as a current liability on the sfp. No special journal entry is required to record an overdrawn amount. 3. combined into one harmonized sales tax(hst) in some provinces. The retailer collects the sales tax from the customer when the sales occurs and remits the tax to the federal and provincial collecting authorities(usually monthly).

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Camden Biotechnology began operations in September 2018. The following selected transactions relate to liabilities of the company for September 2018 through March 2019. Camdenâs fiscal year ends on December 31. Its financial statements are issued in April. 2018 On September 5, opened checking accounts at Second Commercial Bank and negotiated a short-term line of credit of up to $15,000,000 at the bank's prime rate (10.5% at the time). The company will pay no commitment fees. On October 1, borrowed $12 million cash from Second Commercial Bank under the line of credit and issued a five-month promissory note. Interest at the prime rate of 10% was payable at maturity. Management planned to issue 10-year bonds in February to repay the note. Received $2,600 of refundable deposits in December for reusable containers used to transport and store chemical-based products. For the SeptemberâDecember period, sales on account totaled $4,100,000. The state sales tax rate is 3% and the local sales tax rate is 3%. (This is a summary journal entry for the many individual sales transactions for the period.) Recorded the adjusting entry for accrued interest. 2019 In February, issued $10 million of 10-year bonds at face value and paid the bank loan on the March 1 due date. Half of the storage containers covered by refundable deposits were returned in March. The remaining containers are expected to be returned during the next six months. Required: 1. Prepare the appropriate journal entries for 2018 and 2019 transactions. 2. Prepare the current and long-term liability sections of the December 31, 2018, balance sheet. Trade accounts payable on that date were $252,000.

blackhare277

Camden Biotechnology began operations in September 2018. Thefollowing selected transactions relate to liabilities of thecompany for September 2018 through March 2019. Camdenâs fiscal yearends on December 31. Its financial statements are issued in April.2018 On September 5, opened checking accounts at Second CommercialBank and negotiated a short-term line of credit of up to$19,000,000 at the bankâs prime rate (12.5% at the time). Thecompany will pay no commitment fees. On October 1, borrowed $16million cash from Second Commercial Bank under the line of creditand issued a five-month promissory note. Interest at the prime rateof 12% was payable at maturity. Management planned to issue 10-yearbonds in February to repay the note. Received $3,500 of refundabledeposits in December for reusable containers used to transport andstore chemical-based products. For the SeptemberâDecember period,sales on account totaled $4,140,000. The state sales tax rate is 3%and the local sales tax rate is 3%. (This is a summary journalentry for the many individual sales transactions for the period.)Recorded the adjusting entry for accrued interest. 2019 InFebruary, issued $12.4 million of 10-year bonds at face value andpaid the bank loan on the March 1 due date. Half of the storagecontainers covered by refundable deposits were returned in March.The remaining containers are expected to be returned during thenext six months. Required: 1. Prepare the appropriate journalentries for 2018 and 2019 transactions. 2. Prepare the current andlong-term liability sections of the December 31, 2018, balancesheet. Trade accounts payable on that date were $347,000.

bluekoala361

1.All of the following are generally considered current liabilities on a company balance sheet except

Wages Payable

Interest Payable

Bonds Payable

Taxes Payable

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2.If a one-year company loan spans equally over 2 fiscal periods, but interest is set to be paid when the loan amount itself is due, the company would

Still pay cash out for half the interest at the end of the first fiscal year to keep its records correct

Accrue the appropriate amount of interest payable at the end of the first fiscal period

Increase the Loan Payable amount by the interest amount accrued at the end of the first fiscal period

Do nothing until the interest payment itself is actually due

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3.If a firm has a warranty obligation on its product that is redeemed by the customer for cash, the firm would

		Record a warranty payable at the time of the redemption
		Reduce the already recorded warranty payable and cash for the amount of the claim
		Do nothing and just fix the product
		Reduce revenues and retained earnings at the time of the warranty redemption

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4.If a company collects sales tax on its products for the state in which it operates its business, it would

Include the amount in Revenue

Include the amount as an expense

Record a Sales Tax Payable until it is due to the state

Put the cash in a box under the counter

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5.An installment loan generally has all of the following features except

The cash payment per period by the borrower is the same amount each time

The amount of the payment applied to interest decreases over time

The amount of the payment applied to interest increases over time

The amount of the payment applied to the principal increases over time

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6.A pre-approved financing plan that allows companies to borrow and repay funds as needed up to the maximum amount set by the creditor and that is often used for relatively short-term borrowing to finance varying business needs is

		Trade credit
		A Line of Credit
		An account payable
		A debit card

coralbutterfly797

ADM 1340 Chapter Notes - Chapter 10: Sales Taxes In Canada, Accounts Payable, Promissory Note

ADM 1340 Full Course Notes

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