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1、Chapter Chapter 1111Current LiabilitiesCurrent LiabilitiesAccounting, 21st EditionWarren Reeve FessPowerPoint Presentation by Douglas Cloud Professor Emeritus of Accounting Pepperdine University Copyright 2004 South-Western, a division of Thomson Learning. All rights reserved. Task Force Image Galle
2、ry clip art included in this electronic presentation is used with the permission of NVTech Inc.Some of the action has been automated, so click the mouse when you see this lightning bolt in the lower right-hand corner of the screen. You can point and click anywhere on the screen.1. Define and give ex
3、amples of current liabilities. 2. Prepare journal entries for short-term notes payable and disclosure for the current portion of long-term debt. 3. Describe the accounting treatment for contingent liabilities and journalize entries for product warranties. 4. Determine employer liabilities for payrol
4、l, including liabilities arising from employee earnings and deductions from earnings.ObjectivesObjectivesAfter studying this After studying this chapter, you should chapter, you should be able to:be able to:5.Describe payroll accounting systems that use a payroll register, employee earnings record,
5、and a general journal. 6.Journalize entries for employee fringe benefits, including vacation pay and pensions. 7.Use the quick ratio to analyze the ability of a business to pay its current liabilities.ObjectivesObjectivesThe Nature of Current LiabilitiesThe Nature of Current LiabilitiesLiabilities t
6、hat are to be paid out of current assets and are due within a short time, usually within one year, are called current liabilities.Examples:Accounts payable Notes payable Unearned rent Taxes payable Wages payable Current portion of long term debtShort-Term Notes PayableShort-Term Notes PayableAug. 1
7、Accounts PayableMurray Co.1 000 00Issued a 90-day, 12% note on account.Notes Payable 1 000 00A firm issues a 90-day, 12% note for $1,000, dated August 1, 2006 to Murray Co. for a $1,000 overdue account.Oct. 30 Notes Payable1 000 00Interest Expense30 00Issued a 90-day, 12% note on account.Cash 1 030
8、00On October 30, when the note matures, the firm pays the $1,000 principal plus $30 interest ($1,000 x .12 x 90/360).Appears on the income statement as an “Other Expense.”Short-Term Notes PayableShort-Term Notes PayableDescriptionDebitCreditBowden Co. (Borrower)Mdse. Inventory10,000 Accounts Payable
9、 10,000Coker Co. (Creditor)DescriptionDebitCreditAccounts Receivable10,000 Sales 10,000Cost of Mdse. Sold7,500 Mdse. Inventory 7,500May 31. Bowden Co. purchased merchandise on account from Coker Co., $10,000, 2/10, n/30. The merchandise cost Coker Co. $7,500.Short-Term Notes PayableShort-Term Notes
10、PayableDescriptionDebitCreditAccounts Receivable10,000 Sales 10,000Cost of Mdse. Sold7,500 Mdse. Inventory 7,500Bowden Co. (Borrower)Coker Co. (Creditor)May 31. Bowden Co. issued a 60-day, 12% note for $10,000 to Coker on account.Accounts Payable10,000 Notes Payable 10,000Notes Receivable10,000 Acco
11、unts Receivable 10,000Mdse. Inventory10,000 Accounts Payable 10,000Coker Co. (Creditor)DescriptionDebitCreditAccounts Receivable10,000 Sales 10,000Cost of Mdse. Sold7,500 Mdse. Inventory 7,500Short-Term Notes PayableShort-Term Notes PayableDescriptionDebitCreditMdse. Inventory10,000 Accounts Payable
12、 10,000Accounts Receivable10,000 Sales 10,000Cost of Mdse. Sold7,500 Mdse. Inventory 7,500Bowden Co. (Borrower)Coker Co. (Creditor)DescriptionDebitCreditJuly 30. Bowden Co. paid Coker Co. the amount due on the note of May 31. Interest: $10,000 x 12% x 60/360 = $200.Accounts Payable10,000 Notes Payab
13、le 10,000Notes Receivable10,000 Accounts Receivable 10,000 Notes Payable10,000 Interest Expense200 Cash10,200Cash10,200 Interest Revenue 200 Notes Receivable 10,000Short-Term Notes PayableShort-Term Notes PayableDiscounted Notes PayableDiscounted Notes PayableAug.10 Merchandise Inventory19 250 00Int
14、erest Expense750 00Issued a 90-day, note to Rock Co. discounted at 15%.Notes Payable 20 000 00On August 10, Cary Company issues a $20,000, 90-day note to Rock Company in exchange for inventory. Rock discounts the note at 15%.Discount: $20,000 Discount: $20,000 x .15 x 90/360x .15 x 90/360ProceedsPro
15、ceedsDiscount rateDiscount rateDiscounted Notes PayableDiscounted Notes PayableNov. 8 Notes Payable20 000 00Paid note due.Cash 20 000 00On November 8 the note is paid in full.Contingent LiabilitiesProduct LiabilityProduct LiabilityOn June 30, a company sells a product for $60,000 on which there is a
16、 36-month warranty. Past experience indicates that repairs of defects cost 5% of the sales price over the warranty period.June 30 Product Warranty Expense3 000 00Warranty expenses projected for June, 5% of $60,000.Product Warranty Liability 3 000 00On August 16, a customer needed a defective part replaced. Cost to the company was $200 for the part. Aug.16 Product Warranty Payable200 00
