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1、CHAPTER 11LIABILITIES,STUDY OBJECTIVESAfter studying this chapter, you should understand:,Key features of a current liability: It is expected to be paid from existing current assets or through the creation of other current liabilities It will be paid within one year or the operating cycle, whichever
2、 is longer.,STUDY OBJECTIVE 1TYPES OF CURRENT LIABILITIES,Notes PayableAccounts PayableUnearned RevenuesAccrued Liabilities,STUDY OBJECTIVE 2NOTES PAYABLE,Key features of a note payable:Promissory noteInterest,Notes due within a year are current liabilities,Assume First National Bank agrees to lend
3、$100,000 on March 1, 2006, if Cole Williams Co. 12%, 4-month note.,Date,Account Titles,Debit,Credit,General Journal,March 1 Cash 100,000 Notes Payable 100,000,NOTES PAYABLEISSUANCE DATE,Assets received = face value of note,$100,000 x 12% x 4/12 = $4,000,Face Valueof Note,Annual InterestRate,Time in
4、Termsof One Year,Interest,Using the Cole Williams Co. data:,INTEREST FORMULA,If the loan term is expressed in days, use the number of days divided by 365. If loan term is expressed in months, use the number of months divided by 12.,If Cole Williams Co. prepares financial statements semiannually, an
5、adjusting entry is required to recognize interest expense and interest payable of $4,000 at June 30.,Date,Account Titles,Debit,Credit,General Journal,June 30 Interest Expense 4,000 Interest Payable 4,000,NOTES PAYABLEINTEREST ACCRUAL,Date,Account Titles,Debit,Credit,General Journal,July 1 Notes Paya
6、ble 100,000 Interest Payable 4,000 Cash 104,000,NOTES PAYABLEMATURITY DATE,When the loan is paid, the FACE VALUE is debited, any interest accrued is removed, and cash is decreased by this combined amount.,REVIEW QUESTIONINTEREST ACCRUAL,Shari Uecker Company borrows $88,500 on September 1, 2006From E
7、gg Harbor State Bank by signing a one year, 12% note.What is the accrued interest at December 31, 2006?,Answer: $88,500 x 12% x 4/12 = $3,540,Sales tax is expressed as a stated percentage of the sales price on goods sold to customers by a retailer. The retailer collects the tax from the customer whe
8、n the sale occurs. Retailer periodically remits the collections to the states department of revenue.,STUDY OBJECTIVE 3OTHER CURRENT LIABILITIESSALES TAXES PAYABLE,Retailer is a collection agent for the tax authority.,On March 25th cash register readings for Cooley Grocery show sales of $10,000 and s
9、ales taxes of $600.,Date,Account Titles,Debit,Credit,General Journal,Mar. 25 Cash10,600 Sales 10,000 Sales Tax Payable 600,SALES TAXES PAYABLESALE DATE,Sales tax rate = 6%,If Cooley Grocery “rings up” total receipts of $10,600, and the sales tax percentage is 6%, we can figure sales as follows:,$10,
10、600 / 1.06 = $10,000Total receipts Sales = Tax collected$10,600 - $10,000 = $600,EXTRACTING SALES TAX FROM TOTAL RECEIPTS,PAYROLL AND PAYROLL TAXES PAYABLE,Liabilities relating to employee wages and salaries include: Wages and salaries payableWithholding taxes,(to record payment of March 7 payroll),
11、67,564,Cash,67,564,Salaries & Wages Payable,March 11,(record payroll & w/h taxes for week of March 7),67,564,Salaries & Wages Payable,2,922,State Income Taxes Payable,21,864,Federal Income Taxes Payable,7,650,FICA Taxes Payable,100,000,Salaries & Wages Expense,March 7,Credit,Debit,Account,Date,PAYRO
12、LL DEDUCTIONS,(record employers payroll taxes for week of March 7),5,400,SUTA Taxes Payable,800,FUTA Taxes Payable,7,650,FICA Taxes Payable,13,850,Payroll Tax Expense,March 7,Credit,Debit,Account,Date,PAYROLL AND PAYROLL TAXES PAYABLE,Various payroll taxes are levied upon the employer: Matching FICA
13、 taxesFederal unemployment taxesState unemployment taxes,EMPLOYER PAYROLL TAXES,Unearned Revenues occur when a company receives cash before a service is rendered.Examples: Airline sells a ticket for future flights Attorney receives legal fees before work is done.,UNEARNED REVENUES,Superior Universit
14、y sells 10,000 season football tickets at $50 each for its five-game home schedule.,Date,Account Titles,Debit,Credit,General Journal,Aug. 6 Cash 500,000 Unearned Football Ticket Revenue 500,000,UNEARNED REVENUESCASH RECEIPT,As each game is completed, Unearned Football Ticket Revenue is debited for 1/5 of the unearned revenue. The earned revenue, Football Ticket Revenue, is credited.,
