Chapter 8 - Reporting and analyzing liabilities and stockholders’ equity. The main goals of this chapter are to: Explain how to account for current liabilities; explain how to account for bonds; explain how to account for the issuance of common and preferred stock, and the purchase of treasury stock;. | Reporting and Analyzing Liabilities and Stockholders’ Equity 8 WILEY Kimmel ● Weygandt Survey of Accounting, First Edition Explain how to account for bonds. CHAPTER OUTLINE Explain how to account for current liabilities. 1 2 LEARNING OBJECTIVES Explain how to account for the issuance of common and preferred stock, and the purchase of treasury stock. 3 Explain how to account for cash dividends. 4 Discuss how stockholders’ equity is reported and analyzed. 5 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 longer. Current liabilities include notes payable, accounts payable, unearned revenues, and accrued liabilities such as taxes, salaries and wages, and interest. WHAT IS A CURRENT LIABILITY? LEARNING OBJECTIVE Explain how to account for current liabilities. 1 LO 1 Review Question To be classified as a current liability, a debt must be expected to be paid within: 1 year. the operating cycle. 2 years. (a) or (b), whichever is longer. LO 1 WHAT IS A CURRENT LIABILITY? Written promissory note. Usually require the borrower to pay interest. Frequently issued to meet short-term financing needs. Issued for varying periods of time. Those due for payment within one year of the balance sheet date are usually classified as current liabilities. NOTES PAYABLE LO 1 Illustration: First National Bank agrees to lend $100,000 on September 1, 2017, if Cole Williams Co. signs a $100,000, 12%, four-month note maturing on January 1. When a company issues an interest-bearing note, the amount of assets it receives generally equals the note’s face value. NOTES PAYABLE LO 1 CASH FLOW This transaction has no effect on net income. $100,000 Illustration: If Cole Williams Co. prepares financial statements annually, it records the transaction to recognize interest at December 31 as follows: ($100,000 x 12% x 4/12 = $4,000) NOTES PAYABLE LO 1 INCOME STATEMENT Interest . | Reporting and Analyzing Liabilities and Stockholders’ Equity 8 WILEY Kimmel ● Weygandt Survey of Accounting, First Edition Explain how to account for bonds. CHAPTER OUTLINE Explain how to account for current liabilities. 1 2 LEARNING OBJECTIVES Explain how to account for the issuance of common and preferred stock, and the purchase of treasury stock. 3 Explain how to account for cash dividends. 4 Discuss how stockholders’ equity is reported and analyzed. 5 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 longer. Current liabilities include notes payable, accounts payable, unearned revenues, and accrued liabilities such as taxes, salaries and wages, and interest. WHAT IS A CURRENT LIABILITY? LEARNING OBJECTIVE Explain how to account for current liabilities. 1 LO 1 Review Question To be classified as a current liability, a debt must be expected to be paid .
