Chapter 10 - Liabilities. This chapter’s objectives are to: Explain a current liability, and identify the major types of current liabilities, describe the accounting for notes payable, explain the accounting for other current liabilities, explain the financial statement presentation and analysis of current liabilities. | Liabilities 10 Learning Objectives Explain how to account for current liabilities. Describe the major characteristics of bonds. Explain how to account for bond transactions. 3 Explain how to account for long-term notes payable. 2 1 4 Discuss how liabilities are reported and analyzed. 5 A debt that a company expects to pay 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 payable, salaries and wages payable, and interest payable. LO 1 LEARNING OBJECTIVE Explain how to account for current liabilities. 1 What Is a Current Liability? To be classified as a current liability, a debt must be expected to be paid within: one year. the operating cycle. 2 years. (a) or (b), whichever is longer Question What Is a Current Liability? LO 1 Notes Payable Written promissory note. Frequently issued to meet short-term financing needs. Requires the borrower to pay interest. Issued for varying periods. Current Liabilities 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. Instructions Prepare the entry on September 1st. Prepare the adjusting entry on December 31st, assuming monthly adjusting entries have not been made. Prepare the entry required on January 1, 2018, the maturity date. Notes Payable LO 1 Notes Payable 100,000 Cash 100,000 Interest Payable 4,000 Interest Expense 4,000 $100,000 x 12% x 4/12 = $4,000 b) Prepare the adjusting entry on December 31st. 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. a) Prepare the entry on September 1st. LO 1 Notes Payable Cash 104,000 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 . | Liabilities 10 Learning Objectives Explain how to account for current liabilities. Describe the major characteristics of bonds. Explain how to account for bond transactions. 3 Explain how to account for long-term notes payable. 2 1 4 Discuss how liabilities are reported and analyzed. 5 A debt that a company expects to pay 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 payable, salaries and wages payable, and interest payable. LO 1 LEARNING OBJECTIVE Explain how to account for current liabilities. 1 What Is a Current Liability? To be classified as a current liability, a debt must be expected to be paid within: one year. the operating cycle. 2 years. (a) or (b), whichever is longer Question What Is a Current Liability? LO 1 Notes Payable Written promissory note. Frequently issued to meet short-term financing needs. Requires the borrower to pay interest. .
