ACTG 210 Lecture Notes - Lecture 10: Financial Statement, Accounts Receivable, Promissory Note

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11 Aug 2020

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Debts that do not meet both criteria are classified as long-term liabilities. The different types of current liabilities include: notes payable, accounts payable, unearned revenues, accrued liabilities such as taxes, salaries and wages, and interest. Notes payable: companies record obligations in the form of written notes as notes payable. Often used instead of accounts payable because they give the lender written documentation of the obligation in case legal remedies are needed to collect the debt. Usually require the borrower to pay interest and frequently are issued to meet short-term financing needs. On march 1, 2019, clart co. , borrowed ,000 by signing a ,000, The journal entry required to record the proceeds of the note will be: The journal entry required when the loan is paid back will be: Interest expense = ,000 x . 12 x (6/12) Now let us assume that clart co. , is on a fiscal year end june 30.

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Listed below are several terms and phrases associated with current liabilities. Mach each List A to B

List A

1, Cash, current investments, and A/R all divided by current liabilities.

2, Payment is probable and can be reasonably estimated.

3, Gift cards

4, Long-term debt maturing within one year

5, Social Security and Medicare

6, Interest expense is recorded in the period interest is incurred rather than in the period interest is paid.

7, payment is reasonably possible and can be reasonably estimated.

8, Incurred on a notes payable.

9, Unsecured notes sold in minimum denominations of $25,000 with up to 270 days.

10, Classifying liabilities as either current or long-term helps inverstors and creditors assets this.

List B

a, Recoding a contingentliability

b, disclosure of a contingent liability

c, Interest expense

d, FICA

e, Commercial paper

f, The riskiness of a business's obligations

g, Current portion of Long-term debt

h, Unearned revenue

i, Acid=test ratio

j, Accual Accounting

chocolatewoodchuck193

Match the following:

1. Acid-test ratio

2. Current portion of long-term debt

3. Recording a contingent liability

4. Commercial paper

5. Deferred revenues

6. Line of credit

7. Accrual accounting

8. Interest expense

9. The riskiness of a business's obligations

10. Disclosure of a contingent liability

A Cash, short-term investments, and accounts receivable alldivided by current liabilities.

B Loss is probable and amount is reasonably estimable.

C Gift cards

D Long-term debt maturing within one year.

E Informal agreement that permits a company to borrow up to aprearranged limit.

F Interest expense is recorded in the period interest isincurred rather than in the period interest is paid

G Loss is reasonably possible and amount is reasonablyestimable

H Incurred on a notes payable

I obligations Unsecured notes sold in minimum denominations of$25,000 with maturities up to 270 days

J Classifying liabilities as either current or long-term helpsinvestors and creditors assess this.

amaranthwasp103

Required:

1. Open T-accounts for the listed accounts, inserting their unadjustedJune 30, 2014, balances.

2. Post the June 30, 2014, adjusting entries to the T-accounts opened.Round all amounts to the nearest whole dollar.

3. Prepare the liability section ofShell Storage Unitsâ balance sheet at June 30, 2014

The general ledger of Shell Storage Units at June 30, 2014, theend of the companyâs fiscal year, includes the following accountbalances before adjusting entries.

Notes Payable,Short-Term $20,000

AccountsPayable $235,620

Current Portion of Long-term Debt payable

Interest Payable

Salaries payable

Employee Income Tax Payable

Employer Payroll Costs Payable

Employee Insurance Benefits Payable

Estimated Vacation Pay Liability $12,360

Sales Tax and GSTPayable $5972

Unearned RentRevenue $18,000

Long-Term DebtPayable $250,000

The additional data needed to develop the adjusting entries atJune 30 are as follows:

A) The$20,000 short-term note payable was issued on February 28. Itmatures six months from data of issuance and bears interest at6%.

B) Thelong-term debt is payable in annual installments of $50,000 withthe next installment due on August 31. On that date, Shell StorageUnits will also pay one yearâs interest at 3%. Interest was lastpaid August 31 of the preceding year.

C) GrossSalaries for the last payroll of the fiscal year were $6328. Ofthis amount, employee payroll withholdings payable were $1365 andsalary payable was $4963.

D) Employer Payroll Costs Payable was $820, and Shell Storageâsliability for employee health insurance was $991.

E) ShellStorage estimates that vacation pay expense is 6% of gross salariesof $147,500 (the $147,500 includes the last payroll of the fiscalyear).

F) On March 1, the company collected one yearâs rent of $18,000 inadvance.

G) At June 30,Shell Storage is the defendant in a $200,000 lawsuit, which thecompany expects to win. However, the outcome is uncertain.

Notes Payable, Short-term	Accounts Payable	Current Portion of Long- term Debt Payable

Interest Payable	Salaries Payable	Employee Income Tax Payable

Employer Payroll Costs Payable	Employee Insurance Benefits Payable	Estimated Vacation Pay Liability

Sales Tax and
GST Payable

Unearned Rent Revenue

Long-term Debt Payable

SHELL STORAGE UNITS
Balance Sheet
June 30, 2014
LIABILITIES

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ACTG 210 Lecture Notes - Lecture 10: Financial Statement, Accounts Receivable, Promissory Note

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