BU127 Study Guide - Final Guide: Current Liability, Cash Flow, Promissory Note
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BU127 Full Course Notes
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Chapter 10: capital structure- mix of debt and equity for a company. Interest= principle x interest rate x time (in years: provision- when the amount or timing of a liability is uncertain, reported as a liability. Examples: estimated liabilities for warranties, closing of stores/operations, legal and tax disputes: liability for warranties- must recognize the provision for warranty expense in the same period as the sale is recorded. Debit cash, credit sales revenue, debit warranty expense, credit provision for product warranty. Journal entries example: you buy a truck and sign a note to pay a certain amount in the future plus interest. So you figure out the present value, record that value as your debit for truck and credit for notes payable. Then next year or at the end of the year, you calculate the interest and debit interest expense and credit notes payable. Keep doing this until it is time to pay back the note.
