Textbook Notes (369,137)
Canada (162,407)
MGCR 211 (10)
Chapter 9

Chapter 9 - Textbook Notes.docx

3 Pages
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Department
Management Core
Course Code
MGCR 211
Professor
Erica Pimentel

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Chapter 9 Notes Current Liabilities, Contingencies, and Commitments Liability: the company’s obligations arising from past transactions or events. Must have the following 3 characteristics: - represents a duty, responsibility, or obligation that imposes an economic burden - enforceable - exists at the present time contingent liability: liability has not been recorded in the accounts, because the obligation is conditional, dependent, or contingent on the occurrence of a low- probability future event. Mutually unexecuted contract Partially executed contract: one in which one party has performed part or all of its obligation. Valuation Methods for Liabilities -a liability should be valued at its present value on the date it is incurred -the total of the payments to be made --- however, might not adequately measure the liability’s value --- > this ignores the time value of money current liabilities: obligations that must be fulfilled within one year. Relating to operating Activities - accounts payable - wages and other payroll liabilities - corporate income taxes - warranty obligations o recording the estimated warranty expense and obligation , at the time of sale 2010: warranty expense 3 000 estimated warrant obligation 3 000 - unearned revenues o contracts, down payments, etc.  EG magazines, newspaper publishers - Gift certificates and prepaid cards o Revenue is only recognized when the cards are redeemed for goods or services (see journal entries page 588) - Customer rewards or loyalty programs o IFRS measures loyalty program liabilities as the sales value of the goods or services that will be required to satisfy reward redemptions  EG company estimates that the points awarded in a particular accounting period wil be redeemed for goods and services that could have been sold for $4 000, it would record a liability (unearned revenue) for this amount. o Treat the original sale as a bundle: the initial goods and services that are provided at that point, plus the additional goods and services that may be provided in the future under the rewards program. – part of the amount that customers pay when they make purchases is deemed to be fore the rewards that will be provided later. - Warranty Sales o Company
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