Submitted by: Submitted by katshareshian
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Category: Business and Industry
Date Submitted: 04/25/2013 10:00 AM
Chapter 13
Characteristics of Liabilities- entered into transaction with future benefit
Current Liabilities are payables
Accounts Payable- open account (business agreement)
Notes Payable- Written note and interest timed
Credit Line- s/t financing that is only on balance sheet if used, otherwise the agreement is a note for shareholders
Interest- only account for after you’ve accrued it. If you purchase merchandise with a note
Merchandise Inventory $10,000
NP $10,000
Noninterest-bearing Notes- interest is imbedded in the price (implicit rate)
Commercial paper- unsecured notes issued in min denominations of $25,000. This is a liability agreement between a large company to loan money to another large company with low interest- Keeps banks out of the picture
Compensation expense and liability-( sick days, future absences etc.) Book liab. If meets ALL 4 rules
1. Services already performed 2. Benefit can be accrued over time 3. Payment is probable 4. Amount reasonably estimated
Gift Cards- after a reasonable amount of time, the Company can book the revenue (ab 90 days). Concept of breakage.. Inventory and COGS accounts hit after person comes in and uses card after company recognized revenue
Inception: Debit Cash, Credit Unearned Revenue
Used- Debit Unearned Revenue, Credit Sales Revenue
Debt covenance – LT debt payoff within a year has to be classified as current liability. If Debt/Asset ration exceeds 70%, the bank will say pay debt within 1 year or UP interest. Under GAAP if you guarantee auditor within 60 days of the end of the year you can get it down, then you don’t have to classify it as CL. IFRS says 12/31 or else!
Loss contingency- existing uncertain situation involving potential loss depending on whether a future even occurs
Product Warranties and Guarantees- inevitably entail costs, but reasonable estimated using estimation techniques.
Warranty Expense $10,000
Estimated Warranty Liability $10,000
Voluntary...