Professional Documents
Culture Documents
Chapter 10
Current Noncurrent
Liabilities Liabilities
10-2
Estimated Liabilities
Estimated liabilities have two basic
characteristics:
1.The liability is known to exist,
2.The precise dollar amount cannot be
determined until a later date.
Example: An automobile
warranty obligation.
10-3
Current Liabilities: Accounts
Payable
Short-term obligations to suppliers for
purchases of merchandise and to others for
goods and services.
Merchandise Office
inventory supplies
invoices invoices
Examples
Shipping Utility and
charges phone bills
10-4
Current Liabilities: Notes
Payable
When a company borrows money, a note payable is
created.
Current Portion of Notes Payable
The portion of a note payable that is due within one year,
or one operating cycle, whichever is longer.
10-5
Accrued Liabilities
Accrued liabilities arise from the recognition of
expenses for which payment will be made in the
future. Accrued liabilities are often referred to as
accrued expenses.
Examples include:
1.Interest payable,
2.Income taxes payable, and
3.Accrued payroll liabilities.
10-6
Payroll Liabilities
Gross Pay
Net Pay
As the earnings
process is
completed
Cash is
received
in
advance.
a liability account.
10-8
Long-Term Liabilities
10-9
Long-Term Liabilities
10-10
Installment Notes Payable
10-11
Bonds Payable
Bonds
Bonds usually
usually involve
involve the
the
borrowing
borrowing of of aa large
large sum
sum ofof
money,
money, called
called principal.
principal
principal.
principal
The
The principal
principal isis usually
usually paid
paid
back
back asas aa lump
lump sum sum at
at the
the end
end
of
of the
the bond
bond period.
period.
Individual
Individual bonds
bonds are are often
often
denominated
denominated with with aa par
par value,
value,
or
or face
face value,
value of
value
value, of $1,000.
$1,000.
10-12
Bonds Payable
Bonds usually carry a stated rate of interest,
also called a contract rate.
rate
Interest is normally paid semiannually.
Interest is computed as:
Principal × Stated Rate × Time = Interest
10-13
Types of Bonds
Mortgage Debenture
Bonds Bonds
Convertible Junk
Bonds Bonds
10-14
End of Chapter 10
10-15