Broker Loss Case Journal Items 136b Chapter13

 Essay about Contingent Loss Example Journal Entries 136b Chapter13

CURRENT LIABILITIES &

CONTINGENCIES

ECON 136A REFRESHER

What is a responsibility?

пЃ® Present (not automatically current) bound to happen

obligation;

пЃ® Result of a past deal;

Chapter

13

What makes a liability current?

Conversion in one year or operating circuit,

whichever can be longer

пЃ® Current debts are not recorded at their present

benefit as they " turn” in no time that there is simply no

material big difference.

пЃ®

Bob Anderson, UCSB 2004

13-1

13-2

Greg Anderson, 2005

07: 35

пЃ®

136A Concepts

Paperwork Payable

Purchase discounts in A/P was already

covered, refresher is in textual content. You can also

take a look at:

Written pledges to pay out a certain amount of money

on a specific future particular date.

Example -On April you, the corporation bought a truck pertaining to

$30, 500 from GM Company, paying out $4, 1000 in

cash and placing your signature to a one-year, 12% take note for

the balance of the price.

GROSS TECHNIQUE

Purchase Price $10, 000 terms 2/10 net 40

Purchases

twelve, 000

Accounts Payable

15, 000

NET METHOD

Acquisitions

9, 800

Accounts payable

Invoices of $4, 1000 paid inside discount period

Accounts payable

4, 000

Accounts payable

Purchase price cut

80

Funds

Cash

a few, 920

Invoices of $6, 000 paid out after lower price period

Accounts payable

6, 000

Money

6, 500

Bob Anderson, 2004

Accounts payable

Buy discounts dropped

Cash

on the lookout for, 800

a few, 920

a few, 920

5, 880

a hundred and twenty

6, 500

13-3

Bob Anderson, 2004

13-4

Notes Payable

The spring 1 Log Entry?

Trucks

Cash

Records payable

Debit

30, 500

Zero Interest-bearing Note

Created promises to pay some sum of money on the

specified upcoming date. No such thing as 0% interest,

often " impute a rate” if the explained rate differs than a sensible rate.

Credit rating

4, 500

26, 1000

Any admittance required at April 35?

Interest expense

260

Fascination payable

($26, 000 x 12% / 12)

Model -On May well 1, the organization borrowed $80, 000 via Lima Countrywide Bank by signing a $90, two hundred non-interest

bearing note due in one 12 months.

260

13-5

Bob Anderson, 2004

Frank Anderson, 2004

13-6

07: 35

No Interest-bearing Note

May you Journal Admittance?

Cash

Discount on N/P

Notes payable

Debit

70, 000

10, 200

Current Maturities of Long-term

Financial debt

Credit

90, 200

Any entry required at May well 30?

Curiosity expense

850

Discount in N/P

850

($10, 2 hundred / doze = $850)

Straight-line demise is only appropriate if the

the desired info is not materially different from the effective

curiosity method.

Frank Anderson, 2004

13-7

The portion of you possess, mortgage paperwork, and

different long-term indebtedness that

matures with the next fiscal year.

Bob Anderson, 2004

13-8

Classification of Current Obligation to be Refinanced

Short-Term Obligations

It is possible a " current” obligation could possibly be

classified because long-term IN THE EVENT THAT:

1 .

Managing intends to refinance

AND

Management may demonstrate a chance to do

therefore

2 .

пЃ®

пЃ®

Proved by dedication from lender or other party,

OR

Future refinance before the financial statements

are released (like a change in estimate)

13-9

Frank Anderson, 2005

13-10

Joe Anderson, 2005

07: thirty-five

Short-Term Responsibilities

Mgmt. Expects of Refinance

Short-Term Responsibilities

NO

Mgmt. Intends of Refinance

CERTAINLY

Bob Anderson, 2004

CERTAINLY

13-11

Greg Anderson, 2004

NO

Classify as

Current

Liability

13-12

Short-Term Obligations

Short-Term Obligations

Mgmt. Intends of Refinance

NO

Sort out as

YES

Current

Legal responsibility

Demonstrates Potential

to Refinance

NO

Mgmt. Intends of Refinance

ZERO

Classify as

YES

Current

Liability

Displays Ability

to Refinance

CERTAINLY

NO

YES

Actual Re-financing

after "balance sheet" date

but before issue time

13-13

Greg Anderson, 2005

or

13-14

Bob Anderson, 2004

07: 35

Initial Obligations

Short-Term Obligations

Mgmt. Intends of Refinance

NO

Classify because

YES

Shows Ability

to Refinance...

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