ACCO Exam 5

current liabilities

liabilities due within a year

sales tax payable account

sales taxes collected from customers to be remitted periodically to the state and local governments

unearned revenue

The liability created by receiving revenue in advance.

notes payable

Short-term or long-term liabilities that a business promises to repay by a certain date.

interest expense

the interest accrued on money borrowed

interest payable

current liability on borrowed money

sales tax journal entry

Dr. Cash
Cr. Sales Revenue
Cr. Sales Tax Payable

unearned revenue journal entry

Dr. Cash
Cr. Unearned revenue

contingent liabilities

potential liabilities that have arisen as a result of a past transaction or event; their ultimate outcome will not be known until a future event occurs or fails to occur

probable and estimable

record liability

probable but not estimable

disclose in notes

possible

disclose in notes too

remote

do nothing

warranty liabilities

warranty expensed at sale at the end of the period to meet matching requirements

promise to customer that the product will work a certain way

warranty liability sale date JE

1. Dr Cash, Cr sales
2. DR COGS, Cr merchandise
3. Dr Warranty Expense, CR estimated warranty liability

warranty work performance JE

Dr estimated warranty liability
Cr Repair parts inventory (actual amount to fix)

estimated warranty liability

sales * warranty liability

secured bonds

specific assets of the issuer are pledged as collateral

unsecured bonds

backed by issuer's general credit standing

term bonds

specific maturity date

serial bonds

mature at more than one date, repaid over a number of periods

registered bonds

issued in the names and addresses of the holders

bearer bonds

payable to whoever holds them

convertible bonds

can be exchanged for a fixed number of shares of common stock

callable bonds

give the issuer the option to retire them at a stated dollar amount before maturity

bonds payable

long-term liabilities that represent money lent to the firm that must be paid back

par bonds

rate of bonds = market rate

issue par bonds JE

Dr cash
Cr bonds payable

pay semi annual interest (par)

Dr bond interest expense
Cr cash

interest expense

par value * stated interest / 2

pay bond principal (par)

Dr B/P
Cr cash (par value)

Discount bonds

rate of bonds < market rate

issue discount bonds (discount)

Dr cash (issue price)
Cr B/P

pay semi annual interest (discount)

Dr bond interest expense
Cr discount (total discount / # payments)
Cr cash (issue price * % / 2)

pay bond principal at maturity (discount)

Dr B/P (par)
Cr Cash (par)

semi-annual amortization

total discount / # interest payments

carrying value (discount)

bonds payable - unamortized discount

discount bonds total interest expense

total cash interest payments + total bond discounts

premium bonds

rate of bonds > market rate

issue premium bonds JE

Dr cash
CR premium
Cr B/P

pay semiannual interest (premium)

Dr bond interest
Dr premium (total premium / # interest payments)
Cr cash (par value * % / 2)

pay bond principal (premium)

Dr B/P (par)
Cr Cash

unamortized discount

discount at issuance (Dr) - amortization (Cr)

premium bonds carrying value

bonds payable + unamortized premium

unamortized premium

premium at issuance (Cr) - amortization (Dr)

premium bonds total interest expense

total cash payments - bond premium

installment notes

liability requiring a series of payments to the lender including accrued interest AND part of the principal

issuance of installment note

Dr cash
Cr Notes payable (face value)

Record accrued Interest at Year-end (installment notes)

Dr Interest Expense
Cr Interest payable

installment note interest expense

current balance of N/P * % * (months/12)

record payments of installment notes

Dr Notes payable (plug)
Dr interest expense (current N/P * % * (months/12))
DR interest Payable (eliminate accrued interest)
Cr cash (cash payment per note agreement)