1、Current Liabilities andPayroll Accounting,Chapter 11,Past,Present,Future,Defining Liabilities,Because of apast event . . .,Thecompanyhas a presentobligation,. . . For futuresacrifices,C 1,Classifying Liabilities,Current Liabilities,C 1,Current and Long-Term Liabilities,Percent of Total Liabilities,C
2、urrent Liabilities as a Percent of Total Liabilities,C 1,Uncertainty in Liabilities,Uncertainty in Whom to Pay,Uncertainty in When to Pay,Uncertainty in How Much to Pay,C 1,Accounts Payable,Sales Taxes Payable,Unearned Revenues,Short-Term Notes Payable,Known (Determinable) Liabilities,Payroll Liabil
3、ities,Multi-Period Known Liabilities,C 2,On May 15, 2009, Max Hardware sold tools and supplies for $7,500 that are subject to a 6% sales tax.,Sales Taxes Payable,C 2,On May 1, 2009, A-1 Catering received $3,000 in advance for catering a wedding party to take place on July 12, 2009.,Unearned Revenues
4、,C 2,A written promise to pay a specified amount on a definite future date within one year or the companys operating cycle, whichever is longer.,Short-Term Notes Payable,P 1,On August 1, 2009, Matrix, Inc. asked Carter, Co. to accept a 90-day, 12% note to replace its existing $5,000 account payable
5、to Carter. Matrix would make the following entry:,Note Given to ExtendCredit Period,P 1,On October 30, 2009, Matrix, Inc. pays the note plus interest to Carter.,Note Given to ExtendCredit Period,P 1,Note Given to Borrow from Bank,P 1,Face Value Equals Amount Borrowed,On September 1, 2009, Jackson Sm
6、ith borrows $20,000 from American Bank. The note bears interest at 6% per year. Principal and interest are due in 90 days (November 30, 2009).,P 1,On November 30, 2009, Smith wouldmake the following entry:,Face Value Equals Amount Borrowed,P 1,Note Date,End of Period,Maturity Date,End-of-Period Adju
7、stmentto Notes,P 1,Dec. 16, 2009,Dec. 31, 2009,Feb. 14, 2010,James Burrows borrowed $8,000 on Dec. 16, 2009, by signing a 12%, 60-day note payable.,Note Date,End of Period,Maturity Date,End-of-Period Adjustmentto Notes,P 1,On December 16, 2009, James Burrows would make the following entry:,On Decemb
8、er 31, 2009, the adjustment is:,$8,000 12% (15 360) = $40,End-of-Period Adjustmentto Notes,P 1,On February 14, 2010, James Burrowswould make the following entry.,End-of-Period Adjustmentto Notes,P 1,Employers incur expenses andliabilities fromhaving employees.,Payroll Liabilities,P 2,Employee Payrol
9、l Deductions,FICA Taxes,Medicare Taxes,Federal Income Tax,State and Local Income Taxes,Voluntary Deductions,Gross Pay,P 2,FICA Taxes Soc. Sec.,FICA Taxes Medicare,2008: 6.2% of the first $102,200 earned in the year ( Max = $6,324).,2008: 1.45% of all wages earned in the year.,Employers must pay with
10、held taxes tothe Internal Revenue Service (IRS).,Employee FICA Taxes,Federal Insurance Contributions Act (FICA),P 2,Amounts withheld depend on the employees earnings, tax rates, and number of withholding allowances.,Employers must pay the taxes withheld from employees gross pay to the appropriate go
11、vernment agency.,Federal Income Tax,State and Local Income Taxes,Employee Income Tax,P 2,Amounts withheld depend on the employees request.,Employers owe voluntary amounts withheld from employees gross pay to the designated agency.,Voluntary Deductions,Examples include union dues, savings accounts, p
12、ension contributions, insurance premiums, and charities,Employee Voluntary Deductions,P 2,The entry to record payroll expenses and deductions for an employee might look like this.,Recording Employee Payroll Deductions,P 2,FICA Taxes,Medicare Taxes,Federal and State Unemployment Taxes,Employer Payrol
13、l Taxes,P 3,Federal and State Unemployment Taxes,P 3,The entry to record the employer payroll taxes for January might look like this:,SUTA: $4,000 5.4% = $216FUTA: $4,000 (6.2% - 5.4%) = $32,FICA amounts are the same as that withheld from the employees gross pay.,Recording Employer Payroll Taxes,P 3
14、,Multi-Period Known Liabilities,Often include unearned revenues and notes payable.,Unearned revenues from magazine subscriptions often cover more than one accounting period. A portion of the earned revenue is recognized each period and the unearned revenue account is reduced.,Notes payable often ext
15、end over more than one accounting period. A three-year note payable would be classified as a current liability for one year and a long-term liability for two years.,C 2,An estimated liability is a known obligation of an uncertain amount, but one that can be reasonably estimated.,Estimated Liabilitie
16、s,P 4,Employer expenses for pensions or medical,dental, life and disability insurance,Health and Pension Benefits,Assume an employer agrees to pay an amount for medical insurance equal to $8,000, and contribute an additional 10% of the employees $120,000 gross salary to a retirement program.,P 4,Emp
17、loyer expenses for paid vacation by employees,Vacation Benefits,Assume an employee earns $62,400 per year and earns two weeks of paid vacation each year.,P 4,Many bonuses paid to employees arebased on reported net income.,Bonus Plans,Assume the annual yearly bonus to the store manager is equal to 10
18、% of the companys annual net income minus the bonus. The store earned $100,000 net income this year.,P 4,Bonus Plans,Assume the annual yearly bonus to the store manager is equal to 10% of the companys annual net income minus the bonus. The store earned $100,000 net income this year.,Many bonuses pai
19、d to employees arebased on reported net income.,P 4,Warranty Liabilities,Sellers obligation to replace or correct a product (or service) that fails to perform as expected within a specified period. To conform with the matching principle, the seller reports expected warranty expense in the period whe
20、n revenue from the sale is reported.,A dealer sells a car for $32,000, on December 1, 2009, with a warranty for parts and labor for 12 months, or 12,000 miles. The dealership experiences an average warranty cost of 3% of the selling price of each car.,P 4,Warranty Liabilities,On February 15, 2010, p
21、arts of $200 and laborof $250 covered under warranty were incurred.,A dealer sells a car for $32,000, on December 1, 2009, with a warranty for parts and labor for 12 months, or 12,000 miles. The dealership experiences an average warranty cost of 3% of the selling price of each car.,P 4,Amount . . .,
22、Contingent Liabilities,Potential obligation that depends on a future event arising out of a past transaction or event.,C 3,Accounting forContingent Liabilities,C 3,Reasonably PossibleContingent Liabilities,Potential Legal Claims A potential claim is recorded if the amount can be reasonably estimated
23、 and payment for damages is probable.,Debt Guarantees The guarantor usually discloses the guarantee in its financial statement notes. If it is probable that the debtor will default, the guarantor should record and report the guarantee as a liability.,C 3,If income before interest and taxes varies greatly from year to year, fixed interest charges can increase the risk that an owner will not earn a positive return and be unable to pay interest charges.,Times Interest Earned,Times interestearned,Income before interestand income taxes,Interest expense,=,A 1,End of Chapter 11,
