Principles of Financial Accounting · free preview

Analyzing, Journalizing, and Reporting Current Liabilities

Each current liability follows a lifecycle from recognition through settlement, with journal entries matching the obligation's creation, any interest accrual, and final payment, and the balance sheet grouping them for liquidity analysis.

1. The liability lifecycle

The liability lifecycle

2. Short-term notes and interest accrual

Short-term notes and interest accrual

3. Payroll liabilities as an example

Payroll liabilities as an example

4. Reporting and analyzing

Reporting and analyzing

5. Interest accrual across year end

A 10,000 dollar, 8 percent, six-month note is signed October 1. What adjusting entry is needed December 31?

6. Payroll withholding nature

Amounts withheld from employee paychecks for taxes are classified on the company's balance sheet as what?

7. Unearned revenue lifecycle

A theater collects 90,000 dollars in December for a season of performances running January through June. Which sequence of entries is correct?

8. Settlement of accrued liabilities

A company's January payroll includes wages payable of 8,000 dollars accrued at December 31. How does the January payment entry treat that payable?

9. Interest for three months

Compute the accrued interest on a 10,000 dollar note at 8 percent for three months, in dollars, number only.

10. Net pay computation

Gross wages are 20,000 dollars and total withholdings are 4,000 dollars. Compute net cash paid to employees in dollars, number only.

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