Fundamental-Accounting-Principles-(11)

CurrentLiabilitiesandPayrollAccountingChapter11PowerPointEditor:BethKane,MBA,CPACopyright©2015McGraw-HillEducation.Allrightsreserved.NoreproductionordistributionwithoutthepriorwrittenconsentofMcGraw-HillEducation.11-C1:DefiningLiabilities211-3DefiningLiabilitiesC1311-4ClassifyingLiabilitiesExpectedtobepaidwithinoneyearorthecompany’soperatingcycle,whicheverislonger.CurrentLiabilitiesNotexpectedtobepaidwithinoneyearorthecompany’soperatingcycle,whicheverislonger.Long-TermLiabilitiesC1411-5CurrentandLong-TermLiabilitiesCurrentLiabilitiesasaPercentofTotalLiabilitiesC1511-6UncertaintyofLiabilitiesUncertaintyinWhentoPayC1UncertaintyinWhomtoPayUncertaintyinHowMuchtoPay611-C2:KnownLiabilities711-8AccountsPayableSalesTaxesPayableUnearnedRevenuesShort-TermNotesPayableKnownLiabilitiesPayrollLiabilitiesMulti-PeriodKnownLiabilitiesC2811-9OnAugust31,HomeDepotsoldmaterialsfor$6,000thataresubjecttoa5%salestax.SalesTaxPayableC2$6,000×5%=$300911-10OnJune30,Rihannasells$5,000,000inticketsforeightconcerts.UnearnedRevenuesC2OnOct.31,Rihannaperformsaconcert.$5,000,000/8=$625,0001011-11Multi-PeriodKnownLiabilitiesIncludesUnearnedRevenuesandNotesPayableUnearnedRevenuesfrommagazinesubscriptionsoftencovermorethanoneaccountingperiod.AportionoftheearnedrevenueisrecognizedeachperiodandtheUnearnedRevenueaccountisreduced.NotesPayableoftenextendovermorethanoneaccountingperiod.Athree-yearnotewouldbeclassifiedasacurrentliabilityforoneyearandalong-termliabilityfortwoyears.C21111-P1:Short-TermNotesPayable1211-13Awrittenpromisetopayaspecifiedamountonadefinitefuturedatewithinoneyearorthecompany’soperatingcycle,whicheverislonger.Short-TermNotesPayableP11311-14OnAugust23,BradyCompanyasksMcGrawtoaccept$100cashanda60-day,12%$500notetoreplaceitsexisting$600AccountPayable.NoteGiventoExtendCreditPeriodP11411-15OnOctober22,BradypaysthenoteplusinteresttoMcGraw.NoteGiventoExtendCreditPeriodP1Interestexpense=$500×12%×(60÷360)=$101511-16NoteGivenToBorrowFromBankP11611-17NoteGivenToBorrowFromBankOnSept.30,acompanyborrows$2,000fromabankat12%interestfor60days.P1OnNov.29,thecompanyrepaystheprincipalofthenoteplusinterest.Interestexpense=$2,000×12%×(60÷360)=$401711-18NoteDateEndofPeriodMaturityDateAnadjustingentryisrequiredtorecordInterestExpenseincurredtodate.End-of-PeriodAdjustmenttoNotesP11811-19End-of-PeriodAdjustmenttoNotesP1OnDec.16,2015,acompanyborrows$2,000fromabankat12%interestfor60days.AnadjustingentryisneededonDecember31.OnFeb.14,2014,thecompanyrepaysthisprincipalandinterestonthenote.19NEED-TO-KNOWDebitCreditJun.30Cash535Sales500Salestaxespayable($500x.07)35Jun.30Costofgoodssold300Merchandiseinventory300Jul.15Salestaxespayable35Cash35GeneralJournalPart1.Aretailersellsmerchandisefor$500cashonJune30(costofmerchandiseis$300).Thesalestaxlawrequirestheretailertocollect7%salestaxoneverydollarofmerchandisesold.Recordtheentryforthe$500saleanditsapplicablesalestax.Alsorecordtheentrythatshowstheremittanceofthe7%taxonthissaletothestategovernmentonJuly15.P120NEED-TO-KNOWDebitCreditApr.30Cash40,000Unearnedticketrevenue40,000May15Unearnedticketrevenue$40,000/4concerts10,000Earnedticketrevenue10,000GeneralJournalPart2.Aticketagencyreceives$40,000cashinadvanceticketsalesforafour-datetourofHaim.RecordtheadvanceticketsalesonApril30.RecordtherevenueearnedforthefirstconcertdateofMay15,assumingitrepresentsone-fourthoftheadvanceticketsales.P121NEED-TO-KNOWDebitCreditNov.25Cash8,000Notespayable8,000Dec.31Interestexpense($8,000x.05x36/360)40Interestpayable40Feb.23Interestexpense($8,000x.05x54/360)60Interestpayable($8,000x.05x36/360)40Notespayable8,000Cash8,100Part3.OnNovember25ofthecurrentyear,acompanyborrows$8,000cashbysigninga90-day,5%notepayablewithafacevalueof$8,000.(a)ComputetheaccruedinterestpayableonDecember31ofthecurrentyear,(b)preparethejournalentrytorecordtheaccruedinterestexpenseatDecember31ofthecurrentyear,and(c)preparethejournalentrytorecordpaymentofthenoteatmaturity.GeneralJournal36days54daysP12211-P2:PayrollLiabilities2311-24PayrollLiabilitiesEmployersincurexpensesandliabilitiesfromhavingemployees.P22411-25EmployeePayrollDeductionsP22511-26EmployersmustpaywithheldtaxestotheInternalRevenueService(IRS).FICATaxes—Soc.Sec.2014:6.2%ofthefirst$117,000earnedintheyear.EmployeeFICATaxesFederalInsuranceContributionsAct(FICA)FICATaxes—Medicare2014:1.45%ofallwagesearnedintheyear.P22611-27Amountswithhelddependontheemployee’searnings,taxrates,andnumberofwithholdingallowances.Employersmustpaythetaxeswithheldfromemployees’grosspaytotheappropriategovernmentagency.FederalIncomeTaxEmployeeIncomeTaxStateandLocalIncomeTaxesP22711-28Amountswithhelddependontheemployee’srequest.Employersowevoluntaryamountswithheldfromemployees’grosspaytothedesignatedagency.Examplesincludeuniondues,savingsaccounts,pensioncontributions,insurancepremiums,andcharities.EmployeeVoluntaryDeductionsP22811-29Anentrytorecordpayrollexpensesanddeductionsforanemployeemightlooklikethis.RecordingEmployeePayrollDeductionsP2*Amountstakenfromemployee’semploymentrecords2911-P3:PayrollExpenses3011-31Employerspayamountseq