Current Liabilities and Fair Value Accounting
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| show | debts and obligations that a company expects to satisfy within one year or within its normal operating cycle, whichever is longer
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| Liabilities require... | show 🗑
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| Timing is important in the __________ of liabilities. | show 🗑
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| show | understatement; overstatement
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| show | when an obligation occurs, as when goods are bought on credit
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| Accrued liabilities include: | show 🗑
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| On the balance sheet, a liability is generally _______ at the amount of money needed to pay the debt or reported at the _________ of the goods and services to be delivered. | show 🗑
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| If a company's Notes payable account is large, it should ______ the balances, maturity dates, interest rates, and other features of the debts in an _______ note. | show 🗑
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| Disclosure of the fair value and the basis for estimating the fair value of short-term notes payable, loans payable, and other short term debts are ______ unless it is not practical to estimate the value. | show 🗑
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| show | Allows a company to borrow funds when they are needed to finance current operations. Unused lines of credit allow a company to borrow on short notice up to the credit limit, with little or no negotiation.
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| show | liabilities
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| Liabilities fall into two major groups: | show 🗑
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| definitely determinable liabilities | show 🗑
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| show | determine their existence and amount; record them properly
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| The most common definitely determinable liabilities are: | show 🗑
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| Accounts payable | show 🗑
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| Notes payable | show 🗑
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| Commercial paper: | show 🗑
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| show | liability; financial statements
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| show | notes payable in the current liabilities section of the balance sheet
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| What is the key reason for making adjusting entries? | show 🗑
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| show | accrued liability. Interest accrues daily on interest bearing notes. An adjusting entry is made at the end of each period to record the interest obligation up to that point.
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| Dividends Payable | show 🗑
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| Sales and Excise Taxes Payable | show 🗑
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| Current Portion of Long-Term Debt | show 🗑
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| payroll liabilities | show 🗑
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| Wages | show 🗑
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| show | compensation of employees at a monthly or yearly rate
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| The employer pays all federal, state, and local taxes on income. The employee and employer share FICA and Medicare taxes. The employer bears... | show 🗑
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| show | are advance payments for goods and services that a company must provide in the future
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| Estimated Liabilities | show 🗑
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| Estimated liabilities are recorded and presented on financial statements the same way as definitely determinable liabilities except for.... | show 🗑
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| show | Income taxes payable, property taxes payable, promotional costs, product warranty liability
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| show | depends on the results of a corporation's operations which are often not known until the end of the fiscal year; an adjusting entry is necessary. Sole proprietorships and partnerships do not pay income tax their owners must report income on individ taxes
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| Property taxes payable | show 🗑
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| promotional costs | show 🗑
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| show | warranty is feature of the product and is included in selling price; cost should be debited to an expense account in the period of the sale; estimate based on past experience
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| show | accrual accounting
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| vacation pay liability | show 🗑
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| show | To disclose a note to their financial statements any contingent liabilities and commitments
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| show | is a potential liability because it depends on a future event arising out of a past transaction
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| show | lawsuits, income tax disputes, discounted notes receivable, guarantees of debt,failure to follow government regulations
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| When are contingencies recorded? | show 🗑
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| commitment | show 🗑
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| show | is the price for which an asset or liability could be sold, or exit the company, as opposed to the price for which the company could buy the asset or liability; applies to cash equivalents and investments as well as notes payable
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| show | 1) market approach
2) income (or cash flow) approach
3) cost approach
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| show | refers to the cost or benefits of holding or not holding money over time
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| interest | show 🗑
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| future value | show 🗑
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| show | is the interest cost for one or more periods when the principal sum- the amount on which interest is computed-stays the same from period to period
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| compound interest | show 🗑
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| why is compound interest is useful in business? | show 🗑
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| Present value | show 🗑
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| show | value of potential investments
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| show | the annual rate divided by the number of periods in a year
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| The concept of present value is _____ used in business decision making and financial reporting. | show 🗑
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| show | an asset is something that will provide future benefits to the company that owns it. Purchase price of an asset represents the present value of those future benefits.
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| Present value of a deferred payment | show 🗑
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| The application of accrual accounting to unearned revenues and accrued expenses impacts what on the financial statements? | show 🗑
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| What is the primary reason why a company incurs current liabilities? | show 🗑
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| show | is the amount of time it takes to purchase inventory, sell inventory, and collect the resulting receivable
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| to evaluate a company's ability to pay its current liabilities, analysts use two measures of liquidity | show 🗑
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| show | is the number of times, on average, that a company pays its accounts payable in an accounting period. This measure reflects the relative size of accounts payable, credit terms offered by suppliers, and a company's diligence in paying its suppliers
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| Days' payable | show 🗑
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