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Current Liabilities and Payroll

Current Liabilities and Payroll. LO 1a – Recording Notes Payable. LO 1. Current Liabilities. Long-term liabilities are debts due beyond one year. Current liabilities are debts that will be paid out of current assets and are due within one year. LO 1. Short-Term Notes Payable.

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Current Liabilities and Payroll

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  1. Current Liabilities and Payroll LO 1a – Recording Notes Payable

  2. LO 1 Current Liabilities • Long-term liabilities are debts due beyond one year. • Current liabilities are debts that will be paid out of current assets and are due within one year.

  3. LO 1 Short-Term Notes Payable Nature’s Sunshine Company issues a 90-day, 12% note for $1,000, dated August 1, 2011, to Murray Co. for a $1,000 overdue account.

  4. LO 1 Short-Term Notes Payable When the note matures, the entry to record the payment of $1,000 plus $30 interest ($1,000 * 12% * 90 / 360) is as follows: Interest Expense appears on the income statement as an “Other Expense.”

  5. LO 1 Short-Term Notes Payable On May1, Bowden Co. (borrower) purchased merchandise on account from Coker Co. (creditor), $10,000, 2/10, n/30. The merchandise cost Coker Co. $7,500.

  6. Bowden Co. (Borrower) Description Debit Credit LO 1 Short-Term Notes Payable Mdse. Inventory 10,000 Accounts Payable 10,000 Coker Co. (Creditor) Description Debit Credit Accounts Receivable 10,000 Sales 10,000 Cost of Mdse. Sold 7,500 Mdse. Inventory 7,500

  7. LO 1 Short-Term Notes Payable On May31, Bowden Co. issued a 60-day, 12% note for $10,000 to Coker Co. on account.

  8. Bowden Co. (Borrower) Description Debit Credit Accounts Payable10,000 Notes Payable 10,000 Coker Co. (Creditor) Description Debit Credit Notes Receivable 10,000 Accounts Receivable 10,000 LO 1 Short-Term Notes Payable

  9. LO 1 Short-Term Notes Payable On July 30, Bowden Co. paid Coker Co. the amount due on the note of May 31, the face amount of $10,000 plus interest of $200 ($10,000 * 12% * 60 / 360).

  10. Bowden Co. (Borrower) Description Debit Credit Notes Payable 10,000 Interest Expense 200 Cash 10,200 Coker Co. (Creditor) Description Debit Credit Cash 10,200 Interest Revenue 200 Notes Receivable 10,000 LO 1 Short-Term Notes Payable

  11. Bowden Co. (Borrower) Description Debit Credit Notes Payable 10,000 Interest Expense 200 Cash 10,200 Coker Co. (Creditor) Description Debit Credit Cash 10,200 Interest Revenue 200 Notes Receivable 10,000 LO 1 Short-Term Notes Payable $10,000 * 12% * 60 / 360

  12. Bowden Co. (Borrower) Description Debit Credit Notes Payable 10,000 Interest Expense 200 Cash 10,200 Coker Co. (Creditor) Description Debit Credit Cash 10,200 Interest Revenue 200 Notes Receivable 10,000 LO 1 Short-Term Notes Payable $10,000 * 12% * 60 / 360

  13. LO 1 Short-Term Notes Payable On September 19, Iceburg Company borrowed cash from First National Bank by issuing a $4,000, 90-day, 15% note to the bank.

  14. LO 1 Short-Term Notes Payable On December 18, Iceburg Company paid First National Bank $4,000 plus interest of $150 ($4,000 * 15% * 90 / 360).

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