Lecture International accounting: Chapter 9 - Nguyễn Quốc Nhất

Lecture "International accounting - Chapter 8: Liabilities and payrol" has content: Current liabilities of known amount, current liabilities that must be estimated, accounting for payroll, accounting for payroll.
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Lecture International accounting: Chapter 9 - Nguyễn Quốc NhấtCHAPTER 9: CURRENT LIABILITIES AND PAYROLLLearning ObjectivesAfter studying Chapter 9, you should beable to:Account for current liabilities of knownamountAccount for current liabilities that must beestimatedCalculate payroll and payroll tax amountsJournalize basic payroll transactionsChapter 9: CurrentLiabilities and PayrollMA.Nguyen Quoc Nhat9.1. Current Liabilities ofKnown AmountChapter’s content9.1. Current Liabilities of Known Amount9.2. Current Liabilities that Must BeEstimated9.3. Accounting for Payroll9.4. Journalizing Payroll Transactions9.1.1. Accounts PayableAmounts owed for products or services purchased onaccount are accounts payable.Since these are due on average in 30 days, theyare current liabilities. We have seen many accountspayable illustrations in preceding chaptersA reproduction of the Chapter 4 entry that SmartTouch made on June 3 to purchase $700 of inventory onaccount follows:Jun 3 Inventory(A+)Accounts payable700(L+)700Purchase on account.9.1. Current Liabilities ofKnown Amount9.1. Current Liabilities of Known Amount9.1.2. Short-Term Notes Payable9.1.1. Accounts PayableThen, when Smart Touch paid the liability and tookadvantage of the purchase discount on June 15, theentry was as follows:Jun Accounts payable15Cash(A–)Inventory(L–)700(A–)Paid on account within discount period.67921Short-term notes payable are a common form offinancing. Short-term notes payable are promissory notesthat must be paid within one year.Consider how the entry on June 3 would change ifSmart Touch had purchased the inventory with a 10%,one-year note payable. The modified June 3 purchaseentry follows:2013 Account titleJun 3 InventoryShort-term notes payableDebitCredit700700Purchased inventory on a one-year, 10% note.NguyenQuocNhat –nhatnq.faa@gmail.com1CHAPTER 9: CURRENT LIABILITIES AND PAYROLL9.1. Current Liabilities of Known Amount9.1. Current Liabilities of Known Amount9.1.2. Short-Term Notes Payable (Cont)At year-end it is necessary to accrue interestexpense for the seven months from June toDecember (do not adjust interest for the threedays in June) as follows:9.1.2. Short-Term Notes Payable (cont)The interest accrual at December 31, 2013, allocated$41 of the interest on this note to 2013. During 2014,the interest on this note for the five remaining monthsis $29, as shown in the following entry for the paymentof the note in 2014:2013Jun 341Interest expense ($700 x 0.10 x 7/12)41Interest payableAccrued interest expense at year-end.9.1. Current Liabilities of Known Amount9.1.3. Sales Tax PayableMost states assess sales tax on retail sales.Retailers collect the sales tax in addition to theprice of the item sold.Sales tax payable is a current liability because theretailer must pay the state in less than a year.Sales tax collected is owed to the state.2014Jun 3 Short-term notes payableInterest payableInterest expense ($700 x 0.10 x 5/12)CashPaid note and interest at maturity.70041297709.1. Current Liabilities of Known Amount9.1.3. Sales Tax PayableSuppose December’s taxable sales for Smart Touchtotaled $10,000. Smart Touch collected anadditional 6% sales tax, which would equal $600($10,000x0.06). Smart Touch would record thatmonth’s sales as follows:2014Jun 3 Cash ($10,000 x 1.06)Sales revenueSales tax payable ($10,000 x 0.06)10,60010,000600To record cash sales and the related sales tax.9.1. Current Liabilities of Known Amount9.1.3. Sales Tax Payable (cont)Companies forward the sales tax to the state atregular intervals. They normally submit it monthly,but they could file it at other intervals, dependingon the state and the amount of the tax.To pay the tax, the company debits Sales taxpayable and credits Cash.2014Jan 20 Sales tax payableCash(A–)(L–)600600NguyenQuocNhat –nhatnq.faa@gmail.com9.1. Current Liabilities of Known Amount9.1.4. Current Portion of Long-Term Notes PayableMost long-term notes payable are paid ininstallments. The current portion of notespayable (also called current maturity) is theprincipal amount that will be paid within oneyear—a current liability.Let’s consider the $20,000 notes payable thatSmart Touch signed on May 1, 2013. The notebears interest at 6%. If the note will be paid overfour years with payments of $5,000 plus interestdue each May 1, what portion of the note iscurrent?2CHAPTER 9: CURRENT LIABILITIES AND PAYROLL9.1. Current Liabilities of Known Amount9.1.4. Current Portion of Long-Term Notes PayableThe portion that must be paid within one year, $5,000, iscurrent. At the inception of the note, the company recordedthe entire note as long term. A second entry to the accountfor the $5,000 prin- cipal that is current will need to bemade on May 1, 2013.2013May 1Cash ...