2G Payables and accrued wages Flashcards
Various forms of payables
Sales tax payable, unearned revenue, ST notes payable, PR liabilities, Estimated liabilities (vacation, health benefits), Warranty liability, Contingent liabilities, Accruals
Requirements for a payable
- Past transaction or event
- Present obligation
- Future payment of assets or services
Warranty Liabilities JE’s
Dr - Warranty expense
Cr - Estimated warranty liability
to record estimated warranty
Dr - Estimated warranty liability
Cr - Auto Parts Inventory
to record cost of warranty repairs
Contingent liabilities
Obligation that is dependent on a future outcome arising from a past transaction. The future outcome is uncertain.
Contingent liability is probable and estimable
Record liability
Contingent liability is probable and not estimable
Disclose in notes
Contingent liability is possible
Disclose in notes
Contingent liability is remote
No disclosure
Exit and disposal activities
terminate contracts, consolidate/close facilities, relocate employees, etc.
Liability is recognized at fair value when there is little to no ability to avoid the future transfer of assets
Fair value is recorded when it can be reasonable estimated, not necessarily when incurred.
Exit and disposal JE
Dr - Exit and Disposal expense
Cr - Exit and disposal liability
Asset Retirement Obligations
accounting for the costs related to the future disposal of a long lived asset
Calculate Asset Retirement Obligations
costs x present value of $1 amount
Asset Retirement Obligations accrual JE
Dr - Interest Expense
Cr - Asset retirement obligation
