Chapter 11- Current Liabilities Flashcards
What is an operating line of credit?
When the bank allows for the account to be negative and provides a limited amount borrowed with interest
3 categories of current liabilities
Definitely determinable: no uncertainty on existence, amount, or timing
Estimable: No uncertainty on existence but some on amount/timing
Contingent- A future event determines existence, amount and timing
What is collateral?
When someone borrowing money has another asset that can be used to pay off loan if $ runs out.
Warranty Adjusting entry:
Warranty Expense
Warranty Liability
Entry for warranty repairs:
Warranty Liability
Wages Payable
What do you do if a contingency is unlikely to occur
Do not record
What do you do if a contingency is undeterminable/possibility that it will occur
Disclose in notes of FS
What do you do if contingency is likely to occur?
Record as current liability
Entry to record accrued property tax
Property Tax Expense
Property Tax Payable
How to calculate monthly property tax amount
Total amount / 12
How to calculate monthly property tax if new amount part way through the year
New amount-accrued tax / 12
When paying property tax bill, what entry is to be made?
Property Tax Expense (Current month)
Property Tax Payable (Past months)
Prepaid Property Tax (Future months)
Cash
Entry to adjust prepaid property tax expense
Property tax expense
Prepaid property tax
Entry to record advance payment of unearned revenue
Cash
Unearned Revenue
Entry to record unearned revenue when revenue is earned
Unearned revenue
Revenue
