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
Entry to record payroll & withholdings
Salaries and wages expense
CPP Payable
EI Payable
Salaries & Wages Payable
Entry to record payment of payroll to employees
Salaries and Wages Payable
Cash
Entry to record payroll benefits
Payroll Benefits Expense
Vacation Pay Payable
Workers compensation payable
Entry to record sales tax
Cash
Sales
HST Payable
Entry to record remitting of sales tax
HST Payable
HST Recoverable
Cash
What are the four methods of revenue recognition? Describe them
Point of sale: Revenue recognized when good/service is sold
During production: Revenue is recognized at various stages of production
Completion of production: Revenue is recognized when contruction is 100% completed
Collection of cash: Revenue recognized when cash is collected
