FAR 5 -M1 PAYABLES ANC ACCRUED LIAB

Question 1

If equity securities have been issued (after the BS but before it is issued), debit the short term portion to pay the current liab and credit the long term liab instead of common stock

Answer 1

ST liab of 500,000
stock issued for 400,000
cash proceeds used to pay the ST liab
entry for reclassification would be:

DR Short term liab - 400,000
Long term liab - 400,000
(not to common stock)
This is the entry before the event actually happened.
this entry is used bec we already know that it will occur and have definite amt

Question 2

Record the accretion expense over the useful life of the asset ex. oil tanker

ex oil tanker cost $1,500,000
useful life 10 yrs
estimated to be dismantles at yr10 for 150,000
end of yr10 actual dismantling cost was 155,000

Answer 2

each yr-record the ff until you get to the estimated amt of dismantling:

Asset ret cost - 15000 (x10 = 150,000)
Asset ret obligation - 15000

Yr10:
Asset ret obligation - 150,000
Demolition exp 5,000
Cash/AP 155,000