Payables & accrued liabilities

Question 1

What are the typical payroll deductions withheld from the employee and recorded as short liabilities?

Answer 1

1. FICA & Medicare (7.65%)
2. Income taxes

Question 2

How should short term debt that is expected to be refinance prior to the issuance of the Financial statements be classified?

Answer 2

Short term debt that was refinance should be classified as long term debt.

Question 3

How should the expense be recorded for deferred compensation arrangements that the service period is greater than one year?

Answer 3

The consideration to be paid should be allocated evenly throughout period of service.

Question 4

How should ARO and ARC be initially recorded on the balance sheet?

Answer 4

ARO and ARC are recorded at present value and is expensed over the obligation period.

Question 5

How is ARO and ARC subsequently adjusted?

Answer 5

ARO is adjusted by increasing the liability through the accretion expense. At the end the of the obligation period ARO is reported at non discontinued value.

1. Debit - accretion expense
2. Credit - ARO liability

ARC is adjusted by recording the depreciation over the obligation period. At the end the obligation period the ARC carrying amount should be zero.
1. Debit- Depreciation expense
2. Credit- Accumulated depreciation ARC

Question 6

What is the rate used to discount the ARO at present value?

Answer 6

Credit adjusted free-risk rate

Question 7

What is the condition that needs to be satisfied for vacations paid to be accrued?

Answer 7

Vacations may either vest or accumulate in order to be accrued.