Principles of Accounting
Chapter 10

Preview of Ch. #10

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Current Liabilities
Current liability
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A debt that the company expects to pay within one year or the operating cycle, whichever is longer.

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Most companies pay current liabilities by using current assets.

Current liabilities include notes payable, accounts payable, unearned revenues, and accrued liabilities such as taxes, salaries and wages, and interest payable.

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Current Liabilities
Question
The time period for classifying a liability as current is one year or the operating cycle, whichever is:
a. longer
b. shorter
c. probable
d. possible

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Current Liabilities
Notes Payable
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Recorded obligation in the form of written notes.

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Usually require the borrower to pay interest.

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Issued for varying periods of time.

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Those due for payment within one year of the statement of financial position date are usually classified as current liabilities.

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Current Liabilities
Illustration: Hong Kong National Bank agrees to lend HK$100,000 on
September 1, 2014, if C.W. Co. signs a HK$100,000, 12%, four-month note maturing on January 1.
Instructions
a) Prepare the journal entry on September 1.
b) Prepare the adjusting journal entry on December 31, assuming monthly adjusting entries have not been made.
c) Prepare the journal entry at maturity (January 1, 2015).

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Current Liabilities
Illustration: Hong Kong National Bank agrees to lend HK$100,000 on
September 1, 2014, if C.W. Co. signs a HK$100,000, 12%, four-month note maturing on January 1.
a) Prepare the journal entry on September 1.

b) Prepare the adjusting journal entry on Dec. 31.

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Current Liabilities
Illustration: Hong Kong National Bank agrees to lend HK$100,000 on
September 1, 2014, if C.W. Co. signs a HK$100,000, 12%, four-month note maturing on January 1.