Question

Part III: Account for notes payable and accrued interest

__current liabilities____ are notes payable due within one year (or operating cycle if longer).

At the end of each year, a company reclassifies the portion of its long-term debt principal payments that must be paid in the next year from long-term debt to a current _current liability__.

Part IV: Account for accrued liabilities and unearned revenue

The major operating expense for a merchandising company is payroll. True or false?

false

What payroll liabilities does salary expense create?

Employee Income Tax Payable, Gross pay, FICA Tax Payable

Salary Payable, Employee Income Tax Payable, Union dues

Employee Income Tax Payable, FICA Tax Payable, Salary Payable

Healthcare, Salary Payable, FICA Tax Payable

Every expense accrual, including payroll, has the same effect: ____________________ and __________________________ because of the expense.

When is a company required to record warranty expense?

Part V: Account for contingent liabilities

A contingent liability is a potential liability that depends on the _________________ outcome of _________ events.

Part VI: Account for bonds payable and interest expense with straight-line amortization

______________________________ are groups of debt securities issued to multiple lenders, called bondholders.

Answer 1

Answers are as under :

Part III: Account for notes payable and accrued interest

At the end of each year, a company reclassifies the portion of its long-term debt principal payments that must be paid in the next year from long-term debt to a current _current liability__. : True

Current liability means any outcome which is due within one year. Current portion of long term debt is required to be classified to current liability head. It is calculated by multiplying the number of month * principal + interest payment. The balance of long term debt is shown in non current liabilities.

Part IV: Account for accrued liabilities and unearned revenue

Answer :

Accrued liabilities means expenses for the financial year has been incurred but payment for the same will be made in next financial year. Accounting entry for accrued liability of $ 5000 telephone bill will be :

Telephone exp : $5000 Dr

To Expenses payable : $5000 Cr

Unearned revenue means advance receipt of income. Here company received the payment for the service which is yet not required to be recognized as per revenue recognization standard. same cannot be considered in profit and loss account as the income for the financial year and hence it is shown in liability side of balance sheet.

The major operating expense for a merchandising company is payroll. True or false?

Answer :

False: Purchase of goods, is major operating expenses for a merchandising company. Direct labour and direct material cost is a major expenses for this type of companies.

What payroll liabilities does salary expense create?

Answer:

Payroll liabilities is sum off Gross salary+ Bonus+ OT- Employee income tax- Other tax - PF- ESIC

Every expense accrual, including payroll, has the same effect: _________________ and __________________________ because of the expense. ( IF NOT CLEAR ABOUT YOUR QUESTION , THAT WHAT YOU WANT TO KNOW)

When is a company required to record warranty expense?

Contingent liability means possible future liability that depends on uncertain future events. Here we cannot estimate the outcome of future event. Eg are : Liklihood of law suit against the company, warranty claim. As per accounting principle , companies are not required to record the contingent liabilities in financial statement and only it need to be disclosed in notes accompanying the financial statements.

Warranty claim is a type of contingent liability. Warranty claim will turn into warranty expenses only when it is certain that there are chances of defect in the product. It should be recoginzed proportainately till the warranty period in financial statement and company need to estimated the expenses.

Part V: Account for contingent liabilities

A contingent liability is a potential liability that depends on the POSSIBLE outcome of FUTURE UNCERTAIN events.

Hope it is useful ( I was not much clear about your que.)