BUAD 121 Okanagan College Ch 10 Current Liabilities and Payroll of An Organization Essay please see the Etextbook, when you take this work. i will give you

BUAD 121 Okanagan College Ch 10 Current Liabilities and Payroll of An Organization Essay please see the Etextbook, when you take this work. i will give you my account to log in. you must write main point, and write each point detail. Please explain how chapter 10 will affect future accounting studies.You also need to write some important accounting formulas. Chapter 10
Current Liabilities
and Payroll
Chapter 10: Learning Objective 1
1. Account for determinable or certain current liabilities.
2. Account for uncertain liabilities.
3. Determine payroll costs and record payroll
transactions. – IGNORE
4. Prepare the current liabilities section of the balance
sheet.
5. Calculate mandatory payroll deductions (Appendix
10A). – IGNORE
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Liability
A future payment of assets or services that a
company is currently obligated to make as a
result of past transactions or events.
© 2016 McGraw-Hill Education
LO10-1 3
Liabilities
Characteristics
1. The company has a present obligation.
2. Results from past transactions.
3. Settlement to be made in the future.
EXHIBIT
10.1
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LO10-1 4
Current vs. Non-Current Liabilities
Current Liabilities
Are due within one year of the balance sheet date or
within the company’s next operating cycle, whichever
is longer.
Are settled using current assets or by creating other
current liabilities.
•
•
Non-Current Liabilities
•
Are not expected to be settled within the longer
of one year of the balance sheet or the next
operating cycle.
© 2016 McGraw-Hill Education
LO10-1 5
Current vs. Non-Current Liabilities
Current liability
Balance
sheet
date
Non-current liability
1 year or
operating
cycle
Examples:
•Accounts payable
•Unearned revenues
•Wages payable
•Current portion of
notes payable
•Bonds payable
•Lease obligations
•Long-term portion of notes payable
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LO10-1 6
Short-Term Notes Payable
• Issued for varying periods
• If due within one year of the balance sheet date,
classified as current liabilities
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Short-Term Notes Payable
• Interest is recorded in the period the loan is
outstanding (because of April 30 year end in this
example, an adjusting entry is required)
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Short-Term Notes Payable
• At maturity, interest must be updated for two
additional months
• Also, at maturity, the face value of the note plus
interest must be repaid
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Now work on BE 10.4
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Solution
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Current Maturities of Long-Term Debt
• The portion of long-term debt that is due within the
current year
• Amount not due within current year is disclosed as a
long-term liability
• No adjusting entry is required to recognize the current
portion of long-term debt
• The proper classification is recognized when the balance
sheet is prepared
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A TON of practice now
• Exercise 10-1
• Exercise 10-4
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Uncertain Liabilities
• Provision is a liability that exists but the amount and
timing is uncertain
• We owe someone, but not sure how much, when or
even who
• Liability is recognized when:
• Settlement of the liability is likely, and
• Amount of the liability can be reasonably estimated
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Product Warranties
• Promises made by seller to buyer to repair or replace a
product if it is defective or does not perform as
intended
• Warranties will lead to future costs for replacement or
repair of defective units
• Cost of warranty is estimated and accrued based on
prior experience (under expense approach)
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Let’s look at BE10-8
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BRIEF EXERCISE 10.8
Dec. 31
Warranty Expense
18,700
Warranty Liability
18,700
**[(4,400 units × 5%) × $85/unit]
To accrue estimated warranty expense.
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Customer Loyalty Programs and Gift
Cards
• Results in an estimated liability:
• Not known if or when rewards will be redeemed
• If redemptions are likely, and can be estimated based
on past experience:
• Record estimated liability as a reduction in revenue (not
an expense)
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On your own BE 10-11
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BRIEF EXERCISE 10.11
Dec. 2021
Cash
4,750
Unearned Revenue
**To record sale of gift cards.
Jan. 2022
4,750
Unearned Revenue
Sales
**To record sales and redemption of gift cards.
2,425
Cost of Goods Sold
Merchandise Inventory
**To record cost of goods sold.
1,070
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2,425
1,070
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Contingent Liabilities
• Possible obligation resulting from a past event
• Record liability if both conditions are met:
• It is likely (or probable under IFRS) that an obligation
exists, and
• Amount can be reasonably estimated
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Contingent Liabilities
• If contingent loss is likely, but cannot be reasonably
estimated:
• No liability is recorded
• Disclosed in the notes to the statements
• If contingency is unlikely:
• Still disclosed if event is substantial, otherwise not
disclosed
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Let’s discuss 10-12
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Solution 10-12
a.
(2) Disclosed: This liability should be disclosed. The
outcome is neither likely nor unlikely (not determinable). The
treatment would be the same under both IFRS and ASPE.
b. (1) Recorded: This liability is likely and can be reasonably
estimated. The treatment would be the same under both IFRS
and ASPE.
c.
(1) Recorded under IFRS: This liability is “probable” and
can be reasonably estimated.
(2) Disclosed under ASPE: The outcome is not “likely”; the
chance of occurrence is not considered sufficiently high.
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Financial Statement Presentation
• Current liabilities are generally the first category
reported in the liabilities section of the balance sheet
• Each type of current liability is listed separately
• Generally listed in order of liquidity, usually by maturity
date
• Also common to show bank loans, notes payable and
accounts payable first regardless of size
• Terms of operating lines of credit, notes payable, and
other information are disclosed in the notes
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Appendix B: Sales Tax Learning
Objectives
1. Explain the different types of sales tax.
2. Record sales taxes collected by businesses on goods
and services.
3. Record sales taxes paid on the purchase of goods and
services.
4. Record the remittance of sales taxes.
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Types of Sales Taxes
• GST = a federal sales tax on good and services
• A business must register for GST if it provides goods or
services in Canada with revenue of more than $30,000
in any year
• Registrants can claim a credit for GST paid or owed on
goods and services purchased against the GST they
invoice
• GST typically is 5% on most transactions
• GST is payable to the Receiver General for Canada
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Types of Sales Taxes
• Harmonized Sales Tax or HST is a combined tax.
• HST appears in provinces (ON, NS, NB, NL and PEI) that
have agreed to combine their provincial sales tax with
federal GST
• The collection agent is the Receiver General for Canada
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Types of Sales Taxes
• Provincial sales tax or PST is a separate tax charged on
certain goods and services in BC, SK, MB, and QC
• Its percentage varies by province
• Provincial sales taxes are remitted to the Minister of
Finance in each province
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Sales Taxes Collected on Receipts
• Sales taxes collected are not a source of revenue for a
company
• They are collected on behalf of the federal and
provincial governments
• Sales taxes = a liability to be remitted to the
appropriate government at regular intervals
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Sales Taxes Collected on Receipts
• Example: $300 of lawn services were provided by our
company subject to PST of 8% and GST of 5%
Cash
339
Service Revenue
300
PST Payable ($300 × 8%)
24
GST Payable ($300 × 5%)
15
To record cleaning service revenue
• Note: if the company was located in a province with HST
the HST Payable account would be used instead of a PST
and GST Payable accounts
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PRACTICE TIME
Head over to Exercise 10-6
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Solution
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Sales Taxes Paid on Payments
• PST is not typically charged on goods purchased for
resale (exception Quebec)
• PST is charged to businesses that use taxable goods
and services in their operations
• Businesses must pay GST/HST on the purchase of
merchandise but can offset this against any GST/HST
invoiced
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Sales Taxes Paid on Payments
• When merchandise is purchased for resale the GST/H
ST/QST paid are not included as part of the inventory
cost
• The GST/HST paid is debited to an account called GS
T/HST Recoverable
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Sales Taxes Paid on Payments
• Example: A clothing store purchased $2,500 of jeans
for resale in Manitoba on account
Merchandise Inventory
GST Recoverable ($3,000 × 5%)
Accounts Payable
3,000
150
3,150
To record merchandise purchase on account
• Note if HST was charged instead the GST Recoverable
account would be replace with HST Recoverable
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Sales Taxes Paid on Payments
• Example: Supplies are purchased in the amount of
$500 before tax (8% PST and 5% GST) for cash
Supplies ($500 + PST of 8%)
GST Recoverable ($500 × 5%)
Cash
To record the purchase of supplies
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540
25
565
39
Remittance of Sales Taxes
• GST or HST must be remitted to the Receive General
for Canada
• PST is remitted to the Minister of Finance
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Remittance of Sales Taxes
• Example: A retail store in Manitoba invoices GST on all of its sales and
pays GST on all purchases. At the end of the quarter they had the
following balances: GST Recoverable $15,000 and GST Payable
$22,000. The company completes its GST return, prepares the journal
entry as follows and pays the amount owing.
GST Payable
22,000
GST Recoverable
Cash
15,000
7,000
To record the remittance of GST
• Note: if located in a province with HST then would use the same
accounts HST Payable and HST Recoverable
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Remittance of Sales Taxes
• Example: The total PST invoiced by a retail store in
Manitoba for the quarter = $30,000. The entry to
record the remittance is as follows
PST Payable
Cash
To record the remittance of PST
30,000
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30,000
42
IF TIME PERMITS….
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Putting it all together – PUSH yourself
Head to problem 10-2A. You can work with a friend if you
find it helpful.
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