Exam 10: Current Liabilities

Use the following information for questions . On October 1, Jacob's Auto Service borrows $75,000 from Provincial Bank on a $75,000, 3-month, 6% note. -What entry must Jacob's Auto Service make on December 31 before financial statements are prepared?

Canadian Tire Money represents a liability to Canadian Tire.

After the warranty liability has been established, the costs in the future will be recorded with a debit to Warranty Expense.

Disclosure of a contingent loss is usually made

Companies who are reporting under IFRS will have the choice to report current liabilities in a lower section of the Balance Sheet.

If a note payable is payable in a term longer than one year, it will be classified as a non-current liability.

The following unadjusted balances are taken from the trial balance of Jackson Equipment at December 31, 2014: Jackson Equipment sells and installs security systems. Beginning on December 1, 2014, Jackson began offering a 2-year product warranty. Based on research in the industry, Jackson's management believes that 5% of security systems will require some warranty work and that the typical costs for systems requiring warranty work will be $875 during the first year and $325 during the second year. In December, Jackson supplied and installed 80 systems. Instructions a. Calculate and record Jackson's warranty liability at December 31, 2014. b. Prepare the current liability portion of Jackson's balance sheet at December 31, 2014.

A bank overdraft is the same as an operating line of credit.

Elliott Company had the following transactions during March: Mar $\quad$ 1 $\quad$ Purchased computer equipment by issuing a $15,000, 6-month, 8% note payable. Interest is due at maturity. Mar $\quad$ 5 $\quad$ Provided services to customers for $9,800 plus 5% GST; customers paid cash. Mar $\quad$ 15 $\quad$ Purchased supplies on account from Grand and Toy for $3,500. Supplier terms are 2/10, n/30. Mar $\quad$ 31 $\quad$ Paid the Grand and Toy account in full. Instructions a. Record the transactions. b. Record any adjusting entries required at March 31 related to these liabilities.

Most companies pay current liabilities

Liabilities with a known amount, payee and due date are often referred to as determinable liabilities.

Under the expense approach, the warranty liability is measured using

The accounting for warranty costs is based on the concept of matching expenses with revenues, which requires that the estimated cost of honouring warranty contracts should be recognized as an expense

As long as it is likely the company will have to settle the obligation, and the company can reasonably estimate the amount, the liability is recognized.

The relationship between current liabilities and current assets is

Under ASPE, current liabilities are the first category reported in the liability section of the Balance Sheet.

Money borrowed on a line of credit is normally borrowed on a long-term basis.

Interest expense on an interest-bearing note is

The warranty liability account will be carried from year to year and will be increased by

Algonquin Provincial Bank agrees to lend Grimwood Brick Company $80,000 on January 1. Grimwood Brick Company signs an $80,000, 9-month, 5% note. -What entry will Grimwood Brick Company make to pay off the note and interest at maturity assuming that interest has been accrued to September 30?