《银行会计学》（英文版） Chapter F10 Current Liabilities

Chapter F10 Power notes Current Liabilities Learning objectives 1. The Nature of current liabilities 2. Short-Term Notes Payable 3. Contingent Liabilities c10 4. Payroll and Payroll Taxes 5. Accounting Systems for payroll 6. Employees'Fringe Benefits 7. Financial analysis and Interpretation c10-1

C10 - 1 Learning Objectives Power Notes 1. The Nature of Current Liabilities 2. Short-Term Notes Payable 3. Contingent Liabilities 4. Payroll and Payroll Taxes 5. Accounting Systems for Payroll 6. Employees’ Fringe Benefits 7. Financial Analysis and Interpretation Chapter F10 Current Liabilities C10

Chapter F10 Power notes Current Liabilities Slide :f Power Note Topics 3 Short-Term Notes Payable 6. Product Warranty Liability 7 Payroll and payroll Taxes 12. Employees'Earnings 15. Employer's Payroll Taxes 19. Payroll System and Data Flow 26· Quick Ratio k Note: To select a topic, type the slide# and press Enter. c10-2

C10 - 2 • Short-Term Notes Payable • Product Warranty Liability • Payroll and Payroll Taxes • Employees’ Earnings • Employer’s Payroll Taxes • Payroll System and Data Flow • Quick Ratio Slide # Power Note Topics 3 6 7 12 15 19 26 Note: To select a topic, type the slide # and press Enter. Chapter F10 Power Notes Current Liabilities

Short-Term Notes Payable Bowden Co. Buyer/Borrower) Coker Co Seller/Creditor) Description Debit Credit Description Debit Credit Mdse Inventory 10.000 Accts. Receivable 10.000 Accts Payable 10.000 Sales 10.000 Cost of Mdse Sold 7,500 Mdse Inventory 7,500 May 1. Bowden Co purchased merchandise on account from Coker Co., $10,000, terms 2/10, n/30 c10-3

C10 - 3 Short-Term Notes Payable Description Debit Credit Mdse. Inventory 10,000 Accts. Payable 10,000 Accts. Receivable 10,000 Sales 10,000 Cost of Mdse. Sold 7,500 Mdse. Inventory 7,500 Bowden Co. (Buyer/Borrower) Coker Co. (Seller/Creditor) Description Debit Credit May 1. Bowden Co. purchased merchandise on account from Coker Co., $10,000, terms 2/10, n/30

Short-Term Notes Payable Bowden Co. Buyer/Borrower) Coker Co Seller/Creditor) Description Debit Credit Description Debit Credit Mdse Inventory 10.000 Accts. Receivable 10.000 Accts Payable 10.000 Sales 10.000 Cost of Mdse Sold 7.500 Mdse Inventory 7,500 Accts Payable 10.000 Notes Receivable 10.000 Notes Payable 10.000 Accts. Receivable 10.000 May 31. Bowden Co issued a 60-day, 12% note for $10,000 to Coker Co on account. c10-4

C10 - 4 Short-Term Notes Payable Description Debit Credit Mdse. Inventory 10,000 Accts. Payable 10,000 Accts. Payable 10,000 Notes Payable 10,000 Accts. Receivable 10,000 Sales 10,000 Cost of Mdse. Sold 7,500 Mdse. Inventory 7,500 Notes Receivable 10,000 Accts. Receivable 10,000 Bowden Co. (Buyer/Borrower) Coker Co. (Seller/Creditor) Description Debit Credit May 31. Bowden Co. issued a 60-day, 12% note for $10,000 to Coker Co. on account

Short-Term Notes Payable Bowden Co. Buyer/Borrower) Coker Co Seller/Creditor) Description Debit Credit Description Debit Credit Mdse Inventory 10.000 Accts. Receivable 10.000 Accts Payable 10.000 Sales 10.000 Cost of Mdse Sold 7.500 Mdse Inventory 7,500 Accts Payable 10.000 Notes Receivable 10.000 Notes Payable 10.000 Accts. Receivable 10.000 Notes Payable 10.000 Cash 10,200 Interest Expense 200 Interest Revenue 200 Cash 10.200 Notes receivable 10.000 July 30. Bowden Co paid the amount due nterest:$10,000x12%X60/360=$200 c10-5

C10 - 5 Short-Term Notes Payable Description Debit Credit Mdse. Inventory 10,000 Accts. Payable 10,000 Accts. Payable 10,000 Notes Payable 10,000 Notes Payable 10,000 Interest Expense 200 Cash 10,200 Accts. Receivable 10,000 Sales 10,000 Cost of Mdse. Sold 7,500 Mdse. Inventory 7,500 Notes Receivable 10,000 Accts. Receivable 10,000 Cash 10,200 Interest Revenue 200 Notes Receivable 10,000 Bowden Co. (Buyer/Borrower) Coker Co. (Seller/Creditor) Description Debit Credit July 30. Bowden Co. paid the amount due. Interest: $10,000 x 12% x 60 / 360 = $200

Product Warranty Liability To match revenues and expenses properly, warranty costs should be recognized as expense in the same period in which related revenues are recorded. Date Description Debit Cred Dec 31 Product Warranty Expense 3,000 Product Warranty Payable 3.000 Sales of $60, 000 with a 36-month warranty. Estimated average cost to repair defects is 5% Estimated warranty: $60,000 X 5%=$3,000 c10-6

C10 - 6 Date Description Debit Credit Product Warranty Liability Product Warranty Expense 3,000 Product Warranty Payable 3,000 Estimated warranty: $60,000 x 5% = $3,000 Dec. 31 Sales of $60,000 with a 36-month warranty. Estimated average cost to repair defects is 5%. To match revenues and expenses properly, warranty costs should be recognized as expense in the same period in which related revenues are recorded

Payroll and Payroll Taxes Payroll is the amount paid to em ployees for services provided Payrolls are im portant because 1. Good employee relations demand that payrolls be calculated accurately and paid as scheduled 2. Payroll expenditures are subject to a variety of federal, state, and local taxes 3. Total payroll expense(gross payroll plus payroll taxes)has a major im pact on net income c10-7

C10 - 7 1. Good employee relations demand that payrolls be calculated accurately and paid as scheduled. 2. Payroll expenditures are subject to a variety of federal, state, and local taxes. 3. Total payroll expense (gross payroll plus payroll taxes) has a major impact on net income. Payroll and Payroll Taxes Payroll is the amount paid to employees for services provided. Payrolls are important because:

Gross Pay Calculation John T Mc Grath is em ployed by McDermott Supply Co at the rate of $25 per hour, plus 1.5 times the normal hourly rate for hours over 40 per week. For the week ended Decem ber 27. Mc Grath worked 44 hours Employee viewpoint Base earnings(40 X $25 $1,000 Overtime earnings(4 X $37.50) 150 Total earnings $1,150 Employer viewpoint Base earnings(44 X$25) $1,100 Overtime premium(4 X $12.50) 50 Total earnings $1,150 c108

C10 - 8 Base earnings (40 x $25) $1,000 Overtime earnings (4 x $37.50) 150 Total earnings $1,150 Base earnings (44 x$25) $1,100 Overtime premium (4 x $12.50) 50 Total earnings $1,150 Gross Pay Calculation John T. McGrath is employed by McDermott Supply Co. at the rate of $25 per hour, plus 1.5 times the normal hourly rate for hours over 40 per week. For the week ended December 27, McGrath worked 44 hours. Employee viewpoint: Employer viewpoint:

Gross Pay Calculation John T Mc Grath is em ployed by McDermott Supply Co at the rate of $25 per hour, plus 1.5 times the normal hourly rate for hours over 40 per week. For the week ended Decem ber 27. Mc Grath worked 44 hours Employee viewpoint Base earnings(40 x$25) $1,000 Overtime earnings(4 X $37.50) 150 Total earnings $1,150 Same total earnings but a Employer viewpoint Base earnings(44 X$25) $1,100 different view of the Overtime premium(4 X $12.50) 50 overtime Total earnings $1, 150hours c10-9

C10 - 9 Base earnings (40 x$25) $1,000 Overtime earnings (4 x $37.50) 150 Total earnings $1,150 Base earnings (44 x$25) $1,100 Overtime premium (4 x $12.50) 50 Total earnings $1,150 Gross Pay Calculation John T. McGrath is employed by McDermott Supply Co. at the rate of $25 per hour, plus 1.5 times the normal hourly rate for hours over 40 per week. For the week ended December 27, McGrath worked 44 hours. Same total earnings but a different view of the overtime hours Employee viewpoint: Employer viewpoint:

FICA Tax Calculation Assume that John T Mc Grath's annual earnings prior to the current period total $69, 150. The current period earnings are $1, 150 FICA tax calculation: Earnings subject to 6.0% social security tax ($70,000-$69,150) $850 Social security tax rate x6% Social security tax $5100 Earnings subject to 1.5%Medicare tax Current earnings $1,150 Medicare tax rate x1.5% Medicare tax 1725 Total fICa tax $6825 c1010

C10 - 10 ($70,000 - $69,150) $850 Social security tax rate x 6% Social security tax $51.00 Current earnings $1,150 Medicare tax rate x 1.5% Medicare tax 17.25 Total FICA tax $68.25 FICA Tax Calculation Assume that John T. McGrath’s annual earnings prior to the current period total $69,150. The current period earnings are $1,150. FICA tax calculation: Earnings subject to 6.0% social security tax Earnings subject to 1.5% Medicare tax