F4 - Payables and Accrued Liabilities

Question 1

The calendar-year company is closing its three-month period ended March 31. Each employee’s gross pay is $100 per day, and no employee has taken any vacation time as of March 31. What amount should be accrued for vacation pay for the three-month period ended March 31?

Years of Services:
1-5 years = 6 days
6-10 years = 12 days
11+ years = 18 days

Employees:
A - 1 year of service
B - 6 year of service
C - 12 years of service

Answer 1

• Step 1: Multiply days times a 100 to get the annual expense for vacation pay for the 3 employees
• Step 2: Multiply (3/12) because we are only accruing for 3 months not the whole year or Add the vacation pay then divide by 4 quarters
• Answer is $900

Question 2

Rule: Employees’ compensation for future absences should be accrued if:

Answer 2

1. Services are already rendered
   2.The amount can be reasonably estimated
   3.The obligation relates to vested or accumulated rights
   4.Payment of the compensation is probable.

Question 3

Gross method JE (we take discount consideration after they pay):

Answer 3

Beg entry
DR-Inv
CR -AP
Paid entry
DR -AP
CR-Cash
CR - Purchase discount

Question 4

Net method JE (we take discount consideration first entry):

Answer 4

DR - INVENTORY(discount amount )
CR - AP (discount amount)
when paid:
DR - AP (discount)
CR - CASH(discount amount)

Question 5

Accrued legal fees JE:

Answer 5

DR-LEGA EXPENSE
CR - ACCRUED LEGAL
when paid JE:
DR -ACCRUED LEGAL
CR - CASH

Question 6

Buzz words to look our for determining if note payable will use FACE VALUE(stated rate) NO multiplication:

Answer 6

• customary
• ordinary
• usual
  (usually short term note pay)
• same amount as it was issued !!!!!!!! so no INT!!!

Question 7

When do we use imputed interest rate for note payables?

Answer 7

• non interest bearing notes
• stated rate is below mkt rate(like abond discount)
• NEVER FUTURE VALUE

Question 8

How to determine ordinary annuity(used mostly)?

Answer 8

• payments made at the END of the period

Question 9

How to determine annuity DUE= annuity advanced?

Answer 9

• multiple payments (keyword)
• when the payment is made at the begining of the period

Question 10

PV/FV of $1 are classified by:

Answer 10

lump sums

Question 11

How to determine if we an annuity?

Answer 11

• installement pmts

Question 12

Annual Installment calculations

Answer 12

=total amt to reach / fv factor

Question 13

Calculate future value (cash accumulate in x amount of year):

Answer 13

Investment today / present value factor.(of the period)

Question 14

Note payable interest formula (PRT)?
and
What will we do with this number?

Answer 14

Principal x Rate x Time(month/12)

we will deduct from the payment they made to only show the principal amount that needs to be deducted to the principal

Question 15

What we record on the b/s or as net current portion (long term)?

Answer 15

record the present value of loan

Question 16

Cost of equipment acquire formula:

Answer 16

+Note issued
-discount on note
+cash paid

Question 17

Calculate current liability for year 2:

Answer 17

1. step 1 : find out current balance after any payments without interest
2. step 2: calcualte interest by the current principal x rate x time when ( is left to accrue after the paymnet so october -dec 3/12)
3. step 3: add to the current payment + accrued interest