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Flashcards in chapter nine notes Deck (38)
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1

current liability

maturity of 1 year or less

2

non-current liability

maturity of more than a year

3

debt is considered ______ than equity

RISKIER

4

what is a legal obligation that must be repaid?

interest

5

how are liabilities measured?

at their current cash equivalent (what the creditor would accept to cancel the debt immediately)

6

working capital

current asset-current liability

7

current ratio

current asset/current liability

8

current liabilities expected to be paid...

1. using a current asset (usually cash)
2. within one year or operating cycle (WHICHEVER IS LONGER)

9

accounts payable

trade accounts payable

10

accrued liabilities

wages payable
sales taxes payable
payroll taxes payable
interest payable

11

unearned revenue

deferred revenues

12

current maturities of long term debt

portion of long term debt that will be due within next year should be classified as current liability

13

estimated (CONTINGENT) liabilities

based upon the probability of something

14

record contingent liabilitiies

probable and estimated

15

contingent liabilities (add to footnotes)

probable and cannot be estimated (50/50 chance)

16

do nothing

remote

17

if a liability is a lawsuit, warranty, or a guarantee it is...

probable and can be estimated RECORD

18

what is the entry to record a contingent liability

(dr)expense xxx
(cr)estimated liability xxx

19

interest bearing note

principle and interest due at maturity

20

to record issuance of an interest bearing note

(dr)cash xxx
(cr)note payable xxx

21

to record payment at maturity of an interest bearing note

(dr)notes payable xxx
(dr)interest expense xxx
(cr)cash xxx

22

effective interest rate

interest expense/cash proceeds

23

non-interest bearing note

interest is deducted in advance

24

what implies that a note is non-interest bearing?

implied/implicit interest rate
discounted

25

to record issuance of a non-interest bearing note

(dr)cash xxx
(dr)discount on note payable xxx
(cr)note payable xxx

26

to record payment at maturity of a non-interest bearing note

(dr)interest expense xxx
(cr)discount note payable xxx

(dr)note payable xxx
(cr)cash xxx

27

what is the carrying value of a note?

the actual amount that you owe

28

discount on note payable

contra liability account (represents eventual interest expense)

29

simple interest

interest accrued over time on the principle only

30

compound interest

principle + accumulated interest earns/incurs interest in future