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Flashcards in Liabilities & Contingencies Deck (13):
1

Define Current Liabilities

Liabilities that will be settled within 1 year or the Accounting Cycle, whichever is LONGER

2

Accrued Liab/Exp JE

Accrued Liab=exp incurred but not yet paid (unpaid salaries or taxes at period end)

DR Expense (IS)
CR Accrued Liab-Salaries Payable (BS)

DR Accrued Liab
CR Cash

3

Prepaid Exp JE

Prepaid Exp=exp paid in cash but not yet incurred, such as prepaid rent. PREPAID EXP is an ASSET

DR Prepaid Exp (Asset)
CR Cash

DR Expense (IS)
CR Prepaid Exp (Asset)

4

Deferred Revenue JE

Deferred Revenue=Collected but not yet Earned (Gift Certificates)

DR Cash
CR Unearned Rev (BS)

DR Unearned Rev (BS)
CR Revenue (IS)

5

Revenue Receivable JE

Revenue Receivable=Earned but not yet collected (Advances from customers)

DR A/R
CR Revenue (IS)

DR Cash
CR A/R

6

When to Disclose / Accrue LOSS Contingencies

LOSS CONTINGENCIES:
-DON'T Disclose=Remote
-DO Disclose=Reasonably Possible or Probable (doesn't have to be estimable to disclose)

-DON'T Accrue=Remote or Reasonably Possible or Not Estimable
-DO Accrue=Probable & Estimable

7

JE for accruing a probable & estimable Loss Contingency

DR Estimated Loss (IS)
CR Estimated Liability (BS)

8

When to Disclose/Accrue GAIN Contingencies

GAIN CONTINGENCIES:
-Disclose if Reasonably Possible or Proabable&Estimable
-Don't Disclose if Remote
-NEVER Accrue a Gain Contingency

9

When to Accrue a Compensated Absence (ASC 710)

ALL 4:
1. Payment is PROBABLE
2. Amount is ESTIMABLE
3. Services have been RENDERED
4. Rights either VEST or ACCUMULATE
(vest=get if quit; accumulate=carries over to next year)

10

Vacation Pay vs. Sick Pay Accrual

All 3 are met: Probable, Estimable, Rendered &
-VACATION=If Vests/Accumulates, ACCRUE
-SICK Pay VEST=Accrue
-SICK Pay ACCUMULATES (not vests)=No Accrual

11

Define Subsequent Events & 2 Types

=After BS Date but Before F/S Issue
**Condition Must Exist at BS Date to Accrue
**Always Disclose
--Type 1: Condition Exists at BS Date=Accrue & Disclose (Lawsuit it settled)
---Type 2: Condition did Not Exist at BS Date=Disclose Only, Do Not Accrue (Issue Bonds after YE or a Fire)

12

How are compensation costs for restricted stock grants amortized?

straight-line basis over the vesting period.

13

How is Compensation Expense calculated?

Compensation exp= FMV of Stock when GRANTED.
Divided by # Years in Vesting Period