Quản trị Kinh doanh - Chapter 11: Current liabilities and payroll accounting

Current Liabilities and Payroll AccountingChapter 11PowerPoint Editor: Beth Kane, MBA, CPACopyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 11-C1: Defining Liabilities 2Defining LiabilitiesC 13Classifying LiabilitiesExpected to be paid within one year or the company’s operating cycle, whichever is longer.Current LiabilitiesNot expected to be paid within one year or the company’s operating cycle, whichever is longer.Long-Term LiabilitiesC 14Current and Long-TermLiabilitiesCurrent Liabilities as a Percent of Total LiabilitiesC 15Uncertainty of LiabilitiesUncertainty in When to PayC 1Uncertainty in Whom to PayUncertainty in How Much to Pay6 11-C2: Known Liabilities 7Accounts PayableSales Taxes PayableUnearned RevenuesShort-Term Notes PayableKnown LiabilitiesPayroll LiabilitiesMulti-Period Known LiabilitiesC 28On August 31, Home Depot sold materials for $6,000 that are subject to a 5% sales tax.Sales Tax PayableC 2$6,000 × 5% = $3009On June 30, Rihanna sells $5,000,000 in tickets for eight concerts.Unearned RevenuesC 2On Oct. 31, Rihanna performs a concert.$5,000,000 / 8 = $625,00010Multi-Period KnownLiabilitiesIncludes Unearned Revenues and Notes PayableUnearned Revenues from magazine subscriptions often cover more than one accounting period. A portion of the earned revenue is recognized each period and the Unearned Revenue account is reduced.Notes Payable often extend over more than one accounting period. A three-year note would be classified as a current liability for one year and a long-term liability for two years.C 211 11-P1: Short-Term Notes Payable 12A written promise to pay a specified amount on a definite future date within one year or the company’s operating cycle, whichever is longer.Short-Term Notes PayableP 113On August 23, Brady Company asks McGraw to accept $100 cash and a 60-day, 12% $500 note to replace its existing $600 Account Payable. Note Given to ExtendCredit PeriodP 114On October 22, Brady pays the note plus interest to McGraw. Note Given to ExtendCredit PeriodP 1Interest expense = $500 × 12% × (60 ÷ 360) = $1015Note Given To Borrow From BankP 116Note Given To Borrow From BankOn Sept. 30, a company borrows $2,000 from a bank at 12% interest for 60 days. P 1On Nov. 29, the company repays the principal of the note plus interest. Interest expense = $2,000 × 12% × (60 ÷ 360) = $4017Note DateEnd of PeriodMaturity DateAn adjusting entry is required to record Interest Expense incurred to date.End-of-Period Adjustmentto NotesP 118End-of-Period Adjustmentto NotesP 1On Dec. 16, 2015, a company borrows $2,000 from a bank at 12% interest for 60 days. An adjusting entry is needed on December 31. On Feb. 14, 2014, the company repays this principal and interest on the note. 19NEED-TO-KNOWDebitCreditJun. 30Cash535Sales500Sales taxes payable($500 x .07)35Jun. 30Cost of goods sold300Merchandise inventory300Jul. 15Sales taxes payable35Cash35General JournalPart 1. A retailer sells merchandise for $500 cash on June 30 (cost of merchandise is $300). The sales tax law requires the retailer to collect 7% sales tax on every dollar of merchandise sold. Record the entry for the $500 sale and its applicable sales tax. Also record the entry that shows the remittance of the 7% tax on this sale to the state government on July 15.P 120NEED-TO-KNOWDebitCreditApr. 30Cash40,000Unearned ticket revenue40,000May 15Unearned ticket revenue$40,000 / 4 concerts10,000Earned ticket revenue10,000General JournalPart 2. A ticket agency receives $40,000 cash in advance ticket sales for a four-date tour of Haim. Record the advance ticket sales on April 30. Record the revenue earned for the first concert date of May 15, assuming it represents one-fourth of the advance ticket sales.P 121NEED-TO-KNOWDebitCreditNov. 25Cash8,000Notes payable8,000Dec. 31Interest expense($8,000 x .05 x 36/360)40Interest payable40Feb. 23Interest expense($8,000 x .05 x 54/360)60Interest payable($8,000 x .05 x 36/360)40Notes payable8,000Cash8,100Part 3. On November 25 of the current year, a company borrows $8,000 cash by signing a 90-day, 5% note payable with a face value of $8,000. (a) Compute the accrued interest payable on December 31 of the current year, (b) prepare the journal entry to record the accrued interest expense at December 31 of the current year, and (c) prepare the journal entry to record payment of the note at maturity.General Journal36 days54daysP 122 11-P2: Payroll Liabilities 23Payroll Liabilities Employers incur expenses andliabilities from having employees.P 224Employee Payroll DeductionsP 225Employers must pay withheld taxes tothe Internal Revenue Service (IRS).FICA Taxes — Soc. Sec.2014: 6.2% of the first $117,000 earned in the year.Employee FICA TaxesFederal Insurance Contributions Act (FICA)FICA Taxes — Medicare2014: 1.45% of all wages earned in the year.P 226Amounts withheld depend on the employee’s earnings, tax rates, and number of withholding allowances.Employers must pay the taxes withheld from employees’ gross pay to the appropriate government agency.Federal Income TaxEmployee Income TaxState and Local Income TaxesP 227Amounts withheld depend on the employee’s request.Employers owe voluntary amounts withheld from employees’ gross pay to the designated agency.Examples include union dues, savings accounts, pension contributions, insurance premiums, and charities.Employee Voluntary DeductionsP 228An entry to record payroll expenses and deductions for an employee might look like this.Recording Employee Payroll DeductionsP 2*Amounts taken from employee’s employment records29 11-P3: Payroll Expenses 30Employers pay amounts equal to that withheld from the employee’s gross pay.Employer Payroll TaxesFICA TaxesFederal and State Unemployment TaxesMedicare TaxesP 3312014: 6.2% on the first $7,000 of wages paid to each employee. A credit up to 5.4% is given for SUTA paid, therefore the net rate is 0.6%. Federal Unemployment Tax (FUTA)2014: Basic rate of 5.4% on the first $7,000 of wages paid to each employee. Merit ratings may lower SUTA rates.State Unemployment Tax (SUTA)Federal and StateUnemployment TaxesP 332An entry to record the employer payroll taxes for January might look like this.FICA amounts are the same as that withheld from the employee’s gross pay.Recording EmployerPayroll TaxesP 3SUTA: $2,000 x 5.4% = $108FUTA: $2,000 x (0.6) = 1233NEED-TO-KNOWDebitCreditJan. 8Sales salaries expense30,000Office salaries expense20,000FICA - Social security taxes payable($50,000 x .062)3,100FICA - Medicare taxes payable($50,000 x .0145)725Employee federal income taxes payable9,000Employee medical insurance payable2,000Employee pensions payable1,000Salaries payable34,175Part 1) Compute FICA Social Security taxes payable and FICA Medicare taxes payable. Prepare the journal entry to record the company’s January 8 (employee) payroll expenses and liabilities.General JournalA company’s first weekly pay period of the year ends on January 8. On that date, the column totals in its payroll register show that sales employees earned $30,000, and office employees earned $20,000 in salaries. The employees are to have withheld from their salaries FICA Social Security taxes at the rate of 6.2%, FICA Medicare taxes at the rate of 1.45%, $9,000 of federal income taxes, $2,000 of medical insurance deductions, and $1,000 of pension contributions. No employee earned more than $7,000 in the first pay period.P2/P 334NEED-TO-KNOWDebitCreditJan. 8Sales salaries expense30,000Office salaries expense20,000FICA - Social security taxes payable($50,000 x .062)3,100FICA - Medicare taxes payable($50,000 x .0145)725Employee federal income taxes payable9,000Employee medical insurance payable2,000Employee pensions payable1,000Salaries payable34,175Jan. 8Payroll taxes expense5,825FICA - Social security taxes payable($50,000 x .062)3,100FICA - Medicare taxes payable($50,000 x .0145)725SUTA - State unemployment taxes payable($50,000 x .034)1,700FUTA - Federal unemployment taxes payable($50,000 x .006)300General JournalPart 2) Prepare the journal entry to record the company’s (employer) payroll taxes resulting from the January 8 payroll. Its merit rating reduces its state unemployment tax rate to 3.4% of the first $7,000 paid to each employee. The federal unemployment tax rate is 0.6%. 35P2/P3 11-P4: Estimated Liabilities 36Estimated Liabilities An estimated liability is a known obligation of an uncertain amount, but one that can be reasonably estimated.P 437Employer expenses for pensions or medical,dental, life, and disability insuranceHealth and Pension BenefitsAssume an employer agrees to pay an amount for medical insurance equal to $8,000, and contribute an additional 10% of the employees’ $120,000 gross salary to a retirement program.P 438Vacation BenefitsAssume an employee earns $20,800 per year and earns two weeks of paid vacation each year.$20,800 ÷ 50 weeks = $416$20,800 ÷ 52 weeks = $400Weekly vacation benefit$ 16P 439Bonus PlansP 4B = .05 ($210,000 - B)B = $10,500 - 0.05B1.05B = $10,500B = $10,500 / 1.05 *B = $10,000Assume that a bonus will be paid to employees equal to 5% of the company’s annual net income of $210,000.40Warranty LiabilitiesSeller’s obligation to replace or correct a product (or service) that fails to perform as expected within a specified period. To comply with the full disclosure and matching principles, the seller reports expected warranty expense in the period when revenue from the sale is reported.P 441Warranty LiabilitiesP 4On Dec. 1, 2015, a dealer sells a car for $16,000 with a maximum one-year or 12,000 mile warranty covering parts. Past experience indicates warranty expenses average 4% of a car’s selling price. On Jan. 9, 2016, the customer returns the car for repairs. The dealer replaces parts costing $200. 42 11-C3: Contingent Liabilities 43Accounting forContingent LiabilitiesC 344Reasonably PossibleContingent LiabilitiesPotential Legal Claims – A potential claim is recorded if the amount can be reasonably estimated and payment for damages is probable.Debt Guarantees – The guarantor usually discloses the guarantee in its financial statement notes. If it is probable that the debtor will default, the guarantor should record and report the guarantee as a liability.C 345NEED-TO-KNOWDebitCreditWeeklyVacation benefits expense($4,160 - $4,000)160Vacation benefits payable160A company’s salaried employees earn two weeks vacation per year. It pays $208,000 in total employee salaries for 52 weeks but its employees work only 50 weeks. This means its total weekly expense is $4,160 ($208,000 / 50 weeks) instead of the $4,000 cash paid weekly to the employees($208,000 / 52 weeks). Record the company’s regular weekly vacation benefits expense.General JournalExpense recognition principleExpense is recognized in the same period as the revenue it helped generate.P4/C346NEED-TO-KNOWB =.05($840,000 - B)B =$42,000 - .05B1.05 B =$42,000 B =$40,000 DebitCreditDec. 31Employee bonus expense40,000Bonus payable40,000Jan. 20Bonus payable40,000Cash40,000For the current year ended December 31, a company has implemented an employee bonus program equal to 5% of its net income, which employees will share equally. Its net income (pre-bonus) is expected to be $840,000, and bonus expense is deducted in computing net income. (a) Compute the bonus payable to the employees at year-end using the method described in the chapter and round to the nearest dollar; then, prepare the journal entry at December 31 of the current year to record the bonus due. (b) Prepare the journal entry at January 20 of the following year to record payment of that bonus to employees.General JournalExpense recognition principleExpense is recognized in the same period as the revenue it helped generate.47P4/C3NEED-TO-KNOWDebitCreditJun. 11Cash400Sales400Jun. 11Warranty expense($400 x .05)20Estimated warranty liability20Mar. 24Estimated warranty liability15Repair parts inventory15On June 11 of the current year, a retailer sells a trimmer for $400 with a one-year warranty that covers parts. Warranty expense is estimated at 5% of sales. On March 24 of the next year, the trimmer is brought in for repairs covered under the warranty requiring $15 in materials taken from the Repair Parts Inventory. Prepare the (a) June 11 entry to record the trimmer sale, and (b) March 24 entry to record warranty repairs.General JournalExpense recognition principleExpense is recognized in the same period as the revenue it helped generate.48P4/C3NEED-TO-KNOW(ii) Is reasonably estimated but not a probable loss.(ii) Probable loss but cannot be reasonably estimated.DebitCredit(i)Environmental contingent expense900,000Environmental contingent liability900,000General JournalThe following legal claims exist for a company. Identify the accounting treatment for each claimas either (i) a liability that is recorded or (ii) an item described in notes to its financial statements. If anitem is to be recorded, prepare the entry.a. The company (defendant) estimates that a pending lawsuit could result in damages of $500,000; it is reasonably possible that the plaintiff will win the case.b. The company faces a probable loss on a pending lawsuit; the amount is not reasonably estimable.c. The company estimates environmental damages in a pending case at $900,000 with a high probability of losing the case.For a contingent liability to be recorded, the loss must be both probable and reasonably estimable.49P4/C3Global ViewCharacteristics of LiabilitiesAccounting definitions and characteristics of current liabilities are similar for U.S. GAAP and IFRS. Sometimes IFRS will use the word “provision” to refer to a “liability.” Known (Determinable) LiabilitiesBoth U.S. GAAP and IFRS require companies to treat known (or determinable) liabilities in a similar manner. Examples would be accounts payable, unearned revenues, and payroll liabilities. Estimated LiabilitiesRegarding estimated liabilities, when a known current obligation that involves an uncertain amount, but one that can be reasonably estimated, both U.S. GAAP and IFRS require similar treatment. 50 11-A1: Times Interest Earned Ratio 51If income before interest and taxes varies greatly from year to year, fixed interest charges can increase the risk that an owner will not earn a positive return and be unable to pay interest charges.Times Interest EarnedTimes interestearnedIncome before interestand income taxesInterest expense=A 152 11-P5: Payroll Reports, Records, and Procedures 53Appendix 11A: PayrollReports, Records, and ProceduresP 5Payroll ReportsIRS Form 941IRS Form 940W-2Payroll RecordsPayroll RegisterPayroll ChecksEmployee Earnings ReportPayroll ProceduresWithholding TablesW-454Appendix 11B: Corporate Income TaxesCorporations must pay taxes on income. Deferred Income Tax Liabilities 55End of Chapter 1156