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Current Liabilities and Contingencies

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ACCT 2015 INTERMEDIATE FNANCIAL ACCOUNTING 11
Current Liabilities, Contingencies & Provisions
Required Reading: Alfredson – Chap 5, Keiso – Chaps 13, IAS 37

Learning Objectives
1. CURRENT LIABILITIES:
– Define and explain types of current liabilities. – Account for the major types

2. IAS 37 PROVISIONS & CONTINGENCIES
– Define Provisions and answer the following questions:
• • • Why do them When to provide How much to provide

– Calculate and account for Restructuring Provisions – Define Contingent Assets & Liabilities and apply relevant measurement and recognition rules – Apply IAS 37 Disclosure Requirements

CURRENT LIABILITIES
LIABILITY – Claims against the business arising out of a past transaction that will cause an outflow of resources e.g. loans, notes payable


Long-Term Liability - Obligations that a company does not reasonably expect to liquidate within the normal operating cycle Current Liability - Obligations that a company reasonably expects to liquidate either through the use of current assets or the creation of other current liabilities.



1

CURRENT LIABILITIES
E13-2 (Accounts and Notes Payable) The following are selected 2007 transactions of Sean Astin Corporation. Sept. 1 - Purchased inventory from Encino Company on account for $50,000. Astin records purchases gross and uses a periodic inventory system. Oct. 1 - Issued a $50,000, 12-month, 8% note to Encino in payment of account. Oct. 1 - Borrowed $50,000 from the Shore Bank by signing a 12-month, zero-interest-bearing $54,000 note.

CURRENT LIABILITIES
Sept. 1 - Purchased inventory from Encino Company on account for $50,000. Astin records purchases gross and uses a periodic inventory system.
Sept. 1

Purchases Accounts payable

50,000 50,000

CURRENT LIABILITIES
Oct. 1 - Issued a $50,000, 12-month, 8% note to Encino in payment of account.
Oct. 1

Accounts…...

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