FUND.ACCT.PRINC.(LL) 25E <C> W/ CONNECT
FUND.ACCT.PRINC.(LL) 25E <C> W/ CONNECT
25th Edition
ISBN: 9781307692587
Author: Wild
Publisher: MCG/CREATE
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Chapter 11, Problem 1QS
To determine

Concept Introduction

Current Liabilities:

Current Liabilities are the debts or economic obligations that a company owes to its creditors and that have to be settled within one year or within its operating cycle, whichever period is longer.

Operating Cycle:

An operating cycle represents the average period of time that a company takes to acquire inventory, sell the inventory and collect cash from its customers for the inventory sold to them.

To Find:

The items that are normally classified as current liabilities for a company that has a 15-month operating cycle from the options given in the question.

Given Info:

The following items are given for classifying current liabilities (and non-current liabilities) for a company that has a 15-month operating cycle:

  1. Portion of long-term note due in 15 months.
  2. Note payable maturing in 2 years.
  3. Note payable due in 18 months.
  4. Note payable due in 11 months.
  5. FICA taxes payable.
  6. Salaries payable.

Expert Solution & Answer
Check Mark

Answer to Problem 1QS

Solution:

The following items are normally classified as current liabilities for a company that has a 15-month operating cycle:

  1. Portion of long-term note due in 15 months.
  2. Note Payable due in 11 months.
  3. FICA taxes payable.
  4. Salaries payable.

The remaining items that are 'Note Payable maturing in 2 years' and 'Note Payable due in 18 months' are considered as non-current liabilities for a company that has a 15-month operating cycle.

Explanation of Solution

The classification of current and non-current liabilities for a company that has a 15-month operating cycle is explained as follows:

  1. Portion of long-term note due in 15 months- This is a current liability because the portion of long-term note is getting due in 15 months which is within the company's 15-month operating cycle.
  2. Note payable maturing in 2 years- This is not a current liability because note payable is maturing in 2 years and this is not within the company's 15-month operating cycle.
  3. Note payable due in 18 months- This is not a current liability because note payable is getting due in 18 months and this is not within the company's 15-month operating cycle.
  4. Note payable due in 11 months- This is a current liability because the note payable is getting due in 11 months which is within the company's 15-month operating cycle.
  5. FICA taxes payable- FICA taxes payable is a current liability because a company has to pay FICA taxes to the federal government within few days i.e. within one year or within its operating cycle.
  6. Salaries payable- Salaries payable is a current liability because salaries are typically payable by the company in less than one year.
Conclusion

A company's current liabilities have to be settled within one year or within its operating cycle, whichever period is longer. Therefore, a company that has a 15-month operating cycle should consider those items as current liabilities that have to be settled within 15 months.

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Chapter 11 Solutions

FUND.ACCT.PRINC.(LL) 25E <C> W/ CONNECT

Ch. 11 - Prob. 11QSCh. 11 - Prob. 12QSCh. 11 - Prob. 13QSCh. 11 - Prob. 14QSCh. 11 - Prob. 15QSCh. 11 - Prob. 16QSCh. 11 - Prob. 17QSCh. 11 - Prob. 18QSCh. 11 - Prob. 19QSCh. 11 - Prob. 20QSCh. 11 - Exercise 11-1 Classifying liabilities C1 The...Ch. 11 - Prob. 2ECh. 11 - Prob. 3ECh. 11 - Exercise 11-3 Accounting for note payable...Ch. 11 - Exercise 11-4 Interest-bearing notes payable with...Ch. 11 - Exercise 11-5 Computing payroll taxes P2 P3 BMX...Ch. 11 - Exercise 11-7 Payroll-related journal entries...Ch. 11 - Exercise 11-6 Payroll-related journal entries...Ch. 11 - Exercise 11-9 Computing payroll taxes P2 P3 Mest...Ch. 11 - Prob. 10ECh. 11 - Prob. 11ECh. 11 - Prob. 12ECh. 11 - Prob. 13ECh. 11 - Prob. 14ECh. 11 - Prob. 15ECh. 11 - Prob. 16ECh. 11 - Prob. 17ECh. 11 - Prob. 18ECh. 11 - Prob. 19ECh. 11 - Prob. 20ECh. 11 - Prob. 21ECh. 11 - Prob. 22ECh. 11 - Problem 11-1A Short-term notes payable...Ch. 11 - Problem 11-2A Entries for payroll transactions P2...Ch. 11 - Problem 11-3A Payroll expenses, withholdings, and...Ch. 11 - Prob. 4PSACh. 11 - Prob. 5PSACh. 11 - Prob. 6PSACh. 11 - Problem 11-1B Short-term notes payable...Ch. 11 - Problem 11-2B Entries for payroll transactions P2...Ch. 11 - Problem 11-3B Payroll expenses, withholdings, and...Ch. 11 - Prob. 4PSBCh. 11 - Prob. 5PSBCh. 11 - Prob. 6PSBCh. 11 - Review the February 26 and March 25 transactions...Ch. 11 - Bug-Off Exterminators provides pest control...Ch. 11 - Prob. 1GLPCh. 11 - Prob. 1AACh. 11 - Key figures for Apple and Google follow. Apple...Ch. 11 - Prob. 3AACh. 11 - Prob. 1DQCh. 11 - Prob. 2DQCh. 11 - Prob. 3DQCh. 11 - Prob. 4DQCh. 11 - Prob. 5DQCh. 11 - Prob. 6DQCh. 11 - Prob. 7DQCh. 11 - Prob. 8DQCh. 11 - Prob. 9DQCh. 11 - Prob. 10DQCh. 11 - Prob. 11DQCh. 11 - Prob. 12DQCh. 11 - BTN 11-3 Cameron Bly is a sales manager for an...Ch. 11 - Prob. 2BTNCh. 11 - Prob. 3BTNCh. 11 - Prob. 4BTNCh. 11 - Prob. 5BTN
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