# Consider the following situations and determine (1) which type of liability should be recognized (specific account), and (2) how much should be recognized in the current period (year). A. A business sets up a line of credit with a supplier. The company purchases $10,000 worth of equipment on credit. Terms of purchase are 5/10, n/30. B. A customer purchases a watering hose for$25. The sales tax rate is 5%. C. Customers pay in advance for season tickets to a soccer game. There are fourteen customers, each paying $250 per season ticket. Each customer purchased two season tickets. D. A company issues 2,000 shares of its common stock with a price per share of$15.

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### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685

#### Solutions

Chapter
Section
FindFindarrow_forward

### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 12, Problem 1PA
Textbook Problem
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## Consider the following situations and determine (1) which type of liability should be recognized (specific account), and (2) how much should be recognized in the current period (year).A. A business sets up a line of credit with a supplier. The company purchases $10,000 worth of equipment on credit. Terms of purchase are 5/10, n/30.B. A customer purchases a watering hose for$25. The sales tax rate is 5%.C. Customers pay in advance for season tickets to a soccer game. There are fourteen customers, each paying $250 per season ticket. Each customer purchased two season tickets.D. A company issues 2,000 shares of its common stock with a price per share of$15.

To determine

(a)

Introduction:

A current liability is a debt or obligation due during the operating period of the company. A company has normally one year of operating period. A non-current liability is a long-term obligation having a due date in subsequent period.

To state:

The type of current liability.

### Explanation of Solution

Identification of type of liability:

 Situation Type of liability Reason The company purchased an equipment of $10,000 on credit of 5/10, n/30. Current The term of purchase is less than a year. A customer purchase a watering hose of$25 and the tax rate is 5%. Current The payment is made within a year...
To determine

(b)

To compute:

The amount of liability.

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