# 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 depreciates a building with a book value of $12,000, using straight-line depreciation, no salvage value, and a remaining useful life of six years. B. An organization has a line of credit with a supplier. The company purchases$35,500 worth of inventory on credit. Terms of purchase are 3/20, n/60. C. An employee earns $1,000 in pay and the employer withholds$46 for federal income tax. D. A customer pays $4,000 in advance for legal services. The lawyer has previously recognized 30% of the services as revenue. The remainder is outstanding. FindFindarrow_forward ### 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 1PB Textbook Problem 1 views ## 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 depreciates a building with a book value of$12,000, using straight-line depreciation, no salvage value, and a remaining useful life of six years.B. An organization has a line of credit with a supplier. The company purchases $35,500 worth of inventory on credit. Terms of purchase are 3/20, n/60.C. An employee earns$1,000 in pay and the employer withholds $46 for federal income tax.D. A customer pays$4,000 in advance for legal services. The lawyer has previously recognized 30% of the services as revenue. The remainder is outstanding.

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 liability:

 Situation Type of liability Reason The depreciation charged using straight line basis on building with a book value of 12,000 having no salvage value and remaining life of six years. Non-current Life of an asset is more than a year; therefore, depreciation is recognized as non-current. The company purchases inventory worth \$35,500 on credit and terms are 3/20, n/60. Current Inventory is held for operating activities...
To determine

(b)

To compute:

The amount of liability

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