Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 11: Q2RQ (page 603)

What is a current liability? Provide some examples of current liabilities.

Short Answer

Expert verified

Current liabilities are short-term liabilities that must discharge within a year. Current liabilities are significant because they restrict the firm's cash flow, making it crucial for the company to own sufficient liquid assets to support liquidity.

Step by step solution

01

Meaning of Current Liabilities

Current liabilities refer to an individual or business entity's short-term liability that must settle within a year.

02

Examples of current liabilities

Accounts payable, short-term debt,notes payableand unpaid taxesare a few examples of current obligations or current liabilities.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Question:Abernathy Electronics reported the following amounts on its 2018 income statement: Year Ended December 31, 2018 Net income $ 45,000 Income tax expense 6,750 Interest expense 3,750 What is Abernathy’s times-interest-earned ratio for 2018? (Round to two decimals.)

What are the three main characteristics of liabilities?

How might a business use a payroll register?

Logan White is general manager of Valuepoint Salons. During 2018, White worked for the company all year at a \(13,600 monthly salary. He also earned a year-end bonus equal to 15% of his annual salary.

White’s federal income tax withheld during 2018 was \)1,360 per month, plus \(4,876 on his bonus check. State income tax withheld came to \)150 per month, plus \(60 on the bonus. FICA tax was withheld on the annual earnings. White authorized the following payroll deductions: Charity Fund contribution of 1% of total earnings and life insurance of \)40 per month.

Valuepoint incurred payroll tax expense on White for FICA tax. The company also paid state unemployment tax and federal unemployment tax.

Requirements

1. Compute White’s gross pay, payroll deductions, and net pay for the full year 2018. Round all amounts to the nearest dollar.

2. Compute Valuepoint’s total 2018 payroll tax expense for White.

3. Make the journal entry to record Valuepoint’s expense for White’s total earnings for the year, his payroll deductions, and net pay. Debit Salaries Expense and Bonus Expense as appropriate. Credit liability accounts for the payroll deductions and Cash for net pay. An explanation is not required.

4. Make the journal entry to record the accrual of Valuepoint’s payroll tax expense for White’s total earnings.

5. Make the journal entry for the payment of the payroll withholdings and taxes.

Question: Recording employee and employer payroll taxes County Company had the following partially completed payroll register:

EarningsWithholdings

Beginning Cumulative Earnings

Current Period Earnings

Ending Cumulative Earnings

OASDI

Medicare

Income

tax

Health

Insurance

United

way

Total

Withholding

Net

pay

Check

No.

Salaries and Wages Expense

\( 77,000

\) 4,500

\( 900

\) 90

\(15

801

112,000

7,200

1,200

144

35

802

48,000

3,300

600

66

0

803

61,000

3,300

850

66

20

804

0

4,500

1,100

90

0

805

\)298,000

\(22,800

\)4,650

\(456

\)70

Requirements

  1. Complete the payroll register. Round to two decimals.
  2. Journalize County Company’s salaries and wages expense accrual for the current pay period.
  3. Journalize County Company’s expenses for employer payroll taxes for the current pay period.
  4. Journalize the payment to employees.
  5. Journalize the payment for withholdings and employer payroll taxes.
See all solutions

Recommended explanations on Business Studies Textbooks

Managerial Economics

Read Explanation

Managers

Read Explanation

Influences On Business

Read Explanation

Nature of Business

Read Explanation

Organizational Communication

Read Explanation

Introduction to Business

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free