大家好1COPYRIGHT?2008ThomsonSouth-Western,apartofTheThomsonCorporation.Thomson,theStarlogo,andSouth-Westernaretrademarksusedhereinunderlicense.2Chapter8CompletingtheOperatingCycleAlbrecht,Stice,Stice,SwainEmployeeCompensationPayrollRecognizetheexpense.FICAtaxesandFederalincomewithholdings.Withholdingthesetaxesforthegovernment.Theyshouldnotberecognizedasanexpenseofthecompany.EmployerpayrolltaxesEmployer’sportionofFICAtaxes.Federalandstateunemploymenttaxes.Addedtotaxespayabletothegovernment.3PayrollJournalEntriesSalariesExpense...................... 2,700 FICATaxesPayable,Employee....... 180 FederalWithholdingTaxesPayable... 486 StateWithholdingTaxesPayable..... 243 SalariesPayable................... 1723 Torecordemployees’salary.PayrollTaxExpense................... 278 FICATaxesPayable,Employer....... 180 FederalUnemploymentTaxesPayable. 30 StateUnemploymentTaxesPayable... 68 Torecordliabilitiesassociatedwithemployees’salary.4OtherEmployeeCompensationBonusesRecordedjustlikepayroll.Manytimestheyareearningsbased.Goodincentiveformanagementimprovementbutcanalsoprovideincentivestomanipulateearnings.CompensatedabsencesRecognizedastheemployeeearnstherighttotheseabsences.5OtherEmployeeCompensationStockoptionsFairvalueoftheoptionsarerecognizedovertheperiodtheoptionsareearned.PostemploymentbenefitsSeveranceorotherbenefits.Estimatedandaccruedintheperiodtheemployeesareterminated.6OtherCompensation

JournalEntriesSalariesExpense...................... 125 SickDaysPayable................... 125 Torecognizeaccruedsickpay.SickDaysPayable..................... 125 VariousTaxesPayables.............. 35 Cash.............................. 90 Torecordpaymentofsickdaynetof FICA,federal,and statetaxes.SalariesExpense...................... 150,000 VariousTaxesPayables.............. 60,000 BonusPayable..................... 90,000 Torecordbonusearnedbyemployees.7PensionsDefinedcontributionplanEmployercontributesspecificamounteveryyeartobepaidtoemployeeafterretirement.Employeereceiveswhatwascontributedplustheearnings.Theemployeebearstheriskofpoorreturns.DefinedbenefitplanEmployeereceivesamountdefinedintheplan.Usuallybasedonthenumberofyearsworked.Companysetsasidemoneytocovertheobligation,buttheriskofpoorreturnsremainswiththecompany.8PensionsPensionfundMoneysetasidetofulfillpensionobligation.PensionbenefitobligationEstimatedliabilityofretirementpayments.Pension-relatedinterestcostTheincreaseinthepensionobligationresultingfrominterestontheunpaidobligation.ServiceCostTheincreaseinthepensionobligationresultingfromanemployeeworkinganotheryear.ReturnonpensionfundassetsThereturnthecompanyearnsonitspensionfund.9PensionsPensionBenefitObligation–PensionFundAssets=NetPensionLiabilityInterestCost+ServiceCost–ExpectedReturnonFundAssets=PensionExpense10SalesTaxesCash............................. 357 SalesRevenue.................. 340 SalesTaxPayable............... 17 Fromsaleofsandwiches,including5%salestax.Example:Bonds’sBarbequesolda100sandwichesfor$340.Whatisthejournalentryassumingthestatechargesa5percentsalestax?Paidbycustomer,butcollectedbythecompanyforthegovernment.11PropertyTaxes12/31PropertyTaxExpense......... 6,200 PrepaidPropertyTaxes...... 6,200

Torecordpropertytaxexpensebyusingup prepaidpropertytaxes.Example:TheCityofRivertonassessespropertytaxesonlandandbuildings.Bond’sBarbequepaysitspropertytaxesonacalendar-yearbasisandpaidRiverton$6,200lastyearforthecurrentyear.MakeBond’sappropriatejournalentry.Assessedbycounty.Usuallypaidforayearinadvance.12IncomeTaxesExample:Bond’sBarbeque’spretaxincomeis$385,000.Itsincometaxratefortheyearforbothfederalandstateis30percent.Prepareanadjustingentryatyear-endshowingthecompany’staxexpense.12/31IncomeTaxExpense........ 115,500 IncomeTaxPayable....... 115,500

Torecordincometaxexpenseandtaxliabilityon $385,000pretaxincomeforyearusinga30 percenteffectivetaxrate.Basedoffincome.Maybedifferentfromactualtaxespaid.13DeferredTaxesOccurbecauseoftimingdifferencesinrevenueandexpenserecognitionaccordingtoGAAPrulesversusIRSrules.IncomeTaxExpense......... 120,000 IncomeTaxPayable....... 80,000 DeferredTaxLiability...... 40,000

Torecordincometaxexpenseanddeferredtax liabilityduetounrealizedgainsonmutualfunds. Example:Bond’sBarbeque’sowes$80,000intaxesonitsincome.Italsohasgainsonamutualfundthatwillnotbetaxeduntilthemutualfundissold.Thesetaxeswillbe$40,000.Prepareanentryshowingthecompany’staxexpense.14ContingenciesContingentLiabilitiesDependonsomefutureeventtodetermineifaliabilityactuallyexists.EnvironmentalLiabilitiesLiabilitydefinitelyexists,butmeasurementisdifficult.Minimumliabilityestablished.Extensivenotedisclosure.15

Probable Thefutureeventis Estimatetheamount likelytooccur. ofthecontingencyand maketheappropriate journal entry;provide detaileddisclosurein notes.Accountingfor

ContingentLiabilities

Term Definition AccountingPossible Thechanceofthefuture Providedetailed eventoccurringismore disclosureofthe thanremotebutlessthan possibleliabilityin likely. thenotes.Remote Thechanceofthefuture Nodisclosure eventoccurringisslight. required.16Capitalizevs.ExpenseResearchandDevelopmentExpendituresshouldbeexpensedwhenincurred.Uncertaintyoffuturebenefits.AdvertisingExpendituresshouldbeexpensedwhenincurred.Uncertaintyoffuturebenefits.Exceptionfortargetedmarketingtopreviouscustomers.17IncomeStatementRevisitedGrossMarginNetSalesminusCostofGoodsSold.OtherRevenuesandExpensesItemsearnedorincurredoutsideof,orperipheralto,thenormaloperationsofafirm.(i.e.dividendsreceivedfrominvestments)ExtraordinaryItemsNonoperatinggainsandlosses