Quiz 10: Liabilities


(1) Calculate total cash payment for year 1: Consider interest payment for 3 quarters. img Calculate total cash payment for year 2: Consider interest payment for 1 quarter and principal amount. img

(a) Deposits: Interest bearing in the balance sheet of W.F. and Company represents the amounts on deposit of bank accounts. This liability arises from customers depositing money in these accounts and is discharged on maturity of deposit or premature withdrawal by customers. (b) Unexpired subscriptions in the balance sheet of the N.Y.T. Company represent advances from customers to receive newspaper for a particulars period. This liability is discharged by delivering newspapers to these customers for that particulars period. (c) Outstanding mutuel tickets in the balance sheet of The Hollywood Park Companies represent redeemable tickets arising from horses win races, and it is discharged by redeeming the winning tickets. (d) Sales return in the balance sheet of A Greetings represents the return of sales from customers. It is discharged by refunding the customers. (e) Current maturities of long term debt in the balance sheet of W. P. M. Company represent the current liability expected to be paid in a year's time. IT arose from long term debt representing current installment due. It will be discharged by paying of the installment. (f) Amounts received for future vacations in the balance sheet of C.M., Inc. represents the advances received from clients and is discharged by rendering services to the clients. (g) Accrued marketing and distribution in the balance sheet of A.C., Inc., represents the expenses that have not been paid. It is discharged as and when company makes payment. (h) Obligations for post retirement benefits in the balance sheet of G.M. represent represents post retirement benefits of employees and is discharged by paying off the benefits to the trust by the employer.

Liabilities: Liabilities maybe defined as debts or obligations arising from past transactions or events that require settlement at a future date. Characteristics that distinguish liabilities from owner's equity: 1) All liabilities eventually mature. Owner's equity does not mature. The date at which liabilities mature is called maturity date is called maturity date 2) The people to whom the business is liable to i.e, the creditors have financial claims against the business the owner's have right to control business operations. 3) The claims of creditors have legal priority over the claims of owner's.