1. Blueprint Problem: Current Liabilities

1. Blueprint Problem: Current Liabilities Current Liabilities Current liabilities are those liabilities that are due within S or one operating cycle, whichever is S. Current liabilities are Indicate whether each item listed in the following table would be listed as a current liability or not a current liability. Assume that the company’s operating cycle is eight months. 1. Accounts payable S 2. Accrued interest on a note payable that will be paid in 30.0 days S 3. Portion of mortgage payable that is due in the next year S 4. Portion of mortgage that is due more than one year from now :I 5. Salaries payable S 6. Medicare taxes payable S + What’s accrued interest? Notes Payable A note payable is like an ICU. The maker of the note signs a contract (the note) stating that it will repay the payee the principal of the note plus interest on the maturity date. In order to be classi?ed as a current liability, a note payable must have a maturity date of less than one year in the future. On the maturity date, the maker of the note must pay the payee the maturity value of the note. When an interest—bearing note payable is signed, the maker of the note must record the note as S in liabilities in an amount equal to the S of the note. At the end of the ?scal period, the maker of the note must record accrued interest incurred on the note. The entry to record accrued interest includes a debit to S and a credit to E. On the maturity date, the maturity value of the note is paid to the payee.