chapter 9

CURRENT LIABILITIES, CONTINGENCIES, AND COMMITMENTS

LEARNING OBJECTIVES

After studying this chapter, you should be able to:

  1. Describe the recognition criteria and valuation methods for liabilities.
  2. Explain why accounts payable are sometimes thought of as “free debt.”
  3. Understand the issues in accounting for a company's payroll.
  4. Explain warranty obligations and how they are accounted for.
  5. Explain unearned revenues and describe situations where they must be recorded.
  6. Describe the nature of non-financial liabilities and provisions.
  7. Understand the concept of constructive obligations.
  8. Explain why companies use working capital loans and lines of credit.
  9. Calculate the amount of interest owed on various types of short-term notes payable.
  10. Explain why any portion of long-term debt that is due within a year is classified as a current liability.
  11. Calculate the accounts payable turnover rate and average payment period.
  12. Explain contingencies and how they are accounted for.
  13. Explain what commitments are and how they are handled.

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