Chapter 14, Problem 14.10BYP

(3)

To determine

Liability

Liability is an obligation of the business to pay to the creditors in future for the goods and services purchased on account or any for other financial benefit received. It can be current liability or a non-current liability depending upon the time period in which it is paid.

Notes payable

Notes Payable is a written promise to pay a certain amount on a future date, with certain percentage of interest. Companies use to issue notes payable to meet short-term financing needs.

Financial Accounting Standards Board (FASB)

FASB is an independent 7 member board, of accounting professionals overseeing the creation of financial statement. FASB standards are generally known as GAAP.

To Identify: The total debt reported in the balance sheet, and how that amount changed over the most recent two years.

(4)

To determine

To Compare: The total liabilities with the shareholders’ equity and calculate the debt equity ratio for the most recent two years.

(5)

To determine

Incorporation M obtain more financing through notes, bonds, or commercial paper. Are required debt payments increasing or decreasing over time; Is any short term debt classified as long term debt?

(6)

To determine

The criteria for reporting currently payable debt as long term and what is the specific codification citation that Incorporation M would rely on applying accounting treatment.