Current Portion of LongTerm Debt CPLTD Example below

Current Portion of Long-Term Debt (CPLTD) Example below – $10, 000 auto loan payable over 5 years principal due in equal installments each year CPLTD Definition - Amount of principal (out of total long-term debt) payable within one year (12 months) What are we doing… Recognize the portion of long-term debt that will be repaid over the next 12 months and classify it as “Current Portion LTD” to show decision-makers what is due in the coming year. ¡ Steps for recognizing CPLTD: l Initial Transaction ¡ ¡ ¡ 1 Record (debit) for what is received in the long-term loan – i. e. cash, equipment, auto Amount of principal due in the next 12 months is recorded into the CPLTD account (Credit). Amount of principal due after the next 12 months is recorded into the LTD account (Credit).

Current Portion of Long-Term Debt (CPLTD) Example below – $10, 000 auto loan payable over 5 years principal due in equal installments each year (Cont. ) Steps for recognizing CPLTD: ¡ l Second Year and later: ¡ l Step 2 – reset balance in CPLTD account. ¡ ¡ 2 Step 1: l When the principal balance is paid over the next 12 months, the CPLTD account is decreased (debited) and cash is credited. Credit amount of principal due in the next 12 months Debit LTD to reduce balance in this account.

Check-up… 1. If I have a balance of $10, 000 in the unearned revenue account and I provide the services to earn 50% of this balance, what journal entry do I record? 1. 2. 3. 4. Debit cash for $5, 000 and credit unearned revenue for $5, 000 cash for $10, 000 and credit unearned revenue for $10, 000 revenue for $5, 000 and credit unearned revenue for $5, 000 and credit revenue for $5, 000 2. I take out a $100, 000 loan (and I receive the cash) payable in equal installments (10% of principal each year) over the next 10 years. How do I record the initial transaction? 1. Debit Cash for ______, Credit CPLTD for ________, and Credit LTD for _______. 3. I make a $100 sale of merchandise and also collect an additional 10% in sales tax. How much revenue do I recognize for the sale? 1. 2. 3. 4. $100 $110 $90 None

Check-up’s 1. Auto Airbag issues – warranty or contingent loss? 2. Our company stocks and sells bicycle parts in the bicycle part vending machine in UCF’s student Union building. There is a $10 warranty claim 10 months after a part was purchased by a UCF student. We send out a new part to the student - how do we record this transaction? 1) Debit warranty expense 2) Debit warranty payable 3) Credit cash 4) Debit warranty expanse