What is the theoretically correct way to value liabilities

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Problem - (Nature of Liabilities) Presented below is the current liabilities section of Micro Corporation.

 

($000)

 

2018

2017

Current liabilities Notes payable

$68,713

$7,700

Accounts payable

179,496

101,379

Compensation to employees

60,312

31,649

Accrued liabilities

158,198

77,621

Income taxes payable

10,486

26,491

Current maturities of long-term debt

16,592

6,649

Total current liabilities

$493,797

$251,489

Instructions- Answer the following questions.

(a) What are the essential characteristics that make an item a liability?

(b) How does one distinguish between a current liability and a long-term liability?

(c) What are accrued liabilities? Give three examples of accrued liabilities that Micro might have.

(d) What is the theoretically correct way to value liabilities? How are current liabilities usually valued?

(e) Why are notes payable reported first in the current liabilities section?

(f) What might be the items that comprise Micro's liability for "Compensation to employees"?

Reference no: EM132450292

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