1. 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: Initial Transaction  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). 1

2. 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: Second Year and later:  Step 1: When the principal balance is paid over the next 12 months, the CPLTD account is decreased (debited) and cash is credited. Step 2 – reset balance in CPLTD account.  Credit amount of principal due in the next 12 months  Debit LTD to reduce balance in this account. 2

3. 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. Debit cash for $5,000 and credit unearned revenue for $5,000 2. Debit cash for $10,000 and credit unearned revenue for $10,000 3. Debit revenue for $5,000 and credit unearned revenue for $5,000 4. Debit 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. $100 2. $110 3. $90 4. None

4. Check-up’s 1.VW diesel 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