Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

9. Current Liabilities

Types of Liabilities

Financial Accounting

9. Current Liabilities

Types of Liabilities

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Multiple Choice

The costs for legal, promotional, and accounting services to issue stock should be:

recorded as an expense in the period incurred

added to retained earnings

reported as a current liability

deducted from paid-in capital in excess of par value

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Verified step by step guidance

Understand the nature of the costs: Legal, promotional, and accounting services related to issuing stock are considered part of the costs incurred to raise capital. These are not operating expenses but are directly tied to the issuance of stock.

Recognize the accounting treatment: These costs are not recorded as an expense in the period incurred because they are not related to the company's operations. Instead, they are treated as a reduction in the equity raised.

Determine the correct account: These costs are deducted from 'Paid-in Capital in Excess of Par Value,' which is the account representing the additional amount investors pay over the par value of the stock.

Understand why other options are incorrect: These costs are not added to retained earnings because retained earnings represent accumulated profits, not costs. They are also not reported as a current liability because they are not obligations to be paid in the future but are already incurred.

Apply the accounting entry: When recording these costs, debit the appropriate expense account (e.g., 'Stock Issuance Costs') and credit 'Paid-in Capital in Excess of Par Value' to reflect the reduction in equity raised due to these costs.