TheNatureofLiabilities英文版10728.ppt

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1、?The McGraw-Hill Companies,Inc.,1999Slide 10-1Irwin/McGraw-HillChapter 10Liabilities?The McGraw-Hill Companies,Inc.,1999Slide 10-2Irwin/McGraw-HillThe Nature of LiabilitiesI.O.U.Defined as debts or obligations arising from past transactions or events.Maturity=1 year or lessMaturity 1 yearCurrent Lia

2、bilitiesNoncurrent Liabilities?The McGraw-Hill Companies,Inc.,1999Slide 10-3Irwin/McGraw-HillDistinction Between Debt and EquityThe acquisition of assets is financed from two sources:Funds from creditors,with a definite due date,and sometimes bearing interest.Funds from ownersDEBTEQUITY?The McGraw-H

3、ill Companies,Inc.,1999Slide 10-4Irwin/McGraw-HillLiabilitiesQuestionDevon Mfg.borrows$100,000 from First Bank.The loan will be repaid in 20 years and has an annual interest rate of 8%.Is this a current liability or a noncurrent liability?The McGraw-Hill Companies,Inc.,1999Slide 10-5Irwin/McGraw-Hil

4、lLiabilitiesQuestionThe obligation will not be paid within one year or one operating cycle,so it is a noncurrent liability.Devon Mfg.borrows$100,000 from First Bank.The loan will be repaid in 20 years and has an annual interest rate of 8%.Is this a current liability or a noncurrent liability?The McG

5、raw-Hill Companies,Inc.,1999Slide 10-6Irwin/McGraw-HillEvaluating LiquidityCurrent Ratio=Current Assets?Current LiabilitiesWorking Capital=Current Assets-Current LiabilitiesAn important indicator of a company抯抯 ability to meet its current obligations.Two commonly used measures:?The McGraw-Hill Compa

6、nies,Inc.,1999Slide 10-7Irwin/McGraw-HillLiabilitiesQuestionDevon Mfg.has current liabilities of$230,000 and current assets of$322,000.What is Devons current ratio?The McGraw-Hill Companies,Inc.,1999Slide 10-8Irwin/McGraw-HillLiabilitiesQuestionDevon Mfg.has current liabilities of$230,000 and curren

7、t assets of$322,000.What is Devons current ratio?The McGraw-Hill Companies,Inc.,1999Slide 10-9Irwin/McGraw-HillAccounts PayableShort-term obligations to suppliers for purchases of merchandise and to others for goods and services.Merchandise Inventory invoicesShipping chargesUtility and phone billsOf

8、fice supplies invoices?The McGraw-Hill Companies,Inc.,1999Slide 10-10Irwin/McGraw-HillNotes PayableCurrent Notes PayableNoncurrent Notes PayableTotal Notes PayableWhen a company borrows money,a note payable is created.Current Portion of Notes PayableThe portion of a note payable that is due within o

9、ne year,or one operating cycle,whichever is longer.?The McGraw-Hill Companies,Inc.,1999Slide 10-11Irwin/McGraw-HillNotes PayablePROMISSORY NOTE Location Date after this date promises to pay to the order of the sum of with interest at the rateof per annum.signedtitleMiami,FlNov.1,1999Six monthsPorter

10、 CompanyJohn CaldwellJohn CaldwellSecurity National Bank$10,000.0012.0%treasurer?The McGraw-Hill Companies,Inc.,1999Slide 10-12Irwin/McGraw-HillNotes PayableOn November 1,1999,Porter Company would make the following entry.?The McGraw-Hill Companies,Inc.,1999Slide 10-13Irwin/McGraw-HillInterest expen

11、se is the compensation to the lender for giving up the use of money for a period of time.The liability is called interest payable.To the lender,interest is a revenue.To the borrower,interest is an expense.Interest Rate Up!Interest Payable?The McGraw-Hill Companies,Inc.,1999Slide 10-14Irwin/McGraw-Hi

12、llThe interest formula includes three variables that must be considered when computing interest:Interest =Principal?Interest Rate?TimeWhen computing interest for one year,time?equals 1.When the computation period is less than one year,then time?is a fraction.Interest PayableFor example,if we needed

13、to compute interest for 3 months,time?would be 3/12.?The McGraw-Hill Companies,Inc.,1999Slide 10-15Irwin/McGraw-HillWhat entry would Porter Company make on December 31,the fiscal year-end?Interest PayableExample?The McGraw-Hill Companies,Inc.,1999Slide 10-16Irwin/McGraw-HillInterest PayableExampleOn

14、 December 31,Porter Company would record interest payable with the following entry:$10,00012%2/12=$200?The McGraw-Hill Companies,Inc.,1999Slide 10-17Irwin/McGraw-HillPayroll Liabilities Employers incur several expenses and liabilities from having employees.?The McGraw-Hill Companies,Inc.,1999Slide 1

15、0-18Irwin/McGraw-HillFICA TaxesMedicare TaxesFederal Income TaxState and Local Income TaxesVoluntary DeductionsNet PayGross PayPayroll Liabilities?The McGraw-Hill Companies,Inc.,1999Slide 10-19Irwin/McGraw-HillDeferred revenue is recorded.Deferred revenue is a liability account.Cash is received in a

16、dvance.Cash is sometimes collected from the customer before the revenue is actually earned.Unearned Revenue?The McGraw-Hill Companies,Inc.,1999Slide 10-20Irwin/McGraw-HillEarned revenue is recorded.As the earnings process is completed.Deferred revenue is recorded.Cash is received in advance.Unearned

17、 RevenueCash is sometimes collected from the customer before the revenue is actually earned.?The McGraw-Hill Companies,Inc.,1999Slide 10-21Irwin/McGraw-HillRelatively small debt needs can be filled from single sources.BanksInsurance CompaniesPension PlansororLong-Term Debt?The McGraw-Hill Companies,

18、Inc.,1999Slide 10-22Irwin/McGraw-HillLarge debt needs are often filled by issuing bonds.Long-Term Debt?The McGraw-Hill Companies,Inc.,1999Slide 10-23Irwin/McGraw-HillInstallment Notes PayableLong-term notes that call for a series of installment payments.Each payment covers interest for the period AN

19、D a portion of the principal.With each payment,the interest portion gets smaller and the principal portion gets larger.?The McGraw-Hill Companies,Inc.,1999Slide 10-24Irwin/McGraw-HillAllocating Installment Payments Between Interest and PrincipalIdentify the unpaid principal balance.Unpaid Principal?

20、Interest rate=Interest expense.Installment payment-Interest expense=Reduction in unpaid principal balance.Compute new unpaid principal balance.?The McGraw-Hill Companies,Inc.,1999Slide 10-25Irwin/McGraw-HillAllocating Installment Payments Between Interest and PrincipalOn January 1,1999,Rocket Corp.b

21、orrowed$7,851.57 from First Bank of River City.The loan was a five-year loan and had an interest rate of 10%.The annual payment is$2,000.Prepare an amortization table for Rocket Corp.s loan.?The McGraw-Hill Companies,Inc.,1999Slide 10-26Irwin/McGraw-HillAllocating Installment Payments Between Intere

22、st and PrincipalNow,prepare the entry for the first payment on January 1,2000.?The McGraw-Hill Companies,Inc.,1999Slide 10-27Irwin/McGraw-HillAllocating Installment Payments Between Interest and PrincipalThe information needed for the journal entry can be found on the amortization table.The payment

23、amount,the interest expense,and the amount to credit to principal are all on the table.?The McGraw-Hill Companies,Inc.,1999Slide 10-28Irwin/McGraw-HillBonds PayablelBonds usually involve the borrowing of a large sum of money,called principal.lThe principal is usually paid back as a lump sum at the e

24、nd of the bond period.lIndividual bonds are often denominated with a par value,or face value,of$1,000.?The McGraw-Hill Companies,Inc.,1999Slide 10-29Irwin/McGraw-HillBonds PayableBonds usually carry a stated rate of interest,also called a contract rate.Interest is normally paid semiannually.Interest

25、 is computed as:Interest =Principal?Stated Rate?Time?The McGraw-Hill Companies,Inc.,1999Slide 10-30Irwin/McGraw-HillBonds PayableBonds are issued through an intermediary called an underwriter.Bonds can be sold on organized securities exchanges.Bond prices are usually quoted as a percentage of the fa

26、ce amount.lFor example,a$1,000 bond priced at 102 would sell for$1,020.?The McGraw-Hill Companies,Inc.,1999Slide 10-31Irwin/McGraw-HillTypes of BondsMortgage BondsConvertible BondsJunk BondsDebenture Bonds?The McGraw-Hill Companies,Inc.,1999Slide 10-32Irwin/McGraw-HillAccounting for Bonds PayableOn

27、January 1,2000,Rocket Corp.issues$1,500,000 of 12%,10-year bonds payable.Interest is payable semiannually,each July 1 and January 1.Assume the bonds are issued at face value.Record the issuance of the bonds.?The McGraw-Hill Companies,Inc.,1999Slide 10-33Irwin/McGraw-HillAccounting for Bonds PayableO

28、n January 1,2000,Rocket Corp.issues$1,500,000 of 12%,10-year bonds payable.Interest is payable semiannually,each July 1 and January 1.Assume the bonds are issued at face value.Record the issuance of the bonds.?The McGraw-Hill Companies,Inc.,1999Slide 10-34Irwin/McGraw-HillAccounting for Bonds Payabl

29、eRecord the interest payment on July 1,2000.?The McGraw-Hill Companies,Inc.,1999Slide 10-35Irwin/McGraw-HillAccounting for Bonds PayableRecord the interest payment on July 1,2000.?The McGraw-Hill Companies,Inc.,1999Slide 10-36Irwin/McGraw-HillBonds Sold Between Interest DatesBonds are often sold bet

30、ween interest dates.The selling price of the bond is computed as:?The McGraw-Hill Companies,Inc.,1999Slide 10-37Irwin/McGraw-HillLets look at the present value concept!Hold on tight!?The McGraw-Hill Companies,Inc.,1999Slide 10-38Irwin/McGraw-HillThe Concept of Present Value$1,000 invested today at 1

31、0%.Money can grow over time,because it can earn interest.?The McGraw-Hill Companies,Inc.,1999Slide 10-39Irwin/McGraw-Hill$1,000 invested today at 10%.In 5 years it will be worth$1,610.51.In 25 years it will be worth$10,834.71!Present ValueFuture ValueThe Concept of Present Value?The McGraw-Hill Comp

32、anies,Inc.,1999Slide 10-40Irwin/McGraw-HillHow much is a future amount worth today?TodayPresent ValueFutureValueInterest compounding periodsThe Concept of Present Value?The McGraw-Hill Companies,Inc.,1999Slide 10-41Irwin/McGraw-HillHow much is a future amount worth today?Three pieces of information

33、must be known to solve a present value problem:The future amount.The interest rate(i).The number of periods(n)the amount will be invested.The Concept of Present Value?The McGraw-Hill Companies,Inc.,1999Slide 10-42Irwin/McGraw-HillTwo types of cash flows are involved with bonds:TodayPrincipal payment

34、 at maturity.Periodic interest payments called annuities.MaturityThe Concept of Present Value?The McGraw-Hill Companies,Inc.,1999Slide 10-43Irwin/McGraw-HillThe Present Value Concept and Bond Prices The selling price of the bond is determined by the market based on the time value of money.?The McGra

35、w-Hill Companies,Inc.,1999Slide 10-44Irwin/McGraw-HillThe Present Value Concept and Bond Prices The selling price of the bond is determined by the market based on the time value of money.=?The McGraw-Hill Companies,Inc.,1999Slide 10-45Irwin/McGraw-HillEarly Retirement of DebtGains or losses incurred

36、 as a result of retiring bonds should be reported as extraordinary items on the income statement.?The McGraw-Hill Companies,Inc.,1999Slide 10-46Irwin/McGraw-HillLease Payment ObligationsCapital LeasesLease agreement transfers risks and benefits associated with ownership to lessee.Lessee records a le

37、ased asset and lease liability.Operating LeasesLessor retains risks and benefits associated with ownership.Lessee records rent expense as incurred.?The McGraw-Hill Companies,Inc.,1999Slide 10-47Irwin/McGraw-HillCapital Lease Criteria?The McGraw-Hill Companies,Inc.,1999Slide 10-48Irwin/McGraw-HillPen

38、sionsEmployers offer pension plans to employees.Retirees receive pension payments from the pension fund.The employer makes payments to a pension fund.Usually,this is an independent entity managed by a professional fund manager.?The McGraw-Hill Companies,Inc.,1999Slide 10-49Irwin/McGraw-HillPensionsA

39、ctuaries make the pension expense computations,based on:Avg.age,retirement age,life expectancy.Employee turnover rates.Compensation levels.Expected rate of return for the fund.The accountant then posts the entry to record pension expense and pension liability.?The McGraw-Hill Companies,Inc.,1999Slid

40、e 10-50Irwin/McGraw-HillOther Postretirement BenefitsMany companies offer benefits to retirees other than pensions,such as health coverage or fitness club memberships.The unfunded liability must be disclosed on the employer抯抯 balance sheet.?The McGraw-Hill Companies,Inc.,1999Slide 10-51Irwin/McGraw-

41、HillDeferred Income Taxes Corporations pay income taxes quarterly.?The McGraw-Hill Companies,Inc.,1999Slide 10-52Irwin/McGraw-HillThe difference between tax expense and tax payable is recorded in an account called deferred taxes.The Internal Revenue Code is the set of rules for preparing tax returns

42、.Financial statement income tax expense.IRS income taxes payable.GAAP is the set of rules for preparing financial statements.Results in.Results in.Usually.Deferred Income Taxes?The McGraw-Hill Companies,Inc.,1999Slide 10-53Irwin/McGraw-HillExamine the December 31,1998 information for X-Off Inc.X-Off

43、 uses straight-line depreciation for financial reporting and accelerated depreciation for income tax reporting.X-Offs tax rate is 30%.Deferred Income TaxesExample?The McGraw-Hill Companies,Inc.,1999Slide 10-54Irwin/McGraw-HillThe income tax amount computed based on financial statement income is inco

44、me tax expense for the period.Deferred Income TaxesExampleCompute X-Off抯抯 income tax expense and income tax payable.?The McGraw-Hill Companies,Inc.,1999Slide 10-55Irwin/McGraw-HillCompute X-Offs income tax expense and income tax payable.Income taxes based on tax return income are the taxes payable f

45、or the period.Deferred Income TaxesExample?The McGraw-Hill Companies,Inc.,1999Slide 10-56Irwin/McGraw-HillThe deferred tax for the period of$36,000 is the difference between income tax expense of$45,000 and income tax payable of$9,000.Deferred Income TaxesExample?The McGraw-Hill Companies,Inc.,1999S

46、lide 10-57Irwin/McGraw-HillFinancial Leverage Borrowing at one rate and investing at a higher rate.If we borrow$1,000,000 at 8%and invest it at 10%,we will clear$20,000 profit!?The McGraw-Hill Companies,Inc.,1999Slide 10-58Irwin/McGraw-HillEnd of Chapter 10I wonder what the present value of my last hairdo is?