1 / 17

Liabilities

Liabilities. Current liabilities: due in one year or less Types Ratios Long-term liabilities: due in more than one year Bonds Capital leases versus operating leases Contingent liabilities: possible future liabilities. Current Liabilities. Interest payable Unearned revenue

ariel-gross
Télécharger la présentation

Liabilities

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Liabilities • Current liabilities: due in one year or less • Types • Ratios • Long-term liabilities: due in more than one year • Bonds • Capital leases versus operating leases • Contingent liabilities: possible future liabilities

  2. Current Liabilities • Interest payable • Unearned revenue • Sales tax payable • Payroll taxes payable

  3. Interest payable is a current liability Interest Payable

  4. Unearned Revenue Unearned Revenue is a current liability

  5. Sales Tax Payable Sales Tax payable is a current liability

  6. Payroll Taxes Payable

  7. Social Security and Medicare Issues • Depletion of social security funds • Social security payments • 2 for 1 • Live too long after retirement • Vote often • Social security contributions • Not enough Gen X, Y, Z, etc. • Company matches your Social Security and Medicare contributions • Self-employed and independent contractors • Medicare funds • Health insurance for those collecting social security

  8. CURRENT LIABILITY RATIOSShort-Term Creditors

  9. Long-term liabilities • Bonds • Capital leases

  10. BOND BASICS $1,000 at maturity Interest each year at coupon rate IBM $1,000 LOAN

  11. Bond Values • Lend IBM $1,000 for 30 years @ 8%, two years later rates on similar bonds decrease to 6% • Still receiving $80 per year for 28 more years • PV of Annuity, 28 years, 6% • $80 x 13.4062 =$1,072.50 • Receiving $1,000 in 28 years • PV of $1, 28 years, 6% • $1,000 x .1956 = $195.60 • Value of bond = PV of Int Annuity + PV of $1,000 • $1,072.50 + $195.60 = $1,268.10 • 26.8% increase in bond value • If coupon rate > required rate of return, value of bond will be > $1,000

  12. Bond Values • Discount bond cash flows at required rate of return (yield to maturity) • Don’t use coupon rate • If you do, you’ll find value is $1,000 • Interest rates increase, bond values decrease • Interest rates decrease, bond values increase • Bonds are priced at a percent of par value • 104, 98, etc.

  13. Bonds • Advantages • Interest on bonds deducted as an expense on tax return • Dividends on common stock: not an expense • No dilution of stockholders’ interest • Disadvantages • Failure to pay debt can result in bankruptcy • Dividends discretionary; interest is not

  14. Bond Journal Entries

  15. Leasing long-term assets • Advantages of operating leases • No concern about residual value • Generally smaller down payment • Can deduct rent on tax return • Keeps liability off balance sheet • However, should disclose lease commitments in footnotes

  16. Leasing long-term assets • Capital leases • Lease property for most of its useful life • Can purchase the property for nominal amount at end of lease • Lease payments represent financing • Treat as an asset and long-term liability

  17. Contingent liability • Possible future liability • Either • Amount of liability can not be reasonably determined • Or not sure if liability exists • Lawsuits, environmental issues, etc. • Generally disclose in footnotes

More Related