Professional Documents
Culture Documents
Liabilities
Chapter 9
McGraw-Hill/Irwin
Debt - funds
from creditors
Equity - funds
from owners
9-2
Creditors
Creditors
can
can force
force
bankruptcy.
bankruptcy.
9-3
Current
Liabilities
Noncurrent
Liabilities
9-4
Current Liabilities
9-6
Payroll Taxes
Gross Pay
Net Pay
Less Deductions:
Social
Security
Tax
Medicare
Tax
Federal
Income
Tax
State and
Voluntary
Local Income Deduction
Taxes
s
9-7
Notes Payable
A
A note
note payable
payable specifies
specifies the
the interest
interest
rate
rate associated
associated with
with the
the borrowing.
borrowing.
To
Tothe
the lender,
lender, interest
interest is
is aa revenue.
revenue.
To
Tothe
the borrower,
borrower,interest
interest is
is an
an expense
expense..
Notes Payable
Toyota
Toyota borrows
borrows
$100,000
$100,000 for
for 22 months
months at
at
an
an annual
annual interest
interest rate
rate
of
of 12%.
12%. Compute
Compute the
the
interest
interest on
on the
the note
note for
for
the
the loan
loan period.
period.
9-10
Estimated Liabilities
Contingent Liability Examples
Lawsuits
Environmental
Problems
Product
Warranties
9-11
Long-Term Liabilities
Creditors often require the borrower to
pledge specific assets as security for
the long-term liability.
Current
Liabilities
Long-term
Liabilities
9-12
Banks
Insurance
Companies
Pension
Plans
9-13
Cash
9-14
When
When aa company
company has
has operations
operations in
in aa foreign
foreign
country,
country,itit often
often borrows
borrows in
in the
the local
local currency.
currency.
This
This reduces
reduces exchange
exchange rate
rate risk.
risk.
Because
Because interest
interest rates
rates vary
vary from
from country
country to
to
country,
country,companies
companies may
may borrow
borrow in
in the
the foreign
foreign
market
market with
with the
the lowest
lowest interest
interest rate.
rate.
9-15
Lease Liabilities
Operating
Lease
Capital
Lease
Long-term lease;
Short-term lease; No
Meets one of 4
liability or asset
criteria; Results in
Capital Lease
Criteria
recorded
recording an asset
1. Lease term is 75% or more of the assets expected economic life.
a liability
2. Ownership of asset is transferred to lessee at endand
of lease.
3. Lease permits lessee to purchase the asset at a price that is lower than its
fair market value.
4. The present value of the lease payments is 90% or more of the fair market
value of the asset when the lease is signed.
9-16
$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!
1.
1.
2.
2.
3.
3.
4.
4.
The
The growth
growth is
is aa mathematical
mathematical
function
function of
of four
four variables:
variables:
The
The value
value today
today (present
(present value).
value).
The
The value
value in
in the
the future
future (future
(future
value).
value).
The
The interest
interest rate.
rate.
The
The time
time period.
period.
9-18
Future
Value
Interest compounding periods
Today
Future
9-20
9-21
An annuity is a series of
consecutive equal periodic
payments.
Today
9-22
Payment 2
Payment 3
Today
9-23
9-24
Present
Interest
Rate
Interest 31,
Now, lets
look Value
at the journal
entry
at =December
$159,440 2009.
12% = $19,133
9-26
Deferred Taxes
Temporary
Differences
9-28
Corporations
Tax Obligation
Determined by multiplying
taxable income by the corporate
tax rate.
9-30
9-32
9-33
Present
Value
Future
Value
Today
9-34
9-35
Payment 2
Payment 3
Today
9-36
a.
a.
b.
b.
c.
c.
d.
d.
If
If we
we invest
invest $1,000
$1,000 each
each year
year at
at an
an
interest
interest rate
rate of
of 10%,
10%, compounded
compounded
annually,
annually, how
how much
much will
will we
we have
have at
at the
the
end
end of
of three
three years?
years?
$3,000
$3,000
$3,090
$3,090
The
Theannual
annualinvestment
investmentamount
amount is
is $1,000.
$1,000.
$3,300
$3,300
ii== 10%
10%&&nn== 33years
years
$3,310
$3,310
Using
Usingthe
thefuture
futurevalue
valueof
ofan
anannuity
annuity
table,
table, the
thefactor
factoris
is3.3100.
3.3100.
$1,000
$1,000 3.3100
3.3100 == $3,310
$3,310
9-37
End of Chapter 9
McGraw-Hill/Irwin