Post on 19-Oct-2014
description
transcript
Reporting and Interpreting LiabilitiesReporting and Interpreting Liabilities
Group 5
Austria, JeffreyAustria, Jeffrey
Calubayan, ElsieCalubayan, Elsie
Dela Cruz, AlvinDela Cruz, Alvin
Granado, Ma. EuniceGranado, Ma. Eunice
Minaballes, LizaMinaballes, Liza
Delete text and place photo here.
Dr. Maria P. IshiiDr. Maria P. Ishii
Financial AccountingFinancial Accounting
Group 5: Jeffrey Austria, Elsie Calubayan, Alvin Dela Cruz, Ma. Eunice Granado, Liza Minaballes
Reporting and Interpreting LiabilitiesReporting and Interpreting Liabilities
The acquisition of assets is financed from
two sources:
Funds from creditors, with a definite due date, and sometimes
bearing interest.
Funds from owners
DEBTDEBT EQUITYEQUITY
Group 5: Jeffrey Austria, Elsie Calubayan, Alvin Dela Cruz, Ma. Eunice Granado, Liza Minaballes
Reporting and Interpreting LiabilitiesReporting and Interpreting Liabilities
probable debts or obligations of an entity arising from past transactions or events which
will be paid with assets or services
probable debts or obligations of an entity arising from past transactions or events which
will be paid with assets or services
Current Liabilities
Noncurrent Liabilities
I.O.U.
Maturity = 1 year or less Maturity > 1 year
Group 5: Jeffrey Austria, Elsie Calubayan, Alvin Dela Cruz, Ma. Eunice Granado, Liza Minaballes
Reporting and Interpreting LiabilitiesReporting and Interpreting Liabilities
Group 5: Jeffrey Austria, Elsie Calubayan, Alvin Dela Cruz, Ma. Eunice Granado, Liza Minaballes
Reporting and Interpreting LiabilitiesReporting and Interpreting Liabilities
PROMISSORY NOTE
Location Date
after this date promises to pay to the order of the sum of with interest at the rate of per annum.
signed title
Miami, Fl Nov. 1, 2007
Six months Porter CompanySecurity National Bank $10,000.00
12.0%
John Caldwelltreasurer
Group 5: Jeffrey Austria, Elsie Calubayan, Alvin Dela Cruz, Ma. Eunice Granado, Liza Minaballes
Reporting and Interpreting LiabilitiesReporting and Interpreting Liabilities
A note payable specifies the interest rate associated with the borrowing. To the lender, interest is a revenue.
To the borrower, interest is an expense..
A note payable specifies the interest rate associated with the borrowing. To the lender, interest is a revenue.
To the borrower, interest is an expense..
Interest = Principal × Interest Rate × TimeWhen computing interest for one year, “Time” When computing interest for one year, “Time” equals 1. When the computation period is less equals 1. When the computation period is less
than one year, then “Time” is a fraction.than one year, then “Time” is a fraction.
When computing interest for one year, “Time” When computing interest for one year, “Time” equals 1. When the computation period is less equals 1. When the computation period is less
than one year, then “Time” is a fraction.than one year, then “Time” is a fraction.
Group 5: Jeffrey Austria, Elsie Calubayan, Alvin Dela Cruz, Ma. Eunice Granado, Liza Minaballes
Reporting and Interpreting LiabilitiesReporting and Interpreting Liabilities
$10,00012% 2/12 = $200$10,00012% 2/12 = $200
What entry would Porter Company make on December 31, the fiscal year-end?
What entry would Porter Company make on December 31, the fiscal year-end?
Group 5: Jeffrey Austria, Elsie Calubayan, Alvin Dela Cruz, Ma. Eunice Granado, Liza Minaballes
Reporting and Interpreting LiabilitiesReporting and Interpreting Liabilities
What entry would Porter Company would make on January 31, 2008 when they pay the note?
What entry would Porter Company would make on January 31, 2008 when they pay the note?
$10,00012% 1/12 = $100$10,00012% 1/12 = $100
Group 5: Jeffrey Austria, Elsie Calubayan, Alvin Dela Cruz, Ma. Eunice Granado, Liza Minaballes
Reporting and Interpreting LiabilitiesReporting and Interpreting Liabilities
Gross Pay
Net Pay
Medicare Tax
State and Local Income
Taxes
Social Security
Tax
Federal Income Tax
Voluntary Deductions
Less Deductions:
Group 5: Jeffrey Austria, Elsie Calubayan, Alvin Dela Cruz, Ma. Eunice Granado, Liza Minaballes
Reporting and Interpreting LiabilitiesReporting and Interpreting Liabilities
Contingent Liability Examples
Group 5: Jeffrey Austria, Elsie Calubayan, Alvin Dela Cruz, Ma. Eunice Granado, Liza Minaballes
Reporting and Interpreting LiabilitiesReporting and Interpreting Liabilities
Operating LeasesOperating Leases Capital LeasesCapital Leases
Lease agreement transfers risks and benefits associated with
ownership to lessee.
Lease agreement transfers risks and benefits associated with
ownership to lessee.
Lessee records a leased asset and lease liability.
Lessee records a leased asset and lease liability.
Lessor retains risks and benefits associated with ownership.
Lessor retains risks and benefits associated with ownership.
Lessee records rent expense as incurred.
Lessee records rent expense as incurred.
Group 5: Jeffrey Austria, Elsie Calubayan, Alvin Dela Cruz, Ma. Eunice Granado, Liza Minaballes
Reporting and Interpreting LiabilitiesReporting and Interpreting Liabilities
The lease transfersow nership to the
lessee.
The lease containsa bargain purchase
option.
The lease term is equal toor > 75% of the econom ic
life of the property.
The PV of the m inim umlease paym ents = 90% ofthe FM V of the property.
A lease must be recorded asa Capital Lease if it meets
any of the follow ing criteria.
Group 5: Jeffrey Austria, Elsie Calubayan, Alvin Dela Cruz, Ma. Eunice Granado, Liza Minaballes
Reporting and Interpreting LiabilitiesReporting and Interpreting Liabilities
$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 Value
Present Value
Future Value
Future Value
Money can grow over time, because it can earn interest.
Year Amount at Start of
Year
+ Interest During the Year
= Amount at End of Year
1 $1,000 + $1,000 X 10% = $100
= $1,100
2 1,100 + 1,100 X 10% = 110
= 1,210
3 1,210 + 1,210 X 10% = 121
= 1,331
4 1,331 + 1,331 X 10% = 133
= 1,464
5 1,464 + 1,464 X 10% = 146
= 1,610$1,000 x 1.6105 = $1,610.5
From Future Value Table,Interest rate = 10% n = 10
Group 5: Jeffrey Austria, Elsie Calubayan, Alvin Dela Cruz, Ma. Eunice Granado, Liza Minaballes
Reporting and Interpreting LiabilitiesReporting and Interpreting Liabilities
The growth is a mathematical function of four variables:
1. The value today (present value).2. The value in the future (future
value).3. The interest rate.4. The time period.
The growth is a mathematical function of four variables:
1. The value today (present value).2. The value in the future (future
value).3. The interest rate.4. The time period.
Group 5: Jeffrey Austria, Elsie Calubayan, Alvin Dela Cruz, Ma. Eunice Granado, Liza Minaballes
Reporting and Interpreting LiabilitiesReporting and Interpreting Liabilities
The present value of a single amount is the worth to you today of receiving that amount some time in the future.
Interest compounding periodsPresent Value
FutureValue
Today
Group 5: Jeffrey Austria, Elsie Calubayan, Alvin Dela Cruz, Ma. Eunice Granado, Liza Minaballes
How much do we need to invest today at 10% interest, compounded annually, if we need $1,331 in three
years?a. $1,000.00b. $ 990.00c. $ 751.30d. $ 970.00
How much do we need to invest today at 10% interest, compounded annually, if we need $1,331 in three
years?a. $1,000.00b. $ 990.00c. $ 751.30d. $ 970.00
Reporting and Interpreting LiabilitiesReporting and Interpreting Liabilities
Group 5: Jeffrey Austria, Elsie Calubayan, Alvin Dela Cruz, Ma. Eunice Granado, Liza Minaballes
How much do we need to invest today at 10% interest, compounded annually, if we need $1,331 in three
years?a. $1,000.00b. $ 990.00c. $ 751.30d. $ 970.00
How much do we need to invest today at 10% interest, compounded annually, if we need $1,331 in three
years?a. $1,000.00b. $ 990.00c. $ 751.30d. $ 970.00
The required future amount is $1,331.i = 10% & n = 3 yearsUsing the present value of a single amount table, the factor is .$1,331 × = $1,000 (rounded)
The required future amount is $1,331.i = 10% & n = 3 yearsUsing the present value of a single amount table, the factor is .$1,331 × = $1,000 (rounded)
Reporting and Interpreting LiabilitiesReporting and Interpreting Liabilities
.7513.7513
Group 5: Jeffrey Austria, Elsie Calubayan, Alvin Dela Cruz, Ma. Eunice Granado, Liza Minaballes
Reporting and Interpreting LiabilitiesReporting and Interpreting Liabilities
An annuity is a series of consecutive equal
periodic payments.
Today
Present Value
Interest compounding periods
Payment 1 Payment 2 Payment 3
Group 5: Jeffrey Austria, Elsie Calubayan, Alvin Dela Cruz, Ma. Eunice Granado, Liza Minaballes
What is the present value of receiving $1,000 each year for three years at an
interest rate of 10%, compounded annually?
a. $3,000.00b. $2,910.00c. $2,700.00d. $2,486.90
What is the present value of receiving $1,000 each year for three years at an
interest rate of 10%, compounded annually?
a. $3,000.00b. $2,910.00c. $2,700.00d. $2,486.90
Reporting and Interpreting LiabilitiesReporting and Interpreting Liabilities
Group 5: Jeffrey Austria, Elsie Calubayan, Alvin Dela Cruz, Ma. Eunice Granado, Liza Minaballes
What is the present value of receiving $1,000 each year for three years at an
interest rate of 10%, compounded annually?
a. $3,000.00b. $2,910.00c. $2,700.00d. $2,486.90
What is the present value of receiving $1,000 each year for three years at an
interest rate of 10%, compounded annually?
a. $3,000.00b. $2,910.00c. $2,700.00d. $2,486.90
Reporting and Interpreting LiabilitiesReporting and Interpreting Liabilities
The consecutive equal payment amount is $1,000.i = 10% & n = 3 yearsUsing the present value of an annuity table, the factor is .$1,000 × = $2,486.90
The consecutive equal payment amount is $1,000.i = 10% & n = 3 yearsUsing the present value of an annuity table, the factor is .$1,000 × = $2,486.90
2.48692.4869
Share and use Knowledge
UNCONDITIONALLY
THANK YOU!THANK YOU!