Liabilities.fa

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


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



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





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



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.



$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?



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



Gross Pay

Net Pay

Medicare Tax

State and Local Income

Taxes

Social Security

Tax

Federal Income Tax

Voluntary Deductions

Less Deductions:



Contingent Liability Examples



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.



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.



$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



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.



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


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


years?a. $1,000.00b. $ 990.00c. $ 751.30d. $ 970.00




years?a. $1,000.00b. $ 990.00c. $ 751.30d. $ 970.00


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)


.7513.7513



An annuity is a series of consecutive equal

periodic payments.

Today

Present Value

Interest compounding periods

Payment 1 Payment 2 Payment 3


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



a. $3,000.00b. $2,910.00c. $2,700.00d. $2,486.90





a. $3,000.00b. $2,910.00c. $2,700.00d. $2,486.90



a. $3,000.00b. $2,910.00c. $2,700.00d. $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

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!

Date post:	19-Oct-2014
Category:	Technology
View:	172 times
Download:	0 times

Liabilities.fa

Technology