Bài giảng môn Kế toán, kiểm toán - Chapter 7: Accounting for and presentation of liabilities

© 2008 The McGraw-Hill Companies, Inc., All Rights Reserved.Chapter 7Accounting for and Presentation of LiabilitiesPowerPoint Authors: Susan Coomer Galbreath, Ph.D., CPA Charles W. Caldwell, D.B.A., CMA Jon A. Booker, Ph.D., CPA, CIA Cynthia J. Rooney, Ph.D., CPALiabilities are obligations that represent “probable future sacrifice of economic benefits.”The term accrued expenses is often used on the balance sheet to describe liabilities.Current liabilities are those liabilities that will be paid within one year of the current balance sheet date.LO 1Nature of Liabilities7-3Current liabilities include: Accounts payable Short-term debt (Notes payable) Current maturities of long-term debt Unearned revenue or deferred credits Other accrued liabilitiesNoncurrent liabilities include: Long-term debt (Bonds payable) Deferred tax liabilitiesLO 1Nature of Liabilities7-4Straight InterestInterest = Principal × Rate × Time in years= $25,000 × 0.09 × 1= $ 2,250 per year or $187.50 per monthAnnual Percentage Interest Rate (APR)APR = Interest Paid ÷ Money available × Time= $2,250 ÷ $25,000 × 1= 9%LO 2Interest Calculation Methods7-5Any portion of long-term debt that is to be repaid within a year of the balance sheet date is reclassified from the noncurrent liability section to the current liability section under the title, current maturities of long-term debt.Current Maturities on Long-Term DebtLO 27-6Unearned Revenue or Deferred CreditsUnearned revenue is created when customers pay for services or products before delivery.Our goal is to recognizerevenue as the subscriptionis fulfilled each month.1/1/131/31/13Month end2/28/13Month end3/31/13Month endCash received for one-yearsubscriptionOn January 1, 2013, Matrix, Inc. receives $2,400 cash as an advance payment for a one-year subscription to its monthly investment newsletter. LO 37-7Payroll TaxesFICA TaxesMedicare TaxesFederal Income TaxState and Local Income TaxesVoluntary DeductionsNet PayGross Pay- Deductions=LO 47-8Noncurrent Liabilities Long-Term DebtInterest on debt is tax deductible but dividends on stock are not. The after-tax cost of debt can be less than the cost of equities.Long-term debt can provide positive financial leverage. Leverage is the difference between the ROI and the ROE.LO 67-9Financial LeverageWithout LeverageROI = $100,000 ÷ $500,000 = 20%ROE = $100,000 ÷ $500,000 = 20%With LeverageROI = $100,000 ÷ $500,000 = 20%ROE = $88,000 ÷ $350,000 = 25.1%LO 67-10Bonds Payable - TerminologyBOND PAYABLEFace Value $1,000Face value is the amount an investor will receive at maturity.Bond Date 1/1/13Bond date is the date the bond was issued.Interest 10%Stated interest rate is typically an annual rate.6/30 & 12/31Interest payment dates are dates when an investor is paid interest.Maturity Date 12/31/17Maturity date is the date when the face value of the bond is repaid to an investor.LO 77-11Issuance of Bonds Payable at a Discount or a PremiumMarket Rate Effect of Bond Selling PricesIn the previous example, par value was illustrated: Stated Rate = Market RateLO 87-12The Internal Revenue Code is the set of rules for preparing tax returns.Financial statement income tax expense.IRS income taxes payable.GAAP is the set of rules for preparing financial statements.Usually. . . Results in . . .Results in . . .The difference between tax expense and tax payable is referred to as deferred taxes.LO 9Deferred Tax Liability7-13Other Noncurrent LiabilitiesObligations relating to pension plans and other employee benefit plans, including deferred compensation and bonus plans.Expenses relating to these plans are accrued and reflected in the income statement of the fiscal period in which the benefits are earned by the employees.Some companies pay postretirement benefits. For pragmatic reasons, postretirement benefits are measured in a different manner. LO 97-14Contingent LiabilitiesPotential claims on the resources of a company arising from pending litigation, environmental hazards, casualty losses to property, product warranties, or unsettled disputes with the Internal Revenue Service. LO 10Other Noncurrent Liabilities7-15End of Chapter 77-16