会计英语（简明版） Lesson 8 Current and Long-term Liabilities.ppt

1、YE SUN AccountingEnglish2009,1,Lesson 8,Current and Long-term Liabilities,YE SUN AccountingEnglish2009,2,The Nature of Liabilities,I.O.U.,Defined as debts or obligations arising from past transactions or events.,Maturity = 1 year or less,Maturity 1 year,YE SUN AccountingEnglish2009,3,Distinction Bet

2、ween Debt and Equity,The acquisition of assets is financed from two sources:,Funds from creditors, with a definite due date, and sometimes bearing interest.,Funds from owners,DEBT,EQUITY,YE SUN AccountingEnglish2009,4,Current liabilities,Accounts payable: Short-term obligations to suppliers for purc

3、hases of merchandise and to others for goods and services.,Merchandise Inventory invoices,Shipping charges,Utility and phone bills,Office supplies invoices,YE SUN AccountingEnglish2009,5,Current Notes Payable,Noncurrent Notes Payable,Total Notes Payable,When a company borrows money, a note payable i

4、s created. Current Portion of Notes Payable The portion of a note payable that is due within one year, or one operating cycle, whichever is longer.,YE SUN AccountingEnglish2009,6,PROMISSORY NOTE Location Date after this date promises to pay to the order of the sum of with interest at the rate of per

5、 annum. signed title,Miami, Fl,Nov. 1, 1999,Six months,Porter Company,John Caldwell,Security National Bank,$10,000.00,12.0%,treasurer,YE SUN AccountingEnglish2009,7,On November 1, 1999, Porter Company would make the following entry.,YE SUN AccountingEnglish2009,8,Interest expense is the compensation

6、 to the lender for giving up the use of money for a period of time. The liability is called interest payable. To the lender, interest is a revenue. To the borrower, interest is an expense.,Interest Rate Up!,YE SUN AccountingEnglish2009,9,What entry would Porter Company make on December 31, the fisca

7、l year-end?,YE SUN AccountingEnglish2009,10,On December 31, Porter Company would record interest payable with the following entry:,$10,000 12% 2/12 = $200,YE SUN AccountingEnglish2009,11,Payroll Liabilities: Employers incur several expenses and liabilities from having employees.,YE SUN AccountingEng

8、lish2009,12,Personal in come Taxes,Housing fund,Unemployment Insurance,etc.,Voluntary Deductions,Net Pay,Gross Pay,YE SUN AccountingEnglish2009,13,Earned revenue is recorded.,As the earnings process is completed . . .,Deferred revenue is recorded.,Cash is received in advance.,Cash is sometimes colle

9、cted from the customer before the revenue is actually earned. - Unearned,YE SUN AccountingEnglish2009,14,Corporations pay income taxes following tax law.,YE SUN AccountingEnglish2009,15,The difference between tax expense and tax payable is recorded in an account called deferred taxes.,The tax law is

10、 the set of rules for preparing tax returns.,Financial statement income tax expense.,income taxes payable.,GAAP is the set of rules for preparing financial statements.,Results in . . .,Results in . . .,Usually. . .,Deferred Income Taxes,YE SUN AccountingEnglish2009,16,Examine the December 31, 1998 i

11、nformation for X-Off Inc.,X-Off uses straight-line depreciation for financial reporting and accelerated depreciation for income tax reporting. X-Offs tax rate is 30%.,Deferred Income TaxesExample,YE SUN AccountingEnglish2009,17,The income tax amount computed based on financial statement income is in

12、come tax expense for the period.,Deferred Income TaxesExample,Compute X-Offs income tax expense and income tax payable.,YE SUN AccountingEnglish2009,18,Compute X-Offs income tax expense and income tax payable.,Income taxes based on tax return income are the taxes payable for the period.,Deferred Inc

13、ome TaxesExample,YE SUN AccountingEnglish2009,19,The deferred tax for the period of $36,000 is the difference between income tax expense of $45,000 and income tax payable of $9,000.,Deferred Income TaxesExample,YE SUN AccountingEnglish2009,20,An existing condition, situation, or set of circumstances

14、 involving uncertainty as to possible asset (contingent asset) or liability (contingent liability) that will ultimately be resolved when one or more future events occur or when such event or events fail to occur.,Contingency: Defined,YE SUN AccountingEnglish2009,21,Contingent assets are claims or ri

15、ghts to receive assets, which may become valid eventually. Examples are: Pending litigation whose probable outcome is favorable Possible tax refunds in tax disputes Contingent assets are not accrued!,Contingent assets,YE SUN AccountingEnglish2009,22,Contingent liability involve situations of possibl

16、e loss that are dependent on some future event(s). The likelihood of occurrence of the event may be: Remote (slight) Reasonably possible (more than remote but less than likely) Probable (likely),Contingent liability : General,YE SUN AccountingEnglish2009,23,Estimated losses from contingent liability

17、 are accrued as liabilities if: It is probable that a liability has been incurred, and The amount of loss can be reasonably estimated. The interpretation of these terms is often based on lawyers opinions.,Contingent liability: Accrual,YE SUN AccountingEnglish2009,24,To determine whether a liability

18、should be recorded, evaluate: The time period in which the underlying cause of action occurred The probability of an unfavorable outcome The ability to make a reasonable estimate of loss To determine the probability of outcome, evaluate: Nature of litigation and progress of case Opinion of legal cou

19、nsel Response by management,Litigation, Claims and Assessments,YE SUN AccountingEnglish2009,25,The Concept of Present Value,$1,000 invested today at 10%.,Money can grow over time, because it can earn interest.,YE SUN AccountingEnglish2009,26,$1,000 invested today at 10%.,In 5 years it will be worth

20、$1,610.51.,In 25 years it will be worth $10,834.71!,Present Value,Future Value,The Concept of Present Value,YE SUN AccountingEnglish2009,27,How much is a future amount worth today?,Today,Present Value,FutureValue,Interest compounding periods,The Concept of Present Value,YE SUN AccountingEnglish2009,

21、28,How much is a future amount worth today? Three pieces of information must be known to solve a present value problem: The future amount. The interest rate (i). The number of periods (n) the amount will be invested.,The Concept of Present Value,YE SUN AccountingEnglish2009,29,Two types of cash flow

22、s are involved with bonds:,Today,Principal payment at maturity.,Periodic interest payments called annuities.,Maturity,The Concept of Present Value,YE SUN AccountingEnglish2009,30,The Present Value Concept and Bond Prices,The selling price of the bond is determined by the market based on the time val

23、ue of money.,YE SUN AccountingEnglish2009,31,The Present Value Concept and Bond Prices,The selling price of the bond is determined by the market based on the time value of money.,=,=,Non-current liabilities,YE SUN AccountingEnglish2009,32,Bonds Payable,Bonds usually involve the borrowing of a large

24、sum of money, called principal. The principal is usually paid back as a lump sum at the end of the bond period. Individual bonds are often denominated with a par value, or face value, of $1,000.,YE SUN AccountingEnglish2009,33,YE SUN AccountingEnglish2009,34,Bonds Payable,Bonds usually carry a state

25、d rate of interest, also called a contract rate. Interest is normally paid semiannually. Interest is computed as:,Interest = Principal Stated Rate Time,YE SUN AccountingEnglish2009,35,Bonds Payable,Bonds are issued through an intermediary called an underwriter. Bonds can be sold on organized securit

26、ies exchanges. Bond prices are usually quoted as a percentage of the face amount. For example, a $1,000 bond priced at 102 would sell for $1,020.,YE SUN AccountingEnglish2009,36,Types of Bonds,Mortgage Bonds,Convertible Bonds,Junk Bonds,Debenture Bonds,YE SUN AccountingEnglish2009,37,Bonds entries,C

27、ash proceeds Discount on BP face - proceeds Bonds payable face Cash proceeds Bonds payable face Premium on bonds payable proceeds face,YE SUN AccountingEnglish2009,38,Straight-Line Amortizationof Bond Discount,This method amortizes the bond discount by dividing it into equal amounts for each interes

28、t period. Granite Corp. would amortize the $7,500 discount over 20 periods with interest paid at $50,000. $7,500 20 = $375 per period,YE SUN AccountingEnglish2009,39,July 1 Interest Expense50,375 Cash50,000 Discount on Bonds Payable 375 Paid semiannual interest and amortized discount on bonds payabl

29、e,Straight-Line Amortizationof Bond Discount,YE SUN AccountingEnglish2009,40,Granite Corp. sold a 10%, 10-year (20 periods), $1,000,000 bond issue at a price of 101 on Jan. 1.,Cash1,010,000 Bonds Payable1,000,000 Premium on Bonds Payable 10,000 Issued bonds payable at a premium,Issuing Bonds Payable

30、at a Premium,YE SUN AccountingEnglish2009,41,Issuing Bonds Payableat a Premium,Granite Balance Sheet (immediately after issuance of the bonds),Long-term liabilities: Bonds payable, 10%, due 20 xx$1,000,000 Premium of bonds payable 10,000 $1,010,000,YE SUN AccountingEnglish2009,42,July 1 Interest Exp

31、ense49,500 Premium on Bonds Payable 500 Cash50,000 Paid semiannual interest and amortized premium on bonds payable,Straight-Line Amortizationof Bond Premium,YE SUN AccountingEnglish2009,43,Granite Balance Sheet (December 31),Long-term liabilities: Bonds payable, 10%, due 20 xx$1,000,000 Premium on b

32、onds payable 9,000 $1,009,000,Reporting Bonds Payable,YE SUN AccountingEnglish2009,44,Adjusting Entries for Interest Expense,San Antonio Corporation issued $150,000 of its 8%, 10-year bonds at a $3,000 discount on October 1, 2002. The interest payments occur on March 31 and September 30 each year. S

33、an Antonio closes its books on December 31. What accounts are involved?,YE SUN AccountingEnglish2009,45,Adjusting Entries for Interest Expense,Interest Payable: $150,000 8% 3/12 = $3,000 Discount Amortization: $3,000 10 3/12 = $75 Interest Expense: $3,000 + $75 = $3,075 What is the adjusting entry?,

34、YE SUN AccountingEnglish2009,46,Adjusting Entries for Interest Expense,December 31, 2002 Interest Expense3,075 Interest Payable3,000 Discount on Bonds Payable 75 Accrued three months interest and amortized discount on bonds payable,What is the entry on March 31, 2003?,YE SUN AccountingEnglish2009,47

35、,Adjusting Entries for Interest Expense,March 31, 2003 Interest Expense3,075 Interest Payable3,000 Cash6,000 Discount on Bonds Payable 75 Paid semiannual interest, part of which was accrued, and amortized three months discount on bonds payable,YE SUN AccountingEnglish2009,48,Effective-Interest Metho

36、dof Amortization,The effective-interest method keeps interest expense at the same percentage over any bonds life. Generally accepted accounting principles require that interest expense be measured using the effective-interest method.,YE SUN AccountingEnglish2009,49,Effective-Interest Method:Bond Dis

37、count,Assume that Granite Corp. issues $100,000 of its 9% bonds at a discount of $3,851, at a time when the market rate of interest is 10%. These bonds mature in five years and pay interest semiannually.,YE SUN AccountingEnglish2009,50,Effective-Interest Method:Bond Discount,Cash96,149 Discount on B

38、onds Payable 3,851 Bonds Payable100,000 To issue 10%, 10-year bonds at a discount,YE SUN AccountingEnglish2009,51,Effective-Interest Method:Bond Discount,What is the interest expense at the end of period one? $96,149 10% 6/12 = $4,807 What is the interest payment at the end of period one? $100,000 9% 6/12 = $4,500 $4,807 $4,500 = $307 amortization,YE SUN AccountingEnglish2009,52,Effective-Interest Method:Bond Discount,End ofC