会计英语第四版叶建芳.ppt

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1、YE SUN AccountingEnglish,1,Lesson 7,Liabilities,YE SUN AccountingEnglish,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 AccountingEnglish,3,Distinction Between Debt and Equity,The acquisition

2、 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 AccountingEnglish,4,Accounts Payable,Short-term obligations to suppliers for purchases of merchandise and to others for goods and services.,Merc

3、handise Inventory invoices,Shipping charges,Utility and phone bills,Office supplies invoices,YE SUN AccountingEnglish,5,Notes Payable,Current Notes Payable,Noncurrent Notes Payable,Total Notes Payable,When a company borrows money,a note payable is created.Current Portion of Notes PayableThe portion

4、of a note payable that is due within one year,or one operating cycle,whichever is longer.,YE SUN AccountingEnglish,6,Notes Payable,PROMISSORY NOTE Location Date after this date promises to pay to the order of the sum of with interest at the rateof per annum.signedtitle,Miami,Fl,Nov.1,1999,Six months

5、,Porter Company,John Caldwell,Security National Bank,$10,000.00,12.0%,treasurer,YE SUN AccountingEnglish,7,Notes Payable,On November 1,1999,Porter Company would make the following entry.,YE SUN AccountingEnglish,8,Interest expense is the compensation to the lender for giving up the use of money for

6、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!,Interest Payable,YE SUN AccountingEnglish,9,What entry would Porter Company make on December 31,the fiscal year-end?,Interest PayableExample,YE SUN

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

8、Personal in come Taxes,Housing fund,UnemploymentInsurance,etc.,Voluntary Deductions,Net Pay,Gross Pay,Payroll Liabilities,YE SUN AccountingEnglish,13,Earned revenue is recorded.,As the earnings process is completed.,Deferred revenue is recorded.,Cash is received in advance.,Unearned Revenue,Cash is

9、sometimes collected from the customer before the revenue is actually earned.,YE SUN AccountingEnglish,14,Deferred Income Taxes,Corporations pay income taxes following tax law.,YE SUN AccountingEnglish,15,The difference between tax expense and tax payable is recorded in an account called deferred tax

10、es.,The tax law is 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 AccountingEnglish,16,Examine the December 31,1998 in

11、formation 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 AccountingEnglish,17,The income tax amount computed based on financial statement income is income t

12、ax expense for the period.,Deferred Income TaxesExample,Compute X-Offs income tax expense and income tax payable.,YE SUN AccountingEnglish,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 Income TaxesE

13、xample,YE SUN AccountingEnglish,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 AccountingEnglish,20,An existing condition,situation,or set of circumstances involving uncertainty

14、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 AccountingEnglish,21,Contingent assets are claims or rights to receive assets,which may

15、 become valid eventually.Examples are:Pending litigation whose probable outcome is favorablePossible tax refunds in tax disputesContingent assets are not accrued!,Contingent assets,YE SUN AccountingEnglish,22,Contingent liability involve situations of possible loss that are dependent on some future

16、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 AccountingEnglish,23,Estimated losses from contingent liability are accrued as liabilities if:It is probable that a l

17、iability has been incurred,andThe amount of loss can be reasonably estimated.The interpretation of these terms is often based on lawyers opinions.,Contingent liability:Accrual,YE SUN AccountingEnglish,24,To determine whether a liability should be recorded,evaluate:The time period in which the underl

18、ying cause of action occurredThe probability of an unfavorable outcomeThe ability to make a reasonable estimate of lossTo determine the probability of outcome,evaluate:Nature of litigation and progress of caseOpinion of legal counselResponse by management,Litigation,Claims and Assessments,YE SUN Acc

19、ountingEnglish,25,The Concept of Present Value,$1,000 invested today at 10%.,Money can grow over time,because it can earn interest.,YE SUN AccountingEnglish,26,$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,Future Value,The C

20、oncept of Present Value,YE SUN AccountingEnglish,27,How much is a future amount worth today?,Today,Present Value,FutureValue,Interest compounding periods,The Concept of Present Value,YE SUN AccountingEnglish,28,How much is a future amount worth today?Three pieces of information must be known to solv

21、e 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 AccountingEnglish,29,Two types of cash flows are involved with bonds:,Today,Principal payment at maturity.,Periodic interest payments called annui

22、ties.,Maturity,The Concept of Present Value,YE SUN AccountingEnglish,30,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.,YE SUN AccountingEnglish,31,The Present Value Concept and Bond Prices,The selling price of the

23、 bond is determined by the market based on the time value of money.,=,=,YE SUN AccountingEnglish,32,Bonds Payable,Bonds usually involve the borrowing of a large 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 den

24、ominated with a par value,or face value,of$1,000.,YE SUN AccountingEnglish,33,Bonds Payable,Bonds usually carry a stated rate of interest,also called a contract rate.Interest is normally paid semiannually.Interest is computed as:,Interest=Principal Stated Rate Time,YE SUN AccountingEnglish,34,Bonds

25、Payable,Bonds are issued through an intermediary called an underwriter.Bonds can be sold on organized securities 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 AccountingEnglish,35,Types of Bonds,Mortgag

26、e Bonds,Convertible Bonds,Junk Bonds,Debenture Bonds,YE SUN AccountingEnglish,36,Bonds entries,Cash proceedsDiscount on BP face-proceedsBonds payable faceCash proceedsBonds payable facePremium on bonds payable proceeds face,YE SUN AccountingEnglish,37,Straight-Line Amortizationof Bond Discount,This

27、method amortizes the bond discount by dividing it into equal amounts for each interest 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 AccountingEnglish,38,July 1Interest Expense50,375Cash50,000Discount on Bonds Paya

28、ble 375Paid semiannual interest and amortized discounton bonds payable,Straight-Line Amortizationof Bond Discount,YE SUN AccountingEnglish,39,Granite Corp.sold a 10%,10-year(20 periods),$1,000,000 bond issue at a price of 101 on Jan.1.,Cash1,010,000Bonds Payable1,000,000Premium on Bonds Payable 10,0

29、00Issued bonds payable at a premium,Issuing Bonds Payableat a Premium,YE SUN AccountingEnglish,40,Issuing Bonds Payableat a Premium,Granite Balance Sheet(immediately after issuance of the bonds),Long-term liabilities:Bonds payable,10%,due 20 xx$1,000,000Premium of bonds payable 10,000$1,010,000,YE S

30、UN AccountingEnglish,41,July 1Interest Expense49,500Premium on Bonds Payable 500Cash50,000Paid semiannual interest and amortizedpremium on bonds payable,Straight-Line Amortizationof Bond Premium,YE SUN AccountingEnglish,42,Granite Balance Sheet(December 31),Long-term liabilities:Bonds payable,10%,du

31、e 20 xx$1,000,000Premium on bonds payable 9,000$1,009,000,Reporting Bonds Payable,YE SUN AccountingEnglish,43,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 Septem

32、ber 30 each year.San Antonio closes its books on December 31.What accounts are involved?,YE SUN AccountingEnglish,44,Adjusting Entries for Interest Expense,Interest Payable:$150,000 8%3/12=$3,000Discount Amortization:$3,000 10 3/12=$75Interest Expense:$3,000+$75=$3,075What is the adjusting entry?,YE

33、 SUN AccountingEnglish,45,Adjusting Entries for Interest Expense,December 31,2002Interest Expense3,075Interest Payable3,000Discount on Bonds Payable 75Accrued three months interest andamortized discount on bonds payable,What is the entry on March 31,2003?,YE SUN AccountingEnglish,46,Adjusting Entrie

34、s for Interest Expense,March 31,2003Interest Expense3,075Interest Payable3,000Cash6,000Discount on Bonds Payable 75Paid semiannual interest,part of whichwas accrued,and amortized three monthsdiscount on bonds payable,YE SUN AccountingEnglish,47,Effective-Interest Methodof Amortization,The effective-

35、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 AccountingEnglish,48,Effective-Interest Method:Bond Discount,Assume that Granite Corp.issue

36、s$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 AccountingEnglish,49,Effective-Interest Method:Bond Discount,Cash96,149Discount on Bonds Payable 3,851Bonds Payable100,000To issue

37、10%,10-year bonds at a discount,YE SUN AccountingEnglish,50,Effective-Interest Method:Bond Discount,What is the interest expense at the end of period one?$96,149 10%6/12=$4,807What 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 Accounting

38、English,51,Effective-Interest Method:Bond Discount,End ofCarrying InterestCashPeriod ValueExpensePaid AmortizationIssue 96,149Date 1 96,456 4,8074,500307 2 96,779 4,8234,500323 3 97,118 4,8394,500339 4 97,474 4,8564,500356,YE SUN AccountingEnglish,52,Bonds Sold Between Interest Dates,Bonds are often

39、 sold between interest dates.The selling price of the bond is computed as:,YE SUN AccountingEnglish,53,Early Retirement of Debt,Gains or losses incurred as a result of retiring bonds should be reported on the income statement.,YE SUN AccountingEnglish,54,Installment Notes Payable,Long-term notes tha

40、t call for a series of installment payments.,Each payment covers interest for the period AND a portion of the principal.,With each payment,the interest portion gets smaller and the principal portion gets larger.,YE SUN AccountingEnglish,55,Allocating Installment Payments Between Interest and Princip

41、al,Identify the unpaid principal balance.Unpaid Principal Interest rate=Interest expense.Installment payment-Interest expense=Reduction in unpaid principal balance.Compute new unpaid principal balance.,YE SUN AccountingEnglish,56,Allocating Installment Payments Between Interest and Principal,On Janu

42、ary 1,1999,Rocket Corp.borrowed$7,851.57 from First Bank of River City.The loan was a five-year loan and had an interest rate of 10%.The annual payment is$2,000.Prepare an amortization table for Rocket Corp.s loan.,YE SUN AccountingEnglish,57,Allocating Installment Payments Between Interest and Prin

43、cipal,Now,prepare the entry for the first payment on January 1,2000.,YE SUN AccountingEnglish,58,Allocating Installment Payments Between Interest and Principal,The information needed for the journal entry can be found on the amortization table.The payment amount,the interest expense,and the amount to credit to principal are all on the table.,YE SUN AccountingEnglish,59,End of Lesson 7,