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- 1. 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
- 2. 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
- 3. 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
- 4. Group 5: Jeffrey Austria, Elsie Calubayan, Alvin Dela Cruz, Ma. Eunice Granado, Liza Minaballes Reporting and Interpreting LiabilitiesReporting and Interpreting Liabilities
- 5. 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 Company Security National Bank $10,000.00 12.0% John Caldwell treasurer
- 6. 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 × Time When computing interest for one year, “Time”When computing interest for one year, “Time” equals 1. When the computation period is lessequals 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 lessequals 1. When the computation period is less than one year, then “Time” is a fraction.than one year, then “Time” is a fraction.
- 7. Group 5: Jeffrey Austria, Elsie Calubayan, Alvin Dela Cruz, Ma. Eunice Granado, Liza Minaballes Reporting and Interpreting LiabilitiesReporting and Interpreting Liabilities $10,000 × 12% × 2 /12 = $200$10,000 × 12% × 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?
- 8. 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? $10,000 × 12% × 1 /12 = $100$10,000 × 12% × 1 /12 = $100
- 9. 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:
- 10. Group 5: Jeffrey Austria, Elsie Calubayan, Alvin Dela Cruz, Ma. Eunice Granado, Liza Minaballes Reporting and Interpreting LiabilitiesReporting and Interpreting Liabilities Contingent Liability Examples
- 11. 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.
- 12. Group 5: Jeffrey Austria, Elsie Calubayan, Alvin Dela Cruz, Ma. Eunice Granado, Liza Minaballes Reporting and Interpreting LiabilitiesReporting and Interpreting Liabilities T h e l e a s e t r a n s f e r s o w n e r s h i p t o t h e l e s s e e . T h e l e a s e c o n t a i n s a b a r g a i n p u r c h a s e o p t i o n . T h e l e a s e t e r m i s e q u a l t o o r > 7 5 % o f t h e e c o n o m i c l i f e o f t h e p r o p e r t y . T h e P V o f t h e m i n i m u m l e a s e p a y m e n t s = 9 0 % o f t h e F M V o f t h e p r o p e r t y . A l e a s e m u s t b e r e c o r d e d a s a C a p i t a l L e a s e i f i t m e e t s a n y o f t h e f o l l o w i n g c r i t e r i a .
- 13. 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.
- 14. 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
- 15. 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.
- 16. 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 Future Value Today
- 17. 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. $1,000.00 b. $ 990.00 c. $ 751.30 d. $ 970.00 How much do we need to invest today at 10% interest, compounded annually, if we need $1,331 in three years? a. $1,000.00 b. $ 990.00 c. $ 751.30 d. $ 970.00 Reporting and Interpreting LiabilitiesReporting and Interpreting Liabilities
- 18. 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. $1,000.00 b. $ 990.00 c. $ 751.30 d. $ 970.00 How much do we need to invest today at 10% interest, compounded annually, if we need $1,331 in three years? a. $1,000.00 b. $ 990.00 c. $ 751.30 d. $ 970.00 The required future amount is $1,331. i = 10% & n = 3 years Using 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 years Using 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
- 19. 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
- 20. 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. $3,000.00 b. $2,910.00 c. $2,700.00 d. $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. $3,000.00 b. $2,910.00 c. $2,700.00 d. $2,486.90 Reporting and Interpreting LiabilitiesReporting and Interpreting Liabilities
- 21. 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. $3,000.00 b. $2,910.00 c. $2,700.00 d. $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. $3,000.00 b. $2,910.00 c. $2,700.00 d. $2,486.90 Reporting and Interpreting LiabilitiesReporting and Interpreting Liabilities The consecutive equal payment amount is $1,000. i = 10% & n = 3 years Using 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 years Using the present value of an annuity table, the factor is . $1,000 × = $2,486.90 2.4869 2.4869
- 22. Share and use Knowledge UNCONDITIONALLY THANK YOU!THANK YOU!

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