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Liabilities

Liabilities. Current--one year or less Current portion of long-term debt. Contingent Losses. Probable Reasonable Remote Probable and measurable…record Reasonable…disclose Remote…ignore. Contingent Gains. Probable…disclose Other…ignore. Appendices. 10A: Pensions 10B: Deferred taxes

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Liabilities

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  1. Liabilities • Current--one year or less • Current portion of long-term debt

  2. Contingent Losses • Probable • Reasonable • Remote • Probable and measurable…record • Reasonable…disclose • Remote…ignore

  3. Contingent Gains • Probable…disclose • Other…ignore

  4. Appendices • 10A: Pensions • 10B: Deferred taxes • …both have significant impact but are beyond the scope of this class other than to recognize what the terms represent.

  5. L/T Debt…L/T Recb • Key Terms • par value • stated rate of interest • issue price / book value • market rate of interest • Issued in lots of $1,000 • Stated > market…price > par • Market > stated…par > price

  6. Pricing of Debt • PV of two cash flows • principal payment • interest payments • Base int. payments on each payment

  7. Bond Payment Table

  8. Capital vs. Operating Leases • Capital leases • Title transferred • Bargain purchase option • Lease is greater than 75% of the estimated useful life • PV of cash outflow greater than 90% of asset cost at start of lease • Capital leases are similar to installment purchases • Operating leases are expensed

  9. Equity • Par value • Additional Paid in Capital • Retained Earnings

  10. Comprehensive Income • Changes in equity other than capital additions and deletions

  11. Treasury Stock • Cost Method • Repurchase at market price • Reissue at gain…APIC • Reissue at loss…<APIC>, the <RE>

  12. Disclosure • Authorized • Issued • Outstanding

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