Liabilities

1
Liabilities

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

2
Contingent Losses

• Probable
• Reasonable
• Remote
• Probable and measurablerecord
• Reasonabledisclose
• Remoteignore

3
Contingent Gains

• Probabledisclose
• Otherignore

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 DebtL/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 gt marketprice gt par
• Market gt statedpar gt 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 equal to or 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