WELCOME TO WEEK 13!Financial Accounting: Chapter 8

Ashton Converse

Current and Long-Term Liabilities

Let It SNOW!!! *******

Objectives/Schedule

Welcome: Hope you had a great weekend!Fantastic Thanksgiving, Orphanage, and more

Review Collect Homework

Feedback Defining Different Liabilities Ratios Check Understanding and Application

Welcome

Thanksgiving! Orphanage Trip! Ohio State Football Team is Undefeated! Watched Thor with Grace! Relaxed for just a little Started LISTENING TO CHRISTMAS

MUSIC!

Review: Game Time!

What is Thanksgiving all about?Why do U.S. Americans celebrate

Thanksgiving? What TV show did we watch last week? 2 Weeks ago, we studied Long-Lived

Assets…what are they? What are Plant Assets? What are Intangible Assets?

Collect Homework

Please Pass Your Homework about “The Amazing Race” forward.

Did you enjoy the TV show “The Amazing Race”?

Was this a good activity? Are there any improvements you would have

made to the activity?

Defining Different LiabilitiesCurrent Liabilities of known amounts include: Accounts Payable, short-term notes payable, sales

tax payable, current portion of long-term debt, accrued expenses payable, payroll liabilities, and unearned revenues.

What is a Short Term Note Payable? (guess)Note payable due within one year

Current installment of long-term debtThe amount of the principal that is payable within

one year…installments means “pay part each period”

Defining Different Liabilities What is an Accrued Expense? (remember)

An expense incurred but not yet paid in cash○ Also called an accrued liability

What does Payroll Mean?Employee compensation for their workMajor expense for most businesses

Wage: (how does this impact the statements?)Employee pay stated at an hourly rate

Salary:Employee pay stated at a yearly or monthly rate

Defining Different LiabilitiesWhat are unearned revenues? (remember)

Called deferred revenues and revenues collected in advance

Indicate that the business has received cash from customers before earning the revenue.

Estimated Warranty Payable What is a warranty? Many companies will guarantee their products under

a warranty *Whatever the warranty life, the matching

principle demands that the company record the warranty expense in the same period that the business records sales revenue (estimated value)

Defining Different Liabilities Contingent Liability

A potential liability that depends on a future event arising out of the past events

Guidelines:Record an actual liability if it is probable that the

loss will occur and the amount can be reasonably estimated

Report it in a financial statement note if is reasonably possible that a loss will occur

Do not report because it is unlikely that the loss will occur

Defining Different Liabilities

Bonds PayableWhat is a Bond?Groups of notes payable issued to multiple lenders called

bondholders In Groups of about 4 people discuss the

following topics:Why do companies and government issue Bonds?What is the difference between a bond and stock?Discuss the meanings of underwriter, term bonds,

serial bonds, debentures, premium, discount, present value, stated interest rate, market interest rate, convertible bonds, earnings per share, and trading on the equity

Ratios and Liabilities

Times-interest-earned ratio:Ration of income from operations to interest

expenseMeasures the number of times that operating

income can cover interest expense TIE = Operating Income / Interest Expense Talk about Example in Book

Home Depot came up with 110 times and Heinz came up with 5 times

Heinz is more at Risk

Concluding TermsLeases and Pensions Lease

Rental agreement in which the tenant agrees to make rent payments to the property owner in exchange for the use of an asset

LesseeTenant in a lease agreement

LessorProperty Owner in a lease agreement

Operating LeaseUsually a short-term or cancelable rental agreement

Capital LeaseAny Lease that meets these 4 things:

1. The lease transfers title of the leased asset to the lessee at the end of the lease term

2. The lease contains a bargain purchase option

3. The lease term is 75% or more of the estimated useful life of the leased asset

4. The present value of the lease payments is 90% or more of the market alue of the leased asset

Pension: employee compensation that will be received during retirement

Class is Finished

HAVE A GREAT WEEK and WEEKEND!

Thrilled to see what your next chapter in life includes!