Chap9 - PTO = Cost of goods sold Avg Accts Pay 7 Acct 284 Chap 9 Contingent Liabilities-a potential liability that has arisen as a result of a past

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1 Acct 284 Chap. 9 CHAPTER 9 Reporting and Interpreting Liabilities
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2 Acct 284 Chap. 9 Current Liabilities Accounts payable Accrued payables Income taxes payable Payroll taxes payable Deferred Revenues Notes Payable (Interest Bearing) Current portion of long-term debt
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3 Acct 284 Chap. 9 Long Term Liabilities Notes Payable Bonds (Chapter 10)
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4 Acct 284 Chap. 9 Aren’t Liabilities Bad? Before After Assets 100 200 Liabilities 0 100 Equity 100 100 IBIT 20 40 Interest rate 10% Tax Rate 30% What is the impact on ROE of adding debt?
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5 Acct 284 Chap. 9 Impact on Return on Equity Before After Income before Tax $20 $40 Interest 0 10 Income before tax 20 30 Tax 6 9 Net Income 14 21 Equity 100 100 Return on Equity 14% 21%
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6 Acct 284 Chap. 9 Ratio Analysis Current ratio ( liquidity ): CR = Current assets Current liabilities Accounts Payable Turnover Ratio:
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Unformatted text preview: PTO = Cost of goods sold Avg. Accts. Pay. 7 Acct 284 Chap. 9 Contingent Liabilities-a potential liability that has arisen as a result of a past event probable: likely reasonably possible: chance > remote, < likely remote: chance slight 8 Acct 284 Chap. 9 Cash Flow Effect of Current Liabilities Increases to current liabilities are added to net income in the operating section Decreases to current liabilities are deducted from net income in the operating section 9 Acct 284 Chap. 9 Time Value of Money Interest = P x IR x T PV = Amt (PVF t i ) FV = Amt (FVF t i ) PVA = Pmt (PVAF t i ) FVA = Pmt (FVAF t i ) * Remember to use TIMELINES!!...
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This note was uploaded on 09/23/2009 for the course ACCT 284 taught by Professor Clem during the Spring '08 term at Iowa State.

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Chap9 - PTO = Cost of goods sold Avg Accts Pay 7 Acct 284 Chap 9 Contingent Liabilities-a potential liability that has arisen as a result of a past

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