Chapter_9 ppt - 2,000 Interest payable 2,000 To pay interest(2 months worth Interest Payable 2,000 Cash 2,000 Deferred Revenues • Revenues that

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Chapter 9: Liabilities
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Liabilities Liabilities—obligations that result from past transactions, which will be paid with assets or services Liquidity—the ability to pay current obligations
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Accruals Accrued liabilities—expenses that have been incurred before the end of a period but have not been paid Recorded as adjusting entries at year end accrued vacation is reported as part of accrued compensation
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To record accrued compensation: Compensation Expense Accrued vacation liability To record payment of accrued compensation: Accrued vacation liability Cash
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Time Value of Money Interest that is associated with the use of money over time
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Notes Payable Interest = principal x interest x time 100,0000 1-year 12% Note Payable To record issuance of note: Cash 100,000 Notes Payable, short-term 100,000
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Interest = principal x rate x time 2,000 = 100,000 x 12% x 2/12 To record interest expense (2 months worth): Interest expense
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Unformatted text preview: 2,000 Interest payable 2,000 To pay interest (2 months worth): Interest Payable 2,000 Cash 2,000 Deferred Revenues • Revenues that have been collected but not earned • Contingent liability—a potential liability that has arisen as the result of a past event (not yet a liability) • Working capital = current assets – current liabilities Present Value • Present value—the current value of an amount to be received in the future FV = PV x (1+r)^t • Annuity—a series of periodic cash receipts or pmts that are equal in amount each period PV ANN = C x [(1 – 1 / (1+ r/n) nt ) / (r/n)] 200,000 12% 1 year n/p To record purchasing truck via note: Truck (200,000)/(1.12)^2 Note Payable 159,440 To record 1 year’s interest: Interest Expense (159,440x 0.12) = 19,133 Notes Payable (PV loan x i) To record payment of note: Note payable 200,000 Cash 200,000...
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This note was uploaded on 11/14/2009 for the course PAM 2000 taught by Professor Evans,t. during the Spring '07 term at Cornell University (Engineering School).

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Chapter_9 ppt - 2,000 Interest payable 2,000 To pay interest(2 months worth Interest Payable 2,000 Cash 2,000 Deferred Revenues • Revenues that

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