Mgmt 200 Spring 2010 Chap 9 Liabilities and Present Value

Mgmt 200 Spring 2010 Chap 9 Liabilities and Present Value -...

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Current Liabilities, Contingencies, and the Time Value of Money Chapter 9
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LIABILITIES Define: Probable debts or obligations that result from past transactions, which will be paid with assets or services. Classification: Current liabilities, non- current liabilities, contingent liabilities. Capital structure decisions.
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Current Liabilities Accounts payable Accrued liabilities Taxes Compensation Other expense Notes payable – short term Current portion of long-term debt Deferred revenues
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Exercise 9-1: Current Liabilities The items listed below are accounts on Smith’s balance sheet of December 31, 2007: Taxes Payable Accounts Receivable Notes Payable, 9%, due in 90 days Investment in Bonds Capital Stock Accounts Payable Estimated Warranty Payable in 2008 Retained Earnings Trademark Mortgage Payable ($10,000 due every year until 2024) Required Identify which of the above accounts should be classified as a current liability on Smith’s balance sheet. For each item that is not a current liability, indicate the category of the balance sheet in which it would be classified.
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Analysis of liabilities Analysis of liquidity: Working capital Current assets – current liabilities Current ratio Current assets / Current liabilities Accounts payable turnover ratio COGS / Average accounts payable Link to operating cycle
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Contingent liabilities Estimated liabilities: Probable and reasonable estimate Included on balance sheet Warranty liabilities Possible Disclose in footnotes only Pending lawsuits Remote No disclosure required
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Problem 9-5: Warranties Bombeck Company sells a product for $1,500. When a
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This note was uploaded on 05/25/2010 for the course MGMT 200 taught by Professor Greigg during the Spring '08 term at Purdue.

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Mgmt 200 Spring 2010 Chap 9 Liabilities and Present Value -...

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