Presented below is the current liabilities section of Micro Corporation. ($000) 000 2021 000 2020 Current liabilities Notes payable $ 68,713 $ 7,700 Accounts payable 179,496 101,379 Compensation to employees 60,312 31,649 Accrued liabilities 158,198 77,621 Income taxes payable 10,486 26,491 Current maturities of long-term debt $416,592 $416,649 Total current liabilities $493,797 $251,489 Instructions Answer the following questions. a. What are the essential characteristics that make an item a liability? b. How does one distinguish between a current liability and a long-term liability? c. What are accrued liabilities? Give three examples of accrued liabilities that Micro might have. d. What is the theoretically correct way to value liabilities? How are current liabilities usually valued? e. Why are notes payable reported first in the current liabilities section? f. What might be the items that comprise Micro’s liability for “Compensation to employees”?
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
Presented below is the current liabilities section of Micro Corporation.
| ($000) | ||||
| 000 | 2021 | 000 | 2020 | |
| Current liabilities | ||||
| Notes payable |
$ 68,713
|
$ 7,700
|
||
| Accounts payable |
179,496
|
101,379
|
||
| Compensation to employees |
60,312
|
31,649
|
||
| Accrued liabilities |
158,198
|
77,621
|
||
| Income taxes payable |
10,486
|
26,491
|
||
| Current maturities of long-term debt |
$416,592
|
$416,649
|
||
| Total current liabilities |
$493,797
|
$251,489
|
Instructions
Answer the following questions.
a. What are the essential characteristics that make an item a liability?
b. How does one distinguish between a current liability and a long-term liability?
c. What are accrued liabilities? Give three examples of accrued liabilities that Micro might have.
d. What is the theoretically correct way to value liabilities? How are current liabilities usually valued?
e. Why are notes payable reported first in the current liabilities section?
f. What might be the items that comprise Micro’s liability for “Compensation to employees”?
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