Liabilities

1. On the Balance Sheet:

Current Liabilities - due within one year or normal operating cycle, whichever is longer,
with the use of current assets

Liabilities Classified

Relatively less
Certain Certain Uncertain






2. Contingent Liabilities














3. Bonds the most common type of long-term debt. The main purpose is to borrow for
the long-term when the amount needed is too large for one lender. Bonds are issued in
denominations of $100, $1,000, or $10,000 face value, usually with semi-annual cash
interest payments. (Therefore the indebtedness is shared by investing units.)




FEDEX CORPORATION 2004 ANNUAL REPORT

NOTE 18: LEGAL PROCEEDINGS
Operations in 2002 were significantly affected by the terrorist
attacks on September 11, 2001. During 2002, we recognized a total of $119 million of compensation under the Air
Transportation Safety and System Stabilization Act (the Act), of which $101 million had been received as of May 31, 2004. The
amounts recognized were for our estimate of losses we incurred as a result of the mandatory grounding of our aircraft and for
incremental losses incurred through December 31, 2001. All amounts recognized were reflected as reduction of operating
expense under the caption Airline stabilization compensation.

In the fourth quarter of 2003, the Department of Transportation (DOT) asserted that we were overpaid by $31.6 million and has
demanded repayment. We have filed requests for administrative and judicial review. We received an opinion from the District of
Columbia U.S. Court of Appeals stating that most of the determinations that we requested were not yet ripe for decision and the
Court will not rule prior to final determination by the DOT and exhaustion of administrative remedies.

Pursuant to the Federal Aviation Administration reauthorization enacted during the third quarter of 2004, the General Accounting
Office submitted a report to Congress on J une 4, 2004, on the criteria and procedures used by the Secretary of Transportation
under the Act. Issuance of the report frees the DOT to make a final determination on our claim and also reinforces the
Congressional directive to the DOT to refer any remaining disputed claims to an administrative law judge upon an affected
claimants request.

We agreed to mediation with the DOT, but it did not result in a resolution of the dispute. We will continue to pursue our claim for
compensation under the Act. We believe that we have complied with all aspects of the Act, that it is probable we will ultimately
collect the remaining $18 million receivable and that we will not be required to pay any portion of the DOTs $31.6 million
demand. We cannot be assured of the ultimate outcome; however, it is reasonably possible that a material reduction to the $119
million of compensation we have previously recognized under the Act could occur. Based on the DOTs assertion, the range for
potential loss on this matter is zero to $49.6 million. We are a defendant

Present Values
Example 1: Determining a future amount: If you have $100 now (at time t=0) and you invest it at 6% interest for
one year, how much will you have?

Amount In One Year
0 1


$100 ?
Present value (PV) =amount at time zero
Future Value (FV) =amount in the future

This problem can be solved by:
PV(1+i) =FV (1)
100(1.06) =$106

Example Two: Determining a future amount: How much will you have in two years?
Amount In Two Years
0 1 2


$100 ?
This problem can be solved by:

PV(1+i)(1+i) =FV
PV(1+i)
2
=FV (2)
100(1.06)
2
=$112.36

Example Three: Determining the Present Value of a Single Amount: Suppose you have $112.36 in two years, how
much is it worth to you today at 6% interest?

Present Value of a Single Amount
0 1 2


? $112.36
Use equation (2)
PV(1+i)
2
=FV but solve for PV,
PV
0
=
( )

+
2
1
1
i
FV
2
(3) (use Table A.2 on pages 746-7) (112.36.89)=100
Example Four: Determining the Present Value of an annuity: Suppose you receive $100 at the end of each of the
next two years, how much is it worth to you today at 6% interest? (note that all future values are equal; therefore, this
is a present value of an annuity, FV=PMT)

Present Value of an annuity
0 1 2


? $100 $100
PV =
( )

+
1
1
1
i
FV
1
+
( )

+
2
1
1
i
FV
2
(4) (use Table A.4 on pages 748)
PV = PMT (1.833) = 100(1.833)= $183.30



Two types of problems in Accounting

1. Present value of a single future dollar amounts




2. Present value of an annuity (equal future payments)
This table contains factors that convert future cash flows into the present value of those cash flows.
Period 1% 4% 6% 8% 10% 15% 20%
1 0.9901 0.9615 0.9434 0.9259 0.9091 0.8696 0.8333
2 0.9803 0.9246 0.8900 0.8573 0.8264 0.7561 0.6944
3 0.9706 0.8890 0.8396 0.7938 0.7513 0.6575 0.5787
4 0.9610 0.8548 0.7921 0.7350 0.6830 0.5718 0.4823
5 0.9515 0.8219 0.7473 0.6806 0.6209 0.4972 0.4019
6 0.9420 0.7903 0.7050 0.6302 0.5645 0.4323 0.3349
7 0.9327 0.7599 0.6651 0.5835 0.5132 0.3759 0.2791
8 0.9235 0.7307 0.6274 0.5403 0.4665 0.3269 0.2326
9 0.9143 0.7026 0.5919 0.5002 0.4241 0.2843 0.1938
10 0.9053 0.6756 0.5584 0.4632 0.3855 0.2472 0.1615
11 0.8963 0.6496 0.5268 0.4289 0.3505 0.2149 0.1346
12 0.8874 0.6246 0.4970 0.3971 0.3186 0.1869 0.1122
13 0.8787 0.6006 0.4688 0.3677 0.2897 0.1625 0.0935
14 0.8700 0.5775 0.4423 0.3405 0.2633 0.1413 0.0779
15 0.8613 0.5553 0.4173 0.3152 0.2394 0.1229 0.0649
16 0.8528 0.5339 0.3936 0.2919 0.2176 0.1069 0.0541
17 0.8444 0.5134 0.3714 0.2703 0.1978 0.0929 0.0451
18 0.8360 0.4936 0.3503 0.2502 0.1799 0.0808 0.0376
19 0.8277 0.4746 0.3305 0.2317 0.1635 0.0703 0.0313
20 0.8195 0.4564 0.3118 0.2145 0.1486 0.0611 0.0261


This table contains factors that convert equal future payments into the present value of those cash flows.
Period 1% 4% 6% 8% 10% 15% 20%
1 0.9901 0.9615 0.9434 0.9259 0.9091 0.8696 0.8333
2 1.9704 1.8861 1.8334 1.7833 1.7355 1.6257 1.5278
3 2.9410 2.7751 2.6730 2.5771 2.4869 2.2832 2.1065
4 3.9020 3.6299 3.4651 3.3121 3.1699 2.8550 2.5887
5 4.8534 4.4518 4.2124 3.9927 3.7908 3.3522 2.9906
6 5.7955 5.2421 4.9173 4.6229 4.3553 3.7845 3.3255
7 6.7282 6.0021 5.5824 5.2064 4.8684 4.1604 3.6046
8 7.6517 6.7327 6.2098 5.7466 5.3349 4.4873 3.8372
9 8.5660 7.4353 6.8017 6.2469 5.7590 4.7716 4.0310
10 9.4713 8.1109 7.3601 6.7101 6.1446 5.0188 4.1925
11 10.3676 8.7605 7.8869 7.1390 6.4951 5.2337 4.3271
12 11.2551 9.3851 8.3838 7.5361 6.8137 5.4206 4.4392
13 12.1337 9.9856 8.8527 7.9038 7.1034 5.5831 4.5327
14 13.0037 10.5631 9.2950 8.2442 7.3667 5.7245 4.6106
15 13.8651 11.1184 9.7122 8.5595 7.6061 5.8474 4.6755
16 14.7179 11.6523 10.1059 8.8514 7.8237 5.9542 4.7296
17 15.5623 12.1657 10.4773 9.1216 8.0216 6.0472 4.7746
18 16.3983 12.6593 10.8276 9.3719 8.2014 6.1280 4.8122
19 17.2260 13.1339 11.1581 9.6036 8.3649 6.1982 4.8435
20 18.0456 13.5903 11.4699 9.8181 8.5136 6.2593 4.8696


Bonds
A. Bond Definitions - interest rates
i) Stated, coupon, or nominal rate =



ii) Effective, yield, or market rate=




Cash interest =

Interest expense =

B. Bond Prices - an example
Example: Suppose you issue a 3-year, 12%, $1,000 bond that pays semiannual
interest. How much will the bond sell for if the bond yield is 16%? 8%?

What are the bond's cash flows?





To Yield 8%







To Yield 16%






C. Bond journal entries at issuance
Premium Discount








Balance Sheet Presentation at Issuance
Premium Discount







D. Bond amortization tables - 8% bond yield
EFFECTIVE INTEREST METHOD (Method One)
Premium Amortization
(1) (2) (3) (4)
Payment Interest Carrying
Number Expense Cash Amortization Value
$1,105.00
1 60

2 60

3 60

4 60

5 60

6 60 1,000.00

STRAIGHT-LINE METHOD (Method Two)
(1) (2) (3) (4)
Payment Interest Carrying
Number Expense Cash Amortization Value
$1,105.00
1 60

2 60

3 60

4 60
5 60
6 60 1,000.00
E. Interest J ournal entries
























EFFECTIVE INTEREST METHOD
Discount Amortization
(1) (2) (3) (4)
Payment Interest Carrying
Number Expense Cash Amortization Value
$907.54
1 72.60 60 12.60 920.14

2 73.61 60 13.61 933.75

3 74.70 60 14.70 948.46

4 75.88 60 15.88 964.33

5 77.15 60 17.15 981.48

6 78.52 60 18.52 1,000.00





















F. Early Extinguishments of Debt
Suppose that a bond was listed on the Balance Sheet with a carrying value of $960. The
face value was $1,000 with a discount of $40. The company that issued the bond
purchased the bond on the market and retired the bond. The company paid $900 cash.
What is the impact on the Income Statement?


















G. Bond disclosures
a.


b.


c.
Debt Ratios

1. Level of Debt






2. Ability to pay debt
a. Times interest earned =
Expense Interest
taxes and interest before Earnings



b. Coverage ratios =

GAYLORD ENTERTAINMENT 1998-12-31: Balance Sheet
1998/12/31 1997/12/31
Current assets:
Cash $18,746,000 $8,712,000
Trade receivables, less allowance of $5,517 and $4,031, respectively $94,429,000 $82,152,000
Inventories $27,018,000 $23,206,000
Other assets $49,009,000 $37,311,000
Total current assets $189,202,000 $151,381,000

Property and equipment, net of accumulated depreciation $586,898,000 $550,267,000
Intangible assets, net of accumulated amortization $117,529,000 $84,419,000
Investments $78,140,000 $73,991,000
Long-term notes and interest receivable $9,015,000 $233,112,000
Other assets $31,208,000 $24,392,000
Total assets
$1,011,992,00
0
$1,117,562,00
0
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $6,269,000
Accounts payable and accrued liabilities $115,837,000 $127,694,000
Total current liabilities $122,106,000 $127,694,000

Long-term debt $276,712,000 $388,397,000
Deferred income taxes $52,747,000 $32,579,000
Other liabilities $33,039,000 $42,710,000
Minority interest $2,228,000 $9,958,000
Commitments and contingencies

Stockholders' equity:
Preferred stock, $.01 par value, 100,000 shares $0 $0
authorized, no shares issued or outstanding
Common stock, $.01 par value, 150,000 shares $328,000 $327,000
authorized, 32,808 and 32,741 shares issued
and outstanding, respectively
Additional paid-in capital $500,434,000 $498,504,000
Retained earnings $26,699,000 $16,837,000
Other stockholders' equity ($2,301,000) $556,000
Total stockholders' equity $525,160,000 $516,224,000
Total liabilities and stockholders' equity
$1,011,992,00
0
$1,117,562,00
0


GAYLORD ENTERTAINMENT CO /DE 10-K 1998-12-31


Annual maturities of long-term debt, including capital lease

obligations, are as follows:



1999
6,269
2000
9,318
2001
4,128

2002
259,225
2003
1,577
Years thereafter
2,464
Total
$282,981



FINANCIAL INSTRUMENTS


Estimated fair values and carrying amounts of the Company's financial
instruments at December 31, 1998 and 1997 are as follows:






1998 1997

Fair Carrying Fair Carrying
Value Amount Value Amount

Long-term notes & interest receivable $9,015 $9,015
$234,43
3
$233,11
2

Debt $282,981 $282,981
$388,39
7
$388,39
7


The fair value estimates were determined using discounted cash flow
analyses. For fixed-rate long-term notes receivable, the discount rate was
determined based upon similar instruments. The Company's carrying value of its
variable-rate debt and long-term notes receivable approximates fair value. The
carrying amount of short-term financial instruments (cash, trade receivables,
accounts payable and accrued liabilities) approximates fair value due to the
short maturity of those instruments. Credit risk on trade receivables is

minimized by the large and diverse nature of the Company's customer base.

Why might a bond be issued at a premium or discount?

Example: Three ways to borrow $10,000 cash when the market rate is 6%
(semiannual).


Face value =$10,000, stated rate =6%, Market rate =6%
Interest Amort. Carrying


Expense Cash
Discount Value
0 10,000

1 300 300 0 10,000
2
300 300
0 10,000
3 300 300 0
10,000

4 300 300 0 10,000
5 300 300 0 10,000
6 300 300 0 10,000

-








Face value =$11,941, stated rate =0%, Market rate =6%

Interest
Amort. Carrying
Expense Cash Discount
Value

0

10,000
1 300 0 300 10,300
2 309 0 309 10,609

3 318 0 318 10,927

4 0
5 0


6 0 11,941



Face value =$9,500, stated rate =7.937%, Market rate =6%
Interest Amort. Carrying

Expense Cash Premium
Value

0 10,000
1 300 377 77 9,923

2 298 377 79 9,844
3 295 377 82 9,762
4 377

5 377


6
377 9,500


-