Morten Co. is experiencing a slowdown in their operations. The Board of Directors believe it is reasonably possibly that they will have to terminate the current Chief Executive Officer (CEO) as a result. If that comes to pass, the company will be required to pay a severance package per the CEOs employment contract including:

• $60,000 cash upon termination;
• Another $30,000 to be paid one year following termination;
• Cash payments of $18,000 to be paid each year for 5 years.

Required:

1. Using the present value factors, compute the present value of the complete package assuming an interest rate of 7 percent assuming the termination takes effect today.
   1. Annuity tables
   2. Single payment table
2. Given the information above, describe how the severance package would be reported in the company's financial statements.