11 Noncurrent Liabilities Flashcards
A bond sold between interest dates requires that the interest is paid by who?
The buyer will pay the interest accrued between the first interest payment and the issue date, the seller will pay the interest between the issue date and the next payment
Ex - a bond with interest payments of July and December, sold in August
The buyer pays interest from July to August
The seller pays interest from August to December
Operating lease payments are recognized on what basis?
Straight-line basis over the full term of the lease
How are issue prices of bonds valued?
They should be valued at the present values of the future cash flows
Ex. face amount x PV of 1 for bond term at yield percent + face amount x stated interest rate x PV of ordinary annuity for # of interest periods at yield percent
Loss contingencies that are reasonably probably are accrued at what amount?
The minimum estimated amount
The effective interest method calculates interest on bonds at?
The carrying amount of the bonds x the yield (effective) rate
What is a decommissioning liability?
An asset retirement obligation (ARO)
What is the difference between an a PV of an ordinary annuity and the PV of an annuity due (advance)?
An ordinary annuity table assumes the first payment occurs at the end of the first time period, an annuity due is when the first payment occurs at the beginning of the first period
To calculate accretion expense, the ARO balance is multiplied by what?
The credit-adjusted-risk-free (CARF) interest rate
What are debentures?
unsecured bonds
Bonds that mature over a period a period of time vs. maturing all at once are?
serial bonds
If stock warrants are nondetachable how should the proceeds be allocated between the warrants and the stocks?
Nondetachable warrants should have no proceeds allocated. Only detachable warrants should have proceeds allocated and are accounted for as additional paid-in capital
Proceeds on bond issuance are calculated as?
The sum of the PV of the maturity amount and the PV of the interest payments, discounted using the market rate of interest less the bond issuance costs.
