2 - Notes Payable

Question 1

Obligations supported by promissory notes

Answer 1

Notes Payable

Question 2

Notes payable are initially recognized at?

Answer 2

FV - transaction cost

Question 3

Price that would be received to sell the asset or paid to transfer a liability.

Answer 3

Fair Value

Question 4

Matures within 1 year

Answer 4

Short-term payable

Question 5

Matures beyond 1 year

Answer 5

Long-term payable

Question 6

The fair value of short-term payable is equal to its?

Answer 6

Face Value

Question 7

If short-term payable bears significant financing component, its FV is equal to?

Answer 7

Present Value

Question 8

FV of long-term payable that bears a reasonable interest rate is equal to?

Answer 8

Face Amount

Question 9

FV of long-term payable that bears no interest (long-term non interest bearing) is equal to

Answer 9

Present Value

Question 10

FV of long-term payable that bears an unreasonable interest rate is equal to

Answer 10

Present Value

Question 11

Rate that exactly discounts the future cash payments that would equal to its carrying amount

Answer 11

Effective interest rate

Question 12

Amount that would have been paid if transaction was settled outright on cash basis

Answer 12

Cash price equivalent

Question 13

Notes payable initially recognized @ face amount are subsequently measured @

Answer 13

@ Face amount or expected settlement amount

Question 14

Notes payable initially recognized @ present value are subsequently measured @

Answer 14

@ Amortized cost

Question 15

Amount where fin. asset/liability is measured at initial recognition - principal repayments, (+ or -) cumulative amortization

Answer 15

Amortized cost

Question 16

Method of calculating amortized cost of fin. asset/liability and allocating interest income/expense over the period

Answer 16

Effective interest method

Question 17

Rate of interest stated on loan or investment without any adjustments or fees

Answer 17

Nominal rate

Question 18

Interest is computed only on the outstanding principal balance

Answer 18

Simple interest

Question 19

Money a business owes after taking out a loan & an expense to the income statement

Answer 19

Interest expense

Question 20

Current liability for the part of the loan that is currently due but not yet paid and recorded in the balance sheet.

Answer 20

Interest payable

Question 21

Interest is computed on both outstanding balances of principal & accrued interest

Answer 21

Compounded interest

Question 22

Amortization in the immediately following year

Answer 22

Current portion

Question 23

Present value in the immediately following year

Answer 23

Noncurrent portion

Question 24

Interest is only incurred after

Answer 24

a passage of time

Question 25

Annuity factors are applicable only when series are

Answer 25

uniform or equal

Question 26

When cash flows vary (Non-uniform installments) what is used

Answer 26

PV of 1

Question 27

Price that manufacturer of an item suggests that store should charge for it

Answer 27

List price

Question 28

Recognized immediately in profit or loss on initial recognition

Answer 28

Day 1 Difference

Question 29

Similar to note payable; supported by a formal promise to pay sum of money at specific future date

Answer 29

Loan payable

Question 30

Loans payable can be used to imply

Answer 30

bank loans and more

Question 31

How are loans payable accounted for

Answer 31

Similar to notes payable but involves transaction costs

Question 32

Incremental costs that are directly attributable to the acquisition, issue or disposal of fin. instrument

Answer 32

Transaction costs

Question 33

One that would not have been incurred if the entity had not acquired the financial instrument

Answer 33

Incremental costs

Question 34

Transaction costs include:

Answer 34

1. Fees and commissions
2. Levies
3. Transfer of taxes and duties

Question 35

Paid to agents, advisers, brokers, and dealers

Answer 35

Fees and commissions

Question 36

Paid to regulatory agencies and securities exchanges (to collect a tax)

Answer 36

Levies

Question 37

Charge levied on the transfer of ownership or title to property from on entity to another.

Answer 37

Transfer taxes and duties

Question 38

Upfront fee charged by a lender to cover costs of processing the loan; DEDUCTED when measuring carrying amount of loan

Answer 38

Origination fees

Question 39

Normally come in the for of “service fees”

Answer 39

Origination fees

Question 40

Percent of the principal amount and directly deducted from the loan proceeds

Answer 40

Service fee

Question 41

One that has a collateral security which lender can take if the borrower defaults.

Answer 41

Security loan

Question 42

Loan secured by a real property (lot or building)

Answer 42

Mortgage loan

Question 43

Signed by evidencing the loan and the encumbrance over the property

Answer 43

Mortgage note

Question 44

Loan secured by movable personal property (car, equipment, jewelry or livestock)

Answer 44

Chattel mortgage

Question 45

Where interest changes are based on fixed rate

Answer 45

Fixed interest loan

Question 46

Where interest charges vary as market interest changes

Answer 46

Variable interest loan

Question 47

Arrangement between financial institutions and a borrower that establishes the maximum amount of loan the borrower can obtain

Answer 47

Credit line or line of credit

Question 48

Provides convenience and saves the borrower cost

Answer 48

Credit lines

Question 49

Uses a line of credit; It can be used to borrow cash or make credit purchases. When credit limit is reached, card no longer be used until the obligation is settled.

Answer 49

Credit card

Question 50

Linked to the cardholder’s bank account. Funds used purchases are automatically withdrawn from the cardholder’s account.

Answer 50

Debit card

Question 51

longest bone in the body

Answer 51

credit card