3. Flashcards
Effective interest method to calculate interest payment of bonds:
Face value “X” the stated interest rate (or coupon rate).
Effective interest method to calculate interest expense of bonds
Effective interest rate “X” carrying amount of the bonds (carrying amount of bond definition: the net amount between the bond’s face value plus any un-amortized premiums or minus any amortized discounts)
Effective interest method to calculate bond discount
Interest Paid (Bond Face Amount X Stated Rate)
Less:
Interest expense (Bond Carrying amount X Stated Rate)
= Amortization change.
Amortization change
Less: Unamortized Discount
Unamortized discount times Carrying amount
Journal Entries for effective interest method for bonds:
See OneNote, note 1.
Effective interest method to calculate the payment due on call date:
Issue price of the bonds (of Face Value) “X” call price
Total Net Periodic Pension Cost Formula:
“SIRAGE”
Service cost
Interest cost
Amortization of prior service cost
Amortization of transition asset
Existing Net Asset or net obligation
Formula to calculate net periodic pension cost (under US GAAP)
Unrecognized gain or loss <10% of the greater of the PBO or FMV of plan assets at the beginning of the year =Excess "/" Avg remaining service life =Minimum recognized amount
BASE formula to calulate return on plan assets
Beginning balance
Add: contributions & investment return
Subtract: Benefits paid
=Ending balance
How should “unusual in nature” damages be reported on the income statement:
Separately as a component of income from continuing operations.
IFRS Goodwill impairment test
Carrying value of cash generating unit - CGU’s recoverable amount (Recoverable amount definition: FV less cost to sell).
Capitalized costs of a patent include the following:
Purchase price, VAT, and legal costs to register the patent.
Capitalization of computer software costs can be capitalized when?:
After technological feasibility is established. For example: coding and testing costs can be capitalized after technological feasibility are established.
The effective tax rates for operations for the full year should reflect:
Anticipated foreign tax planning alternatives. In addition the effect of other anticipated tax credits, capital gains rates, and foreign tax credits should be included.
Under FASB and IASB, relevance is a fundamental:
qualitative characteristic, and materiality is a component of relevance.
A component that is held for sale is valued at:
the lower of BV of NRV
What is the journal entry process when repurchasing stock? (Par value method)
First Debit Treasury stock to the extent of the price of the stock (for example: 5 par stock was repurchased for $12. Then the first entry would be the amount of shares repurchased for par in TS). Then debit APIC - Stock (either common of preferred) to the extent that the repurchase price exceeded the par value. (in the case that there was a $5 par stock repurchased for 12, the APIC - Stock would be debited for the difference between the $5 par and the issuance price $8 = $3), Any excess over issuance price is debited to RE.
What is the journal entry process when repurchasing stock? (Cost method)
When repurchasing stock under the cost method, you would just debit the repurchase (cost) price to TS. If you were to re-sell the TS, you would debit the sale price to cash, credit the TS original repurchase price, then you would would plug the difference to APIC (if available per previous JE’s) or RE.
What amounts should be reported in accumulated OCI related to the pension plans on BAlance Sheets:
Remeasurements of the defined benefit liability, including remeasurements from actuarial gains, are reported in other comprehensive income and are not reclassified to the income statement.
How should discounted notes proceeds be recorded:
At the maturity value less the discount applied.
