5: Liabilities

Question 1

Criteria for Exit or Disposal liability recognition

Answer 1

Footnote until

1. An obligation event has occurred (announced publicly with details)
2. The event results in a present obligation to transfer assets or to provide services in the future
3. The entity has little or no discretion to avoid the future transfer of assets or providing of services.

Question 2

Cumulative Accretion Expense + Cumulative Depreciation Expense=

Answer 2

Asset Retirement Obligation (ARO, total cost)

Question 3

Gross Method of reporting liabilities

Answer 3

Report whole liability, if discount is taken later you debit the liability and credit a discount.

Question 4

Net Method of reporting liabilities

Answer 4

Report the liability assuming you will take the discount, if discount is not taken later then you credit the liability and debit discount lost.

Question 5

Straight line amortization method

Answer 5

Premium (discount) and issuance cost/ Number of periods the bond is outstanding= period amortization

Question 6

Effective Interest method

Answer 6

carrying value at the beginning of the period x effective interest rate = interest expense