ACC 300 Chapter 7 Flashcards
Cash equivalents
Short term high liquid investements that are readible convertible to cast and have little risk of changes in values/interest rate
Bank overdrafts
Reported as current liabilities
Face value
Principal amount
Stated rate of interest
Rate on face of the note
Effective rate of interest
Rate used to look up present value factors
Present value
At date of issuance a note is valued at present value of future principal and interest cash flows and discounted at the market rate of interest
Implicit interest rate
Rate that a company computes when it knows the future amount and the present value of a note
Discount on notes recieveable
Excess of the fface value over the present value. Market rate is greater than stated rate
Premium on notes revevible
Excess of the present value of the note over the face value. Market rate is less than stated rate
Net carrying amount of the note
This is the anount at which notes are reported on the balance sheet. Face value less discount or plus premium
Amoritaztion
The process of writing off the discount or premium over the life of the note
Effective interest method
Amotization method which determines periodic interest revenue by applying a constant interest rate to the net carrying amount of the note
Fair value option
Recivables are recorded at fair value unrealized holding gains or losses are reported as part of net income
Secured borrowing
Assigning or pledging. Used as collateral, while borrowing cash by promissory note
Secured borrowing borrower
Makes collections on all accounts and remits the collections plus finance charge to the lender
