Chapter 8 - Note Payable Flashcards
Under PFRS 9, paragraph 5.1.1, a note payable not designated at fair value through profit or loss shall be measured initially at _____.
Fair value minus transactions costs that are directly attributable to the issue of the note payable.
If the note payable is irrevocable designated at fair value through profit or loss, the transaction costs are _____.
Expensed immediately
The “fair value” of the note payable is equal to the _____ of the future cash payment to settle the note payable.
Present value
The term “present value is the _____ of future cash outflow in settling the note payable using THE MARKET RATE OF INTEREST.
Discounted amount
Under PFRS 9, Paragraph 5.3.1, after initial recognition, a note payable shall be measured:
A. At amortized cost using the effective interest method
B. At fair value through profit or loss if the note payable is designated irrevocably as measured at fair value through profit or loss
The amortized cost of note payable is the amount at which the note payable is…
Measured initially minus principal repayment, plus or minus the cumulative amortization using the effective interest method of any difference between the initial carrying amount and maturity amount
The difference between the face amount and present value of the note payable is amortized through…
Interest expense using the effective interest method
The difference between the face amount and present value is either _____ or _____.
Discount or premium in the issue of note payable.
When a note is issued solely for cash, the present value is equal to the _____.
Cash proceeds
When a property or non-cash asset is acquired by issuing a promissory note which is interest bearing, the property or asset is recorded at the _____.
Purchase price.
The purchase price is reasonably assumed to be the present value of the note and therefore, the fair value of the property because the note issued is interest bearing.
When a non-interest bearing note is issued for property, the property is recorded at the _____ of the propperty.
Cash price.
The cash price is assumed to be the present value of the note issued.
The difference between the cash price and the face of the note issued represents the _____.
Imputed interest
Based on the sound philosophy that no lender would part away with his money or property interest-free.
Imputed interest
_____ represents the amount outstanding every year
Note payable
Developed from the note payable outstanding every year.
Fraction
Amortization
The amount of discount multiplied by the fraction developed
_____ represents the annual installment
Payment
_____ is equal to the preceding present value multiplied by the implied interest rate
Interest
_____ is the portion of the payment after deducting interest representing principal.
Principal
_____ is the balance of the preceding present value after deducting the principal payment.
Present value
_____ is equal to the preceding present value multiplied by the implied interest rate.
Interest expense
_____ is the balance minus the interest expense every year
Discount on note payable
_____ is the preceding balance plus the interest expense every year.
Present value
In accordance with PFRS 9, paragraph 4.2.2, at initial recognition, a note payable may be _____ irrevocably designated as _____.
At fair value through profit or loss.
PFRS 9, paragraph 5.7.7, provides that the gain or loss on financial liability designated at fair value through profit or loss shall be accounted for as follows:
A. The change in fair value attributable to the CREDIT RISK is recognized in OTHER COMPREHENSIVE INCOME.
B. The remaining amount of the change in fair value is recognized in profit or loss
The risk that the issuer of the liability would cause a financial loss to the other party by FAILING TO DISCHARGE THE OBLIGATION.
Credit risk
Credit risk does not include market risk such as interest risk, currency risk and price risk
Application Guidance B5.7.9 provides that amount recognized in other comprehensive income resulting from change in fair value attributable to credit risk…
Shall not be subsequently transferred to profit or loss.
However, the cumulative gain or loss recognized may be transferred within equity.
Under the fair value option, any transaction cost is recognized as _____.
Outright expense
There is no amortization of discount and premium on note payable. As a matter of fact, interest expense is recognized using the nominal or stated interest rate.
An unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand or at a fixed or determinable future time a sum certain in money to order or to bearer.
Promissory note
