Debt Flashcards
How do you calculate the bond’s carrying amount at the end of a year when using the effective interest method?
How do you calculate the bond issue cost (BIC) for the income statement?
How do you calculate the current liability when a long-term note is payable in installments?
How do you calculate bond interest expense for a bond issued during the year? (Update this to include exact formula)
How do you calculate the carrying value of bonds issued with detachable stock warrants when both Fair values are known?
How do you calculate the annual stated interest rate on bonds?
How are earnings from a bond sinking fund treated?
How do you calculate a bonds following year carrying value when issued at a discount using the effective interest method and given initial CV?
How do you determine if there’s a gain on troubled debt restructuring involving only a modification of terms?
How do you report a gain or loss when a company retires bonds early?
What happens if a company uses the straight-line method instead of the effective interest method to amortize bond premiums?
Effective interest method reports higher interest expense initially.
How do you calculate the Net Present Value (NPV) of an investment?
How do you calculate a gain or loss on early bond retirement, including bond issue costs?
How do you calculate the premium or discount on bonds issued with detachable warrants?
How do you calculate the total bond issue proceeds when bonds are issued after the dated date, including accrued interest?
How do you calculate the discount or premium for bonds with detachable warrants when both fair values are known?
How does interest expense behave when a discount on bonds payable is recorded using the effective interest method? ( FIX THIS CARD, NO ANSWER)
How do you calculate the unamortized discount for bonds, and when do you use it?(FIX THIS , is this for straight line method).
How do you classify a note payable as current or noncurrent when it is being refinanced given collateral and a limit
How do you calculate the unamortized bond premium using the effective interest method?
How do you calculate the remaining note payable after a quarterly payment? Remember, note payable is not a Bond
How do you JE the issuance of a bond at 98 with a face value of $50,000?
A client bought a bond at a discount. What does this say about the market interest rate compared to the stated rate?
How do you allocate proceeds when both FV of bonds and warrants are known vs. only one is known?
How do you classify term, debenture, serial, and collateralized bonds?
How do you calculate the required payment for an annuity due to accumulate a specific future value?
What happens to a bond’s price when the market rate is lower than the bond’s interest rate?
What is the step-by-step process to calculate the issue price of bonds given TVM info
How do you classify a note payable when refinancing is intended but the lender is not financially capable of honoring the refinancing agreement?
Must have the ability and intent to reclassify a note as Long term
A company issues $1,000,000 in bonds at a premium of $50,000, with bond issuance costs of $20,000. How do you calculate the net proceeds?
How do you calculate the gain or loss on bond redemption, including unamortized bond premium, bond discount, and issuance costs?
How do you calculate interest income after a troubled debt restructuring when the terms include reduced interest rates and extended maturity?
Primary Reason for Agreeing to a Debt Covenant
Answer: To reduce the interest rate on the bonds being sold.
Explanation: A debt covenant reduces the lender’s risk by limiting the company’s long-term debt, which typically results in a lower interest rate for the company on the debt issued.
How do you calculate the gain on restructuring debt when a company exchanges an asset (e.g., land) for a note?
How do you calc the G/L on restructering of debt if no payments are mentioned? (This card needs work)
What’s the difference between debt restructuring and troubled debt restructuring (TDR)?
Net Present Value (NPV) Calculation steps to determine profitability of investment:
Calculate the annual payment needed to accumulate a specific future value (FV) when deposits are made at the beginning of each period.
What happens if a bond premium is not amortized?
Interest expense is overstated because the premium is not reducing the interest expense.
Stockholders’ equity is understated because overstated interest expense leads to lower net income, which reduces retained earnings (part of stockholders’ equity).
What happens to interest expense for bonds issued at a premium vs. bonds issued at a discount?
Premium bonds: Interest expense decreases over time because the premium amortization reduces the expense.
Discount bonds: Interest expense increases over time because the carrying value of the bond increases, and interest expense is calculated based on this higher value.
What are the steps to calculate the bond’s value at the end of Year 1 when given present value information.
What is included and not included in bond issue costs?
Included:
legal fees
accounting fees
promotion costs
underwriting commissions
Not Included:
Advertising fees (expensed when incurred).
How to calculate the new note payable balance after a quarterly payment?
How do you calculate interest payable on bonds at year-end?
How is the sinking fund reported on the balance sheet?
How should a note payable be presented if it has no stated interest rate and the fair value of services is less than the note’s face value?
How can you determine if a debt restructuring is classified as a troubled debt restructure?
How do you calculate the gain on restructuring debt in a troubled debt restructuring when an asset is given up.
What are the Steps to Solve for Present Value and Interest Income in a Debt Restructuring
How to calculate Restructuring Debt Gain when cash is paid to settle Debt
Whats the Primary Reason for a Debt Covenant Limiting the percentage of its Long-term Debt
To reduce the interest rate on bonds
Calculate bond carrying amounts / interest rates and fill in amortization table
Your Amortization table
How do you calculate the unamortized premium on a bond?
How do you calculate the effective annual interest rate on a bond?
Bond premium amortization formulas
Sim Disc Amort table
Sim Disc Amort/BS 2
Debt covenant sim for reference
