Exam 1 Flashcards
Calc interest payment
Face value x stated interest rate
Calc interest expense
Present Value of cash flows x market interest rate
Discount
Stated rate less than effective rate
Premium
Stated rate is more than effective rate
Present value of cash flows
Use the effective rate as reference when calc
Traded payable
Formally recognized by written promissory note, long term with interest
Non interest bearing note
Interest is deducted from the face amount to determine the cash proceeds available to borrower
Secured loans
Short term loan with collateral as security
Commercial paper
Minimum 25,000. Interest discounted st issuance, mature withing 270 days
Gift card breakage
When giftcards expire
Working capital
CA-Cl
Product warranties
Produces a loss contingency
Extended warranty
Recorded like deferred revenue
Debenture bond
Backed by full faith and credit
Debt issue cost
Reduces cash proceeds, accounted like discounts on bond payable
Trades payable
Often longer and includes interest.
Formally recognized with a promissory note
Short term notes payable
Lower int rate
Promissory note
Line of credit
Agreement to provide short term financing
Committed v noncommitted
Secured kaons
Has collateral like AR to secure the Loan
Conditions for paid future absences
Obligation already paid by employees services
Can be taken a year later
Payment probable
Can be reasonably estimated
Conditioning for ST obligations to be refinanced
Company intend to refinance on LT basis
Demonstrated ability to refinance to LT bases
Product warranties
Loss contingency
Cost recorded on same period prpduct sold
Extended warranty
Seperate performance obligation
Recorded as deferred revenue
Debt securities
Bonds and notes
Equity security
Common and preferred stock
HTM
Record amortized cost
Unrealized disclosed only
Typically investing
Trading securities
Reported at FV
Unrealized effect NI
Recognized as operating
Available for sale
Unrealized recognized in OCI
Must reverse FV Adj to reclass to OCI
Typically investing
Passive influence
Treat like trading securities
Unrealized to NI
Record at FV
Does not include revenue from NI
Significant Influence
Calls for equity methods <20% voting right
Equity method
Recorded at cost Dividends booked Record investment revenue from NI Adjust for depreciation No FV adj
Recording investment revenue (EM)
Net income × % of share
Increases investment
Book against revenue
Dividends Equity Method
Book against investment
Adjustment for depreciation
Book Rev against investment, decreases investment
Reporting investment EM
Original cost + investment revenue
(Share of NI - Dividends earned)
Passive dividend collection
Book against dividend revenue
