F-5 Simulation Flashcards

1
Q

How to calculate sales revenue & sales tax payable

A
  1. Divide sales revenue credits by (one plus sales tax %) to get sales revenue
  2. Multiply that by sales tax % to get sales tax collected
  3. Subtract sales tax collected by advance payments (sales revenue credits) to get sales tax payable
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2
Q

Note payable when you don’t record an interest expense

A
  1. Use the Retained Earnings formula
  2. If you don’t record interest expense then net income is too high and R/E is overstated and the opposite is true when you overstate the expense
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3
Q

Interest expense J/E for loans taken

A

Dr. Interest expense

Cr. Cash or payables

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4
Q

Tangible Net Worth

A

Stockholder’s equity minus intangibles

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5
Q

Steps for bond retirement

A
  1. Cash goes out the door so you’re crediting it
  2. Remove everything related to the bond which is the bond payable at face amount including unamortized portion
  3. Then see if you need a gain or a loss
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6
Q

Bond Retirement J/E

A
Dr. Bond Payable - Face amount
Dr. Premium if premium*
Dr. Loss if needed*
Cr. Cash - Face value multiplied by decimal
Cr. Discount if discount*
Cr. Gain if needed*
Cr. Unamortized costs
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7
Q

If bond is a premium and you’re calling at a premium

A

Don’t amortize, just remove the hole thing and the same goes for discounts?

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8
Q

If market value for bonds is less or more than stated value

A
  1. If market rate is less than you have a premium

2. If market rate is more then you have a discount

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9
Q

Issuing a bond journal entry

A

Cash - amount paid
Dr. Discount
Cr. Bonds Payable - face amount
Cr. Premium

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10
Q

Journal entry for bond interest

A

Dr. Interest expense - amount paid multiplied by market
Dr. Premium
Cr. Cash - face multiplied by stated
Cr. Discount

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11
Q

How to quickly determine of bond redemption will equal a gain or a loss

A
  1. If issued at a discount then redeemed at a premium then you have a loss, because you are paying a premium to buy something you issued at a discount
  2. If you issued at a premium and redeemed at a discount, then you have a gain because you are paying a discounted price for something you issued at a premium
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12
Q

Lessee operating lease journal entries

A

Initial entry
Dr. Asset - (minimum payment x annuity)
Cr. Lease liability

Subsequent entries
Dr. Lease exp - annual payment
Cr. Lease liability - Lease expense minus [PV of payments times interest rate]
Dr. Cash
Cr. Accumulated depreciation
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13
Q

Lessee finance lease journal entries

A

Initial entry
Dr. Asset - (minimum payment x annuity)
Cr. Lease liability

Subsequent entries
Dr Interest expense
Dr. Lease liability
Cr. Cash/lease payable

Dr. Amortization
Cr. Accumulated depreciation

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14
Q

How do you book an asset retirement obligation (ARO)?

A

Find the PV of the future cost

Dr. Asset Retirement Cost (ARC)
Cr. Asset Retirement Obligation (ARO)

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15
Q

How to calculate accretion expense

A

Just multiply accretion rate by the ARC

Dr. Accretion expense
Cr. Asset Retirement obligation

*we eventually want it to equal the original future value”

or ARO multiplied by credit-adjusted risk free interest rate

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16
Q

Depreciation for AROs

A

Just divide the carrying value by the number of years

Dr. Depreciation expense
Cr. Accumulated depreciation

17
Q

How is a note payable presented on the balance sheet

A

Face amount less discount on liability itself at the imputed interest rate

18
Q

Journal entry for issuing bond at Discount with interest payments

A

Issuer
Dr. Cash
Dr. Discount
Cr. Bond Payable

Dr. Bond interest expense - market
Cr. Discount on bond payable
Cr. Cash - face

Investor
Dr. Investment in bonds
Cr. Cash

Dr. Cash - face
Dr. Bond investment
Cr. Bond interest revenue - market

19
Q

Journal entry of issuing bond at a premium with interest payments

A

Issuer
Dr. Cash
Cr. Premium
Cr. Bond payable

Dr. Bond interest expense - market
Dr. Premium
Cr. Cash - face

Investor
Dr. Investment in bonds
Cr. Cash

Dr. Cash - face
Cr. Investment in bonds
Cr. Bond interest revenue - market

20
Q

Formula to back into bond coupon rate

A

Payment = Face value x [coupon/annual-semi-quarter]

21
Q

What do lower market rates at issuance mean for bond discount?

A

Higher initial carrying value and amortization of the discount would have been lower

22
Q

What do higher market rates at issuance mean for bond discount?

A

Lower initial carrying value and amortization would have been higher.

23
Q

Changes in market rate of bond and its book value.

A

Change in market rate will not affect the CV of the bond but instead will affect the market value so if the market rate increases the market value of bond decreases in vice versa