F4 - Payables & LT liabilities Flashcards
What is an annuity and how does it work
Annuity= Same payment over a period of time. When question presents annuity payments we have to look at at the “Present value of an ordinary annuity”. Therefore we calc, PV of annuity with correct period (x) payment amount
Notes payable and how to get the ending balance, how it is reported on bal sheet.
Notes payable balance considers both interest and principle. Than the balance sheet account gets reduced by principle only. If payment has been made you have to deduct interest from that payment to get the ending balance for the year. Which is reported on the LT liabilities. (what is due CY is not a notes payable). They are presented at face value (-) discounted rate.
Non interest bearing note
Non interest bearing notes are reported at PV of future cashflows.
When is the note interest payable recorded?
If note is received 8/15 the payable is recorded at that date.
Notes payable recorded at FACE VALUE EXCEPTION
If note is done under usual trade terms, note is due within 1 year it is recorded at face value.
Cost of an asset using a note to pay
Note (-) discount of PV (+) cash paid.
If debt is settled by stock
we report it as a liability
Notes payable issued for services rendered
Presentation is to show note payable at face minus discounted imputed rate
What is the effective interest rate paid by the company when there are loan costs
More than the stated rate plus bank charge
How are notes due reported as?
Since it is a balance sheet account, Notes due presented as the PV of remaining monthly payments.
What portion of the note is considered current liability and short term liability.
The portion of the note that is due in current year is a current liability, if note is 4 years than 1 year worth of payment needs to be accounted for as such.
When interest is compounded annually we take the accrued interest and add it into the principle.
Note payable + interest is Year 1
Year 1 + note + interest is the compound to year 2.
Differences of purchase commitment and purchase agreement
Purchase agreement is not the same as purchase commitment watch for what it is, with an agreement you accrue a loss with a commitment you dont.
What do delivery cost represent on A/P.
delivery cost on APs is the cost to the buyer, seller can prepay but that is a loan an paid back.
Interest payable
Pay attention to years that have passed by. Every year the interest paid reduces since the principle is getting reduced.
