F5

Question 1

Refinancing note payable

Answer 1

A short-term obligation is excluded from current liabilities and included in noncurrent debt if the company intends to refinance it on a long-term basis
supported by
1.Non cancellable financing agreement
2.actual refinancing

Question 2

Accumulated Vacation expense

Answer 2

1.Services are already rendered and
2.The amount can be reasonably estimated and
3.The obligation relates to vested or accumulated rights and
4.Payment of the compensation is probable

Question 3

Amortization of premium

Answer 3

Reduces interest and carrying value
If amortization not done both interest and carrying value will be overstated

Question 4

Troubled Debt restructuring

Answer 4

Settlement -FV<Amount of debt
Gain=CV-FV

Question 5

Reasonably possible Loss

Answer 5

Only footnote disclosure is required for a “reasonably possible” (not “probable”) loss

Question 6

How is interest expense and interest payment affected when discount on bonds payable

Answer 6

Interest payment -same
Interest Expense-Calculated by nultiplying market interest rate with carrying value
When carrying value increases interest expense increases
Slated interest rate >Effective interest rate=Discount

Question 7

Contingent liability of discounted note receivable

Answer 7

Maturity Value