F5 Flashcards
Under the effective interest method: How do you calc the amount interest payable for interest period @ a premium?
Face Value of the bond at the beginning of the period to the stated int rate
What is the calc for interest payment per period on a bond?
How do you calc interest pymt over life of the bond?
Int per period = Face Value * stated rate
Int over life = Int per period * PV factor @ mkt rate
How are remote related party transactions recorded?
Not accrued for - only disclosed since it is related party
When are gain contingencies recognized?
When gain is realized
What is the formula for present value
PV = Future Value * PV factor
How are employee FICA taxes treated for employeers?
As a liability NOT expense
How do you calculate the gain on debt restructuring?
- if FV received < CV of payable given up
- CV - FV
What is the criteria for recording exit and disposal activities?
- Event occurred
- Event results in present obligation to provide services in future
- entity has little/no discretion to avoid future transfer
What are the 4 things to add in disclosure of exit and disposal?
- Description of event,
- Amount of loss (FV)
- Reconciliation of amount
- Liab for cost associated with activity if FV not easily rec
What is an ARO and what is the JE when recorded
Asset retirement obligation - Legal obligation associate with retirement of LLA from constructing or development
JE: @ PV
DR: ARC
CR: ARO liab
What are the loss contingency rules?
- loss is PROBABLE and amount is REASONABLY ESTIMATED –> RECORD AND DISCLOSE
- Loss is Reasonable possible –> footnote disclosure (if range in amt can be determined –> disclose range)
- Loss Is remote –> Ignore
When is their a premium or discount issued on a bond?
Discount = MKT > Stated
Premium = Stated > MKT
What are Bond issuing costs and what is their impact on the CV of the bond?
Transaction fees when bonds are issued (legal, accting fees, underwriting, )
Decreases CV of the bond at issuance and is included in the amort of life of bond
how to calc gain on debt restructuring on a transfer of asset (from debtor to creditor) for the debtor?
- Debtor writes asset to FV –> FV of asset transferred - NBV of asset transferred = G/L on transfer
- Restructuring gain–> CV of payable - FV of asset transferred
Under the modification of terms for the debtor, how is a Gain rec?
Liability - Undiscounted cash flows at new rate
For the bank under debt restructuring - how do you calc the impairment and what is the JE?
Amt owed - FV amount Rec = Bad debt expense
DR: BDE
CR: Allowance for credit losses
How do you calc the G/L in extinguishment of debt before maturity?
Cash paid to extinguish bond
- Carrying value of the bond ( FV - Unamort discount +unamort preimum)
What is the JE to record loss on extinguishment of bond?
DR: Bond Payable (face value)
DR: Loss on Payable (plug)
CR: Discount on BP and BIC (unamort portion of discount and BIC)
CR: Cash (paid at reacquisition)
DR: BP (Face value)
DR: Premium on BP and BIC (unamort portion of preimum and BIC)
CR: Cash (reacquisition price)
CR: Gain on Extinguishment
If the bonds at redemption are Lower than when they were issued –> what is the result
Loss (in continuing ops)
If there is a loss on a loan guarantee after year end - will this be accrued/disclosed?
disclosed
Would a discount increase int expense?
Yes –> int exp increase amort for discount
IF there is a discounted note receivable at y/e - what is the value reported on the F/S at y/e and as what?
Report the maturity value as a contingent liability
How are loans and collection of loans to other entites/related parties reflected in the cash flow statement?
As investing activity
If a creditor has determined that a loan is impaired, what are the 3 ways to measure the impairment?
- PV FCF discounted @ the effective rate
- loans observable mkt price
- FV of collateral if loan is not collateral dependent
What GAAP concept relates to recording gain contingencies?
Conservatism
What is the JE to record interest payment on bond premium and discount?
Premium:
DR: Int expense (bond CV * mkt rate)
DR: Amort bond premium (differece)
CR: Cash (stated rate * Face value)
Discount
DR: Int expense (Bond CV * mkt)
CR: Amort bond discount (difference)
CR: Cash (Face *stated value)
What is the calculation for expense of an ARO?
Annual depreciation expense + Accretion expense
What is the calculation setup for a bonus that is calculated as a % of income over 100k before income taxes and after bonus income is $160k
(160-100-bonus) * Bonus Percentage
What type of bonds are debentures
Unsecured bonds
When are gain contingencies disclosed?
When they are probable or reasonably possible
How would you calc the sales tax rev and payable of a cash transaction
Cash rec
_________ = Sales revenue
1 + sales tax rate
Sales revenue * Sales Tax rate = Amount payable
When should employee compensation for future absences (or vacation ) be accrued?
- services are rendered
- Obligation relates to vested or accum rights
- amount can be reasonably estimated
- Payment is probable
If there is note payable due in 10 years with no interest bearing, what is the JE on the date of purchase
Even if it says “no interest” –> still need to accrue for interest and will record as if it was sold at a discount “Imputed interest”
Date of purchase:
DR: Equipment (PV of note)
DR: discount
CR: Note payable (full amount)
When is there a loss on restructuring
NEVER
