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FAR > F5 > Flashcards

F5 Flashcards

1
Q

Under the effective interest method: How do you calc the amount interest payable for interest period @ a premium?

A

Face Value of the bond at the beginning of the period to the stated int rate

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2
Q

What is the calc for interest payment per period on a bond?

How do you calc interest pymt over life of the bond?

A

Int per period = Face Value * stated rate

Int over life = Int per period * PV factor @ mkt rate

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3
Q

How are remote related party transactions recorded?

A

Not accrued for - only disclosed since it is related party

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4
Q

When are gain contingencies recognized?

A

When gain is realized

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5
Q

What is the formula for present value

A

PV = Future Value * PV factor

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6
Q

How are employee FICA taxes treated for employeers?

A

As a liability NOT expense

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7
Q

How do you calculate the gain on debt restructuring?

A
  1. if FV received < CV of payable given up
  2. CV - FV
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8
Q

What is the criteria for recording exit and disposal activities?

A
  1. Event occurred
  2. Event results in present obligation to provide services in future
  3. entity has little/no discretion to avoid future transfer
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9
Q

What are the 4 things to add in disclosure of exit and disposal?

A
  1. Description of event,
  2. Amount of loss (FV)
  3. Reconciliation of amount
  4. Liab for cost associated with activity if FV not easily rec
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10
Q

What is an ARO and what is the JE when recorded

A

Asset retirement obligation - Legal obligation associate with retirement of LLA from constructing or development

JE: @ PV

DR: ARC
CR: ARO liab

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11
Q

What are the loss contingency rules?

A
  1. loss is PROBABLE and amount is REASONABLY ESTIMATED –> RECORD AND DISCLOSE
  2. Loss is Reasonable possible –> footnote disclosure (if range in amt can be determined –> disclose range)
  3. Loss Is remote –> Ignore
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12
Q

When is their a premium or discount issued on a bond?

A

Discount = MKT > Stated
Premium = Stated > MKT

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13
Q

What are Bond issuing costs and what is their impact on the CV of the bond?

A

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

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14
Q

how to calc gain on debt restructuring on a transfer of asset (from debtor to creditor) for the debtor?

A
  1. Debtor writes asset to FV –> FV of asset transferred - NBV of asset transferred = G/L on transfer
  2. Restructuring gain–> CV of payable - FV of asset transferred
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15
Q

Under the modification of terms for the debtor, how is a Gain rec?

A

Liability - Undiscounted cash flows at new rate

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16
Q

For the bank under debt restructuring - how do you calc the impairment and what is the JE?

A

Amt owed - FV amount Rec = Bad debt expense

DR: BDE
CR: Allowance for credit losses

17
Q

How do you calc the G/L in extinguishment of debt before maturity?

A

Cash paid to extinguish bond
- Carrying value of the bond ( FV - Unamort discount +unamort preimum)

18
Q

What is the JE to record loss on extinguishment of bond?

A

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

19
Q

If the bonds at redemption are Lower than when they were issued –> what is the result

A

Loss (in continuing ops)

20
Q

If there is a loss on a loan guarantee after year end - will this be accrued/disclosed?

A

disclosed

21
Q

Would a discount increase int expense?

A

Yes –> int exp increase amort for discount

22
Q

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?

A

Report the maturity value as a contingent liability

23
Q

How are loans and collection of loans to other entites/related parties reflected in the cash flow statement?

A

As investing activity

24
Q

If a creditor has determined that a loan is impaired, what are the 3 ways to measure the impairment?

A
  1. PV FCF discounted @ the effective rate
  2. loans observable mkt price
  3. FV of collateral if loan is not collateral dependent
25
Q

What GAAP concept relates to recording gain contingencies?

A

Conservatism

26
Q

What is the JE to record interest payment on bond premium and discount?

A

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)

27
Q

What is the calculation for expense of an ARO?

A

Annual depreciation expense + Accretion expense

28
Q

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

A

(160-100-bonus) * Bonus Percentage

29
Q

What type of bonds are debentures

A

Unsecured bonds

30
Q

When are gain contingencies disclosed?

A

When they are probable or reasonably possible

31
Q

How would you calc the sales tax rev and payable of a cash transaction

A

Cash rec
_________ = Sales revenue
1 + sales tax rate

Sales revenue * Sales Tax rate = Amount payable

32
Q

When should employee compensation for future absences (or vacation ) be accrued?

A
  1. services are rendered
  2. Obligation relates to vested or accum rights
  3. amount can be reasonably estimated
  4. Payment is probable
33
Q

If there is note payable due in 10 years with no interest bearing, what is the JE on the date of purchase

A

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)

34
Q

When is there a loss on restructuring

A

NEVER

FAR (9 decks)

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