F5 - Liabilities

Question 1

When effective interest method of amortization is used for bonds issues at a premiums the interest payable is calculated?

Answer 1

Face Value of the bond at the beginning of the period multiply by the contractual interest rate.

Question 2

The market price of a bond issued at a premium is equal to the present value of the its principal amount and the

Answer 2

Present value of all future interest payments, at market interest rate.

Question 3

What are serial bonds and Debenture Bonds?

Answer 3

Serial bonds are prenumbered bonds that the issuer may call and redeem pro-rata over the life

Debenture bonds are unsecured bonds

Question 4

The extinguishment of a debt (bond) the caculation is?

Answer 4

Face value of the retired bond

• Less pro rata unamortized bond issuance cost
  ● Retired bond / full face value of the bond × unamortized insurance bond cost.

= Give net carrying value
- Less reaquisition price (face value of retired bond + premium or - descount)

= Extingishment debt

Question 5

Calculate the issuing price of a bond is

Answer 5

PV of Principal for the year/periods @ PV factor of yield rate

+

PV of interest annuity for year/period ( bond $ * interest stated rate) * PV factor of yield rate

= bond issue rate.

Question 6

What are the contingency treatments

1 a Loss that are probable (amount and range is easily estimated)
1 b amount cannot be reasonably estimated
2 loss contingency resonable possible
3 loss contingency remote
4 loss contingency remote but has garantee
5 gain contingency probable or reasonable
6 gain contingency remote

Answer 6

1a Accrued and Disclose range and nature
1b Disclose range and nature
2 Disclose range and nature
3 IGNORE 
4 Disclose range and nature
5 Disclose range and nature
6 IGNORE

Question 7

How to calculate trouble debt restoration

Answer 7

That loan amount * PV (@ rate on pending years)
= PV of principal
Loan amount * reduce rate = annual interest * PV factor (@ rate on pending years)
= PV interest

(PV of principal + PV interest) - (note receivable + accrued interest [add each year interest not paid])
= valuation allowance

Question 8

Liabilities are recognized when the following criteria are met

Answer 8

1. An obligation event has occurred
2. The event results in a present obligation to tranfer assets or to provide services in the future.
3. The entity has little or no discretion to avoid the future tranfer of asset or providing of service.

Question 9

A liability is only recognized when all of the following criteria are met for a commitment to an exit or disposal are:

Answer 9

1. A obligation event has occurred.
2. Events results in a present obligation to tranfer assets or to provide services in the future.
3. Entity has a little or no discretion to avoid the future transfer of asset or providing of service.

Question 10

The market value of a bond issued at a discount or premium is presentes value of 2 cash flows:

Answer 10

1. The present value of the principal amount plus
2. The present value of all future interes payments
3. Both at market effective rate of interest.