F5 - Liabilities Flashcards
CPA-00657: Able Inc. had the following amounts of long-term debt outstanding at December 31st, Year 1:
14 1/2% term note, Due in Year 2 = $3,000
11 1/8% term note, Due in Year 5 = 107,000
8% note, due in 11 annual principal payments, plus interest beginning December 31, Year 2 = 110,000
7% guaranteed debentures due Year 6 = 100,000
Total = $320,000
Able’s annual sinking fund requirement on guaranteed debentures s $4,000 per year. What amount should Able report as current maturities of long-term debt as of December 31, Year 1, balance sheet?
Answer: (B) $13,000
RULE: Current maturities of long-term debts in the balance sheet should include amounts due and payable within 12 months of the balance sheet date.
The $4000 sinking fund requirement should be disclosed in a footnote but not included as a current maturity of long-term debt. Deposits into a bond sinking fund are an asset held by a trustee to repay the entire liability at maturity.
CPA-00449: The discount resulting from the determination of a note payable’s PV should be reported on the balance sheet as a (an):
Answer: (C) Direct reduction from the face amount of the note.
Although the discount is a separate account from the note payable account, the note payable is reported on the balance sheet at the net of the note payable face value less the unamortized discount.
