F5 M3 Long-Term Liabilities Flashcards

1
Q

What is the normal present value formula?

A

Present value = Future amount x Present value factor
Present value = Future value / (1+r)^n
n = number of periods
r = periodic interest rate

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2
Q

When working with the present value of $1 and future value of $1 computations, how many cash flows will there be?

A

1 lump sum

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3
Q

When working with annuities, how many cash flows will there be?

A

Multiple equal cash flows

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4
Q

What is the difference between an ordinary annuity and an annuity due?

A

Ordinary annuity is at the end of each period

Annuity due is at the beginning of each period

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5
Q

How do you calculate the present value factor?

A

1 / (1+r)^n
n = number of periods
r = periodic interest rate

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6
Q

If interest compounds on an “other-than-annual basis” the number of periods and the interest rate must be adjusted. For example, if the annual interest rate is 12% and interest compounds quarterly over 10 years what is i and n?

A
i = 3%
n = 40 periods
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7
Q

How do you calculate your future value factor?

A

(1+r)^n

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8
Q

What is the formula for the present value of an ordinary annuity?

A

Annuity payment x present value of ordinary annuity of $1 for appropriate n and r

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9
Q

If you’re needing to calculate the present value of the annuity due but you’re given the present value of an ordinary annuity, how can you calculate the PV of the annuity due?

A

PV ordinary annuity minus one period

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10
Q

What value do you record long-term liabilities?

A

Present value

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11
Q

Current maturities of long-term debt in the balance sheet should include amounts due and payable within ____ months of the balance sheet date.

A

12 months

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12
Q

Bonds or notes due within one year are shown as (current/noncurrent) if the issuer has the intent and ability to refinance with a new issuance of long-term debt.

A

Noncurrent

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13
Q

Although the discount is a separate account from the notes payable account, the note payable is reported on the balance sheet at the _____.

A

Net of the note payable face value less the unamortized discount

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14
Q

Loan origination fees shall be deferred and recognized

A

Over the life of the loan as an adjustment to interest income

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15
Q

You’re given that there will be five equal annual year-end payments of $5,009 and that the company recorded the note at its present value of $19,485. How much total interest revenue will be earned over the life of the note?

A

$5,560

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16
Q

The effective interest rate paid includes all costs charged by the ____.

A

Bank

17
Q

Normally interest is imputed when no rate is stated. An exception exists for ______. The note is recorded at _____.

A

Receivables and payables arising from transactions with customers or suppliers in the normal course of business when the trade terms do not exceed 1 year.
Recorded at face.