F5 M3 Long-Term Liabilities Flashcards
What is the normal present value formula?
Present value = Future amount x Present value factor
Present value = Future value / (1+r)^n
n = number of periods
r = periodic interest rate
When working with the present value of $1 and future value of $1 computations, how many cash flows will there be?
1 lump sum
When working with annuities, how many cash flows will there be?
Multiple equal cash flows
What is the difference between an ordinary annuity and an annuity due?
Ordinary annuity is at the end of each period
Annuity due is at the beginning of each period
How do you calculate the present value factor?
1 / (1+r)^n
n = number of periods
r = periodic interest rate
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?
i = 3% n = 40 periods
How do you calculate your future value factor?
(1+r)^n
What is the formula for the present value of an ordinary annuity?
Annuity payment x present value of ordinary annuity of $1 for appropriate n and r
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?
PV ordinary annuity minus one period
What value do you record long-term liabilities?
Present value
Current maturities of long-term debt in the balance sheet should include amounts due and payable within ____ months of the balance sheet date.
12 months
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.
Noncurrent
Although the discount is a separate account from the notes payable account, the note payable is reported on the balance sheet at the _____.
Net of the note payable face value less the unamortized discount
Loan origination fees shall be deferred and recognized
Over the life of the loan as an adjustment to interest income
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?
$5,560