FAR 12 Flashcards
The market price of a bond issued at a premium is equal to the present value of its principal amount:
An the present value of all future interest payments, at the market (effective) interest rate.
Borrower: How do you record initial j/e for acquiring a bond at a premium?
Dr. Cash
Cr. Premium on bonds payable
Cr. Bonds Payable
How do you record the entry for the first interest payment on a bond?
Dr. Bond interest expense (for payable)
Cr. Cash
Borrower: How do you record initial j/e for acquiring a bond at a discount?
Dr. Cash
Dr. Discount on bonds payable
Cr. Bonds payable
How do you calculate the income statement component of effective interest rate method?
Income Stateemnt
Net Carry Value x Effective interest rate = Interest expense
How do you calculate the balance sheet component of effective interest rate method?
B/S
Bond Prince x Coupon Rate = Interest Paid
What is the J/E to record bond amortization for the borrower?
Dr. Bond Interest Expense
Dr. Premium on bonds payable
Cr. Cash
What is the J/E to record bond amortization for the Investor (Lender)?
Dr. Cash
Cr. Investment in bonds
Cr. Bond interest revenue
If you incorrectly used straight line method instead of effective interest method to amortize discount, how would it affect year 1 and the last year?
Overstated in year 1
No effect at the end of the term.
How are gains or losses on fixed assets (including involuntary conversions) recognized?
During the period incurred based on recorded amount (NBV) plus any costs associated with the transactions.
Under US GAAP, in preparing consolidated financial statements of a U.S. parent company with a foreign subsidiary, the foreign subsidiary’s functional currency is the currency:
Of the environment in which the subsidiary primarily generates and expends cash.
The research costs associated with an internally developed asset will always be?
Expensed.
During a period of inflation, holding a monetary liability would result in a?
Purchasing power gain.
Is gain or loss recognized under GAAP book value method at the time bonds are converted to common stock?
No.
The use of the market value method recognizes gain or loss?
Yes. but it is not GAAP.
How do you calculate the bonds book value?
Face value less the unamortized discount.
Discount or premium on the sale of bons is included in the carrying value of the bonds on the?
Balance sheet.
The amount of bonds payable recorded should be?
Recorded net. The amount issued at face value less stock warrant amount
What statements are required to be presented for special-purpose governments engaged inly in business type activities (such as utilities)
The financial statements required for enterprise funds, including MD&A and RSI.
The debt service fund is part of?
The governmental fund.
How do you record the JE for budgeted amounts?
Dr. Estimated rev cont. Dr. Est other financing sources. Dr. Budgetary control (negative) Cr. Appropriations control Cr. Estimated other financing uses. Cr. Budgetary control (positive)
When a snowplow pruchased by a governmental unit is received, it should be recorded in the general fund as an?
Expenditure.
Dr. Expenditures
Cr. Vouchars Payable
It is inappropriate to record depreciation expense in?
Governmental funds. It does not reflect the use of financial resources.
Fixed assets donated to a governmental unit should be recorded?
At estimated fair value when received.
