Far Bonds module 4

Question 1

Contingent liabilities dicounted should be dislcosed at what value and when

Answer 1

When with recourse and at their maturity value by the person issuing with recourse they maintain liability if other person is unable to collect

Question 1

When given a note payable with the amount of the full note and the principal payments and interest rate-how calc accrued interest payable

Answer 1

Take the full amount of the note less the first interest payment then take that amount and multiply it by the interest rate and the number of months remaining in year

Question 2

The amount of accrued interest receivable that the company that is issuing the mortgage should charge is the amount of the loan times the interest rate on the loan and the months held

Answer 2

Interest earned is calculated as the proceeds times the present value write and the difference between interest earned is amortized and deferred

Question 3

To calculate the cash received on bonds

Answer 3

Take the cash price paid times number of bonds issues then add accrued interest payable by the face value of the bond times the coupon rate times portion of the year held then deduct any bond issues costs and this is the amount of cash received.

Question 4

When lease rates fluctuate at what rate do you report them at

Answer 4

On a straight line basis after taking the average and dividing

Question 5

When calcukating sales taxes paid and sales revenue when given a tax rate and given the amount of sales and payments

Answer 5

Take the sales revenue and divide by 1+ the tax rate then multiply that amount times the tax rate then subtract any amounts debited for already paid this is your sales tax payable and the first number calculates is your sales revenue

Question 6

Whenn calculting a loss on early extinguishmentnof bonds how

Answer 6

Take face value of bonds being retired subtract out amortization of discount by pro rata share take amounts of bonds being retired in numerator/ total bonds in denominator then multiply by aamortizedd. bond issue costs then subtract by premium reacquired and this is your lsoss

Question 7

When assets are transferred in a troubled debt restructuring the assets transferred is written down to fair value then a ordinary gain or loss is recorded

Answer 7

After this the gain or loss recorded on debt restructuring is the difference between debt and fair value of asset transferred

Question 8

Calculating a loss on bond retirement when issued at a discount and retired at a premium

Answer 8

1-calc the discount. Then calc the difference between faace value and discount. How much time has gone by and how long were bonds for create a ratio of what is left on bond discount that hasn’t been amortized multiply that times discount and deduct for face value. Do the same thing if it gives you bond issue costs this will give you the net carrying value you can then subtract this from the premium price you reacuired it for to get the loss

Question 9

When stated rate of interest is less than effective rate of interest

Answer 9

1st this means issued at a disocunt is stated rate is less than effective rate amount recorded for interest expense will be greater thanthan the amount actually paid for the interest

Question 10

Bennett Inc. issues 100 4% coupon, $1,000 par value bonds maturing in 5 years. The bonds are issued at a price of $92,488 and the market rate for comparable bonds is 5.75%.

Assuming that Bennett uses the straight-line method of amortization, interest expense for Year 2 is closest to:

Answer 10

5500
Calculated as such first see what the difference is between face value and discount price then take that discount and divide by five years then take face value of bond times coupon rate to get interest payable and add that to the annual dicount

Question 11

Use the yield when calculating present value of the bonds for interest rate use the yield rate then use coupon rate times face value

Answer 11

Remember to use present value in the table not future value

Question 12

credit right of use asset amortization to reduce it

Answer 12

and debit lease liability to reduce it

Question 13

When calculating interest expense pay attention to the months that are in the year calculating

Answer 13

And the months in the term of lease

Question 14

If a lease pays annual and its asking about the reduction in the lease carrying value

Answer 14

There will be no interest in year one if pay annual so year 2 will be the first interest payment and that first reduction in the carrying value.

Question 15

For what the lessor should include in the lease expense when given lease improvements first month last month and refundable security deposit

Answer 15

Take length of lease in years times months and then divide the improvements by months add this amortization of improvements to the first months rent that will be what you include as your expense

Question 16

For a troubled debt restructuring involving only a modification of terms, which of the following items specified by the new terms would be compared to the carrying amount of the debt to determine if the debtor should report a gain on restructuring?

Answer 16

Total future cash payments

Question 17

To calculate an estimated warranty liability you take

Answer 17

The percentage of estimate in first year and second year for each year given and add those amounts all together then subtract actual warranty costs incurred.

Question 18

Pay attemtion to queestions regarding fica and witholding

Answer 18

If it says x amount has been withheld already then you only need to calculate the additional that has not been withheld

Question 19

A lease with a bargain purchase option that lessee is reasonably certain to exercise what impact will it have on cash flow from operations

Answer 19

the variable lease payments not included will negatively impact

Question 20

To caalculate stated interest rate on bonds when given cash paid interest expense and carrying value and face value of bonds

Answer 20

The cash paid for the interest expense and divide by the face value of the bonds. The gaap interest rate would be interest expense/ carrying value of the bond. don’t forget to multiply this rate by two if given that it is semianual

Question 21

When given bonds that pay interest quarterly how do you account for the total proceeds at issuance if given a discount face value

Answer 21

1) Take the number of bonds and multiply by value of bonds and discount rate that is what bond issues for
Then take the bond face value times number of bonds times stated interest rate then divide by four to get the quarterly interest paid. Look to months to see how many months have gone by for quarters then multiply the amount 2/3 or whatever amount times the interest then add that to the price at issuance

Question 22

Estimated liabilities when given box tops or item to redeem with cash

Answer 22

1) Take the estimated redeem percentage multiplied by amount shown
Less the actual amount redeemed
Divide by the number that they need to use to reddem
Then multiply by what it cost you for each item less what they pay you this is estimated liability

Question 23

When a piece of equipment is leased to calculate the value of that equipment in someones balance sheet you would

Answer 23

Take the payment required if it is at the beginning it will be an annuity due factor you will use
Then you will take the residual value and it will be the present value of a dollar since a one time payment add them together and that is the value of the equipment on the balance sheet

Question 24

In a finance lease the reduction of the lease liability should equal

Answer 24

The value of the liability at the end of the previous year

Question 25

To calculate real estate taxes payable when you have two equal installments and pay on novermber 1 but asssed taxes for fiscal year ended in june and have two payments of 12000

Answer 25

You take july and august multiply that by the 24000 payment time 2/12
Then September by 1/12
and October by 1/12 add all those and those are the amount that will be debited to taxes payable

Question 26

When looking at your accounts payable balance

Answer 26

Look at when items were mailed out if you incurred the amount but haven’t sent it out it should still show as a value in your accounts payable

Question 27

Footnote disclosures required when reasonable possible

Answer 27

Only accrue an amount when probaable and know the value

Question 28

To calculate a lease price when part of the year is free first take

Answer 28

Amount of monthly lease times the amount of payments
Then multiply the year the lease spans by 12 divide the first number by this then multiply by the months you used the lease for.

Question 29

TBS Hints journal entry correcting accrued interest payable

Answer 29

If you report interest expense as accrued interest payable you need to debit retained earnings as it will be overstated and credit to accrued interest payable as it should be credited not debited

Question 30

For the asset retirement cost aand obligation to calculate the present value in a task based simulation
Then to calculate the total accfretion given over five years you take

Answer 30

Use the risk free credit rate that the company is provided to calculate the present value
The future value of ARO given less the present value you calculated and that it total accretion over five years

Question 31

Escrow liability beginning plus receipts plus interest earned less payments for taxes

Answer 31

is the calculation for ending escrow liability