Financial Liabilities & Long Term Debt Flashcards
Liquidation with Notes
- When liquidating reduce value of note by the liquidating value of collateral
- Multiply that amount by the & being paid then add the liquidating value of collateral
Trying to figure out if interest is understated or overstated for a particular year
- multiply (# of months by 12), then multiply by interest rate and then my value of loan
- do that for each loan and find the difference between them and interest expense given
Debt Amortization Schedule
Cash Interest—Interest Exp—Discount/Premium—CV
CV means carrying value
Debt Journal Entries with Premium or Discount
Expense
Discount on Note Payable
—–Premium on Note Payable
—–Note Payable
Interest Expense Journal Entries
Interest Expense
Premium on Note
—–Discount on Note
—–Cash
End of Interest Journal Entries
- Interest Expense J/E
- Notes Payable
- —-Cash
Interest Expense when Discount
Market is bigger than Stated
Interest Expense when Premium
Market is less than Stated
Debt Retirement Journal Entry
Bonds Payable - Face of Bonds Retired Premium - Unamortized Portion Loss - Plug ----------Bond Issue Costs - Unamortized Portion ----------Discount - Unamortized Portion ----------Cash - Market Price ----------Gain - Plug
Net amount for computing gain or loss on the retirement of debt
Subtract unamortized bond issue costs and discounts and if its a portion of the year count that in too
Premiums and Discounts when there is FV
Not included
Underwriter Fees for bonds
Deducted
Bond Issue Journal Entry
Cash
Premium
—–Discount
—–Bonds Payable
Deferred charge for bond issue costs using effective interest method
the same amount will be deducted as an expense in the income statement using the effective interest method.
