Lecture 16 Flashcards
r and t have to be the same ___ _ ___
number of units
r (monthly) =
r (annual) / 12
n (monthly) =
n (years) * 12
liabilities
obligations to pay cash or to provide goods and services in the future as a result of past transactions or events
LT liabilities
fall due more than 1 year beyond BS date
reclassify portion due next year as current liability
current liabilities
fall due within 1 year, shown in nominal terms
sometimes combined into “accrued liabilities” when reported
sales tax payable
taxes collected by firm on behalf of the gov.
sales tax DOES NOT impact IS
sales tax journal entry
summarize sales transactions
cash
sales tax revenue
sales tax payable
journal entry - disbursement of sales tax to state
sales tax payable
cash
income taxes payable
income taxes due to the gov based on firms earnings for the period
income tax journal entry
income tax exp
income tax payable
warranty expense
part of COGS, recorded in same period as sales revenue
estimated based on historical and projected warranty claim rates and costs-per-claim
journal entry - warranty expense
warranty expense
est. warranty payable
journal entry - warranty expenditures
warranty payable
cash
EB warranty payable
BB + warranty expense - warranty claims
note
non-interest bearing note requires that the borrower make a single payment to the lender on the maturity date
LT obligations - essential future
require borrower to make a contractual series of 1+ cash payments to the lender in the future
mortgage
mortgage note requires borrower to make a series of equal periodic payments over the term of the mortgage
bond
interest bearing note, requires borrower to make series of equal periodic payments over the term of the bond agreement and a single relatively larger lump-sum payment on maturity date
interest
payment for cost of using lenders funds
principal
a (partial) repayment of the original amount borrowed
net book value of liability
current + noncurrent portion of BS
full amount of a liability - amount already paid
measured at PV
different names for net book value of liability
book value, carrying value
ex. mortgage payable, bonds payable, note payable
int exp on LT liabilities each period =
(net book value of liability) * (interest rate when note was issued)
interest per compounding period
(amount of loan) * (annual interest rate) * (compounding interval [months] / 12 months)
value of note on date of issuance =
PV of future payment
net book value of note liability of date of issuance =
PV of future payments using (historical) interest rate determined when note was issued
add interest to _________
amount of the note payable liability
since interest is not paid
for notes, amount of interest and amount of liability ___ each period
increases
@end of last interest compounding interval, the amount of the note payable will be ___
the amount of the payment to be made at that time
journal entry - reclassification
note payable (etc)
current portion of LT debt
value of mortgage on date of issuance =
PV of future payments
net book value of mortgage liability on date of issuance =
PV of future payments using (historical) interest rate when the mortgage was issued
after mortgage payment, the amount of the liability ___
decreases
for mortgage, amount of interest and liability ___ each period
decreases
after the last payment, the amount of the mortgage liability will be
0
journal entry - interest for note
int exp
note payable
journal entry - interest for mortgage
int exp
mortgage payable
journal entry - payment of mortgage
mortgage payable
cash
current portion of mortgage
compare PV of mortgage payments w/PV 1 year later
for sales tax, cash =
sales revenue + taxes
