M4 Pillars Flashcards
What do Balloons represent
Represent a long term liability - the whole note is due at one date
How do you calc bonus when it is taken “After deducting bonus”
Take eligible income and bonus and subtract the bonus by that amount (That is new eligible income) Than take the new amount and calc the bonus percentage.
How do you calc sales tax payable?
If store is paying for sales tax we take the sales of 2k and divide it the rate. (2,000/1.08) Which will give the sales tax and the difference is the sales revenue.
What is vacation expense reported as?
Reported as both the accrued amount and the amount that is expensed.
How do you recognize contingent liabilities?
These are recognized evenly over the life of the contingency
How do you recognize a change in value of for a property after it is depreciated?
Change in value is depreciated as G/L
What is the warranty expense?
is the sale amount (x) the estimate. Thats it
What is accrued interest?
Based on principle left of the loan dont forget to take into consideration
Subsequent events hierarchy
Remote: no accrue or disclosure
Reasonably possible: no accrue BUT DISCLOSE
Possible: Accrue AND disclose
What happens when we factor WITH recourse
We DISCLOSE a contingent liability for the face amount
Liabilities that are due WITHIN 1 year can still be classified as long term IF
They have the intent and ability to refinance. It must be done after the balance sheet date but before issuance of the F/S.
What is the interest receivable on a note?
Difference between balance sheet amount and income statement amount. (Amortization)
How do notes receivable appear on the balance sheet?
They appear as the PV of an ordinary annuity at the market rate
How do we report notes payable as of balance sheet amount?
When reporting notes payable back out interest
When do we use PV factor of future annuity?
For payments made in advance and for future deposits.
How do we report bond sinking funds?
Disclosed in the footnotes
What amount do we report as notes payable after a payment
1) use note table
When using the note table if there is a discount on the note we have to reduce the face amount by the discount than back out the interest to get the note as of year end.
2) balance sheet presentation always shows notes - discounts
How do you calc compounding interest on a note
Year 1 loan (x) rate = interest
Take interest from Y1 and add it to the loan amount than (x) the rate.
What are the proceeds of a bond?
Figure out what discount or prem is. Than we take accrued interest which is the balance sheet amount and the rate.
What DIS-qualifies as debt extinguishment?
Placing it into a trust.
What is the G/L on bond debt
Bond at balance sheet +/- prem or discount = CV of bond. Take the CV (-) cash paid to retire is the G/L on retirement
Operating lease rules:
Shall record an operating lease on a straight line basis
Payment known at commencement is ehat is used
Interest and lease is recorded together
What happens when there are free months on a lease
Take the months in payment multiply by amount = what is paid
Take what is paid divide by total ALL lease months
How are leasehold improvements considered with leases?
Take the leasehold improvement, straight line it over the life of the improvement.
That is what is amortized.
Add the amortization (+) current monthly lease expense.
Finance lease rules
OWNS
Ownership transfer
Written purchase option that is reasonable certain to exercise
PV of lease payments is 90% of FV of property
Lease term is 75% of the assets useful life
Specialized asset
PV of an ordinary annuity is what
Year end payments
PV of annuity is what
beg year payments
IF title is passed at end of lease how do we amortize the lease?
By the assets useful life
If no title transfer than we dep/amor using the lease term.
