Monetary Exchange w/ non int loan & SFAS No 6 c/s used as liability

Question 1

How to find the interest revenue and the carry amount on a non-interest note payable exchange for an equipment?

Answer 1

Step 1)
Face amount on non-interest bearing note
x Present value factor at $$ for # of periods
—————————
= Carry amount at 1-1- Period 1

Step 2) 
Carry amount at period 1 
x % interest rate 
-------------- 
= Interest revenue

then: Interest revenue + carry amount = New carry amount on 12-31-Period 1

Step 3) New carry amount on 12-31-Period 1
x % interest rate
——————
= New carry aount on 12-31-year 2

Example:

Face amount $200,000
x PV factor 0.75
———— ————
= carry amount 150,000 at 1-1-period 1

Carry amount 150,000
x 0.10 interest 0.10
———————– ———
= interest rev $15,000

Add back interest revenue: $15,000 + $150,000
= $165,000 new carry amount on 12-31-period 1

Carry amount 165,000
x 0.10 interest 0.10
—————- ———
= interest rev $16,500 at 12-31-period 2

Add back interest: 16,500 + 165,000 = 181,500

Question 2

What is the meaning of SFAS No 6, classification of short-term obligations expected to be refinanced using common stock proceeds?

Answer 2

THIS ANSWER NEED TO BE REVISED!!!!!!!!!!!!

If equity securities have been issued [after the balance sheet date but before the balance sheet is issued], the SHORT-TERM OBLIGATION, although excluded from current liabilities, shall not be included in owners’ equity.

Other words, if issued $400,000 common stock after year-end but before release balance sheet, and this $400,000 used to help pay down $500,000 short-term liabilities.

Then, this $400,000 c/s is reported as a $400,000 short-time liability.

Then: need DISCLOSURE as subsequent event that shows a net short-term liability of $100,000.

Also: Journal entry on this is:

Dr. Short-term liability $400,000
Cr. Long-term liability $400,000