Non Current Liabilities

Question 1

What is interest payable on a bond?

Answer 1

The face amount of the bond X the stated interest rate (aka contractual or coupon rate) X the time period.
Ex: 10000 x 10% x 3/12

Question 2

What is interest expense on a bond?

Answer 2

The carrying amount of the bond multiplied by the effect rate (aka yield rate).

Question 3

What’s the formula for accretion expense?

Answer 3

Beginning carrying amount of the ARO times the credit adjusted risk free rate (CARF).

Question 4

Formula for annuity due

Answer 4

Present value (or future value) of an ordinary annuity multiplied by (1 + i) to get the annuity due.
[i equals interest]

Question 5

What is the unamortized discount?

Answer 5

The difference between the face amount and carrying amount. Example 9000-9621= 621. 621 is the discount amortized
Unamortized discount is the full amount left. Example: bond discount of 3793-621discount amortized =3,172.

Question 6

Fun fact

Answer 6

In a TDR-troubled debt restructuring, a debtor recognizes a gain or loss based on the difference between the carrying amount of the asset and the fair value of the asset or equity interest.

Question 7

What is an ARO

Answer 7

An asset retirement obligation reflects a legal obligation arising from the acquisition construction development or normal operation of an asset

Question 8

What’s accretion expense?

Answer 8

An allocation of the difference between the maturity amount and carrying amount of the ARO.

Question 9

What is a decommissioning liability?

Answer 9

Another name for asset retirement obligation, ARO

Question 10

How do you record an ARO?

Answer 10

Dr asset
Cr liability

Question 11

How does an entity account for an asset retirement obligation?

Answer 11

Recognizing the FV of the liability using an expected present value technique.

Question 12

Whats a TDR?
Troubled Debt Restructuring

Answer 12

When a creditor grants a concession to a debtor for economic or legal reasons that normally would not otherwise be considered.

Question 13

True or False. A TDR is settled with a transfer of assets or equity.

Answer 13

True

Question 14

Fun facts

Answer 14

In a TDR, a gain is recognized by the debtor when the carrying amount of the debt exceeds the FV.

And also the debtor recognizes a gain or loss on the disposition of the asset equal to the difference of the carrying amount of the debt and the FV.

Question 15

TDA

Answer 15

Gain=Debt carrying amount >
FV of asset

Gain(loss) on disposition of asset equal to the difference between the FV of the assets and their carrying amount.

Question 16

Fun fact

Answer 16

A non interest bearing note received or payable should be recorded at the PV of the future cashflows discounted at the prevailing rate of interest.