NONCURRENT LIABILITIES Flashcards
Calc, the amount should fine report as a liability for accrued interest at Dec 31, year 4?
Step 1 - Calc the First year interest for the 12 months
Step 1
Borrowed 10,000
note bearing interest 12% (10,000 x 12%)
1st year interest 1,200
Step 2
Borrowed 10,000
1,200
11,200
12%
10
12
the accrued interest for the next 10 months 1,120
March 1 Year 3 - Dec 31, Year 4
Step 3
1st year interest 1,200 Accrued interest for 10 months 1,120 Accrued interest 2,320
Calc, the long term liabilities of the bond?
Step 1
face value 500,000
Present value of $1 five periods
0.7129860
356,493.00
Step 2
face value 500,000
PV of the 5 annual payments 8%
40,000
Step 3
face value 40,000
PV of oridinary annuity of $1, five periods
4.1002
164,008
Step 4 add the
356,493
164,008
long term liabilities 520,501
Calc, whether the trouble debt restructuring gain or loss?
Gross Receivable 100,000
Allowance for credit loss 25,000
The receivable transferred is 75,000
Part 2
Gross Receivable 100,000
The receivable transferred 75,000
Gain on restructuring 25,000
Calc, the total equity net increase of trouble debt restructuring?
Journal entries
debt trouble debt restructuring 1,200,000
credit cash 400,000
credit gain on net increase 800,000
Are bonds carrying amount and Retained earnings affected by error occurred on bonds premium which they incorrectly used the straight line method?
No effect on either bonds carrying amount or retained earnings
When a bond retirement paid exceeded the carrying amount is that an loss or gain?
This is a loss in continuing operations
Calc, the accretion expense to the asset retirement obligation?
ARO 100,000 x interest rate 10% = 10,000
How should sinking funds be reported in classified Balance Sheet?
the entire balance in the sinking fund account should apear as noncurrent asset
Calc, the amount bond liability should be reported?
1000 bonds x 1000 face value x .99 = 990,000
paid bond issued costs 35,000
Bond Liability 955,000
calc, the issue expense that should be reported in the income statement?
incurred costs 3,300 x 4 x 55 months = 240 straight line amortization
4 is for the April 1, year 1
Calc, the interest expense that should be reported for the bond?
Issued 300,000
Interest 8%
June 1 7/12
= Interest expense 14,000
Calc, the acquisition cost for the frachisee?
periodic payment 40,000
times PV FACTOR 2.91
PV OF PERIODIC PAYMENTS 116,400
PLUS DOWN PAYMENT 80,000
PV OF FRACHISEE FEE 196,400.0
What is debendture bonds?
unsecured bond
What is a serial bond?
mature in installments at various dates
Examples of Serial bonds?
Registered bonds & Commodity bonds
Examples of Debenture bonds?
Registered bonds & convertible bonds
Calc, the total amount term bonds?
Registered Debentures 700,000
Collateral Trust Convertible 600,000
Registered and collateral are examples of debentures
Example if a machinery payment is due when it was purchased what kind of Present value concept is appropriate?
Present value of an annuity due of $1 for 5 periods
Example of Present value of $1
On September 1, Year 1 purchased a new machine and payment is due on September 1, year 3
If there is a semi-annually payments what periods?
increases
for an examples 20 years compound to 40 instead
Calc, the interest rate implicit in the lease?
Start off with the cost to purchase the equipment of 15,192 - payments made 4,000 = 11,192 / 4,000 = 2.798
The implicit lease is 16%
Calc, the acquisition cost of an a franchise?
periodic payment 40,000
times PV annuity 2.910
PV of periodic payments 116,400
plus 80,000
PV of franchise fee 196,400
Calc, the accumulated in 2 years using the PV of $1 discounted rate of 10%?
10,000 / .826 = 12,107
When the market rate is greater than stated rate, how is the bond issued?
it’s a discount
When the market rate is less than the stated rate, how is the bond issued?
it’s a premium
When the market and stated rate are the same the bond, how is the bond issued?
the bond is issued face value
If the bond are issued between interest rates, what will the bond holder do?
then the bond holder will pay the accrued interest and receive the full interest amount the next interest payment date
Calc, the interest payable for the balance sheet?
Issued price 800,000 x 8% stated rate 3/12 = 16,000 is the interest payable
Calc, the annual stated interest rate for the debenture bonds?
Look for how much interest payment is made and that will help you start off the problem
12,000 interest semi annually
x 2
24,000 / 200,000 debenture bonds
The entry the company should use to record the original issued of a bond. Using the information
Issused bond at 98 with maturity 50,000
Debt - Cash 49,000 50,000 x .98
Bond Discount 1,000
Credit - Bond Payable 50,000
Bond interest expense is figure out how?
When the bond was issued so June 1, Year 4
and the interest expense for the year ended is the period Dec 31st
7 Months would be the
Remember Bond interest expense we start the count from the point where the bond was issued
Calc, the accrued interest payable report on balance sheet?
start off with the bond issued 300,000 x 12% x 6/12 = 18,000
The reason it’s 6/12 because the interest paid is semiannually mentioned on the problem
next we 9000 x 3/6 = 18,000 Interest paid from July 1 - Sept 30
18,000 x 3/6 = 9000
Calc, the payable semiannually bond received bond issuance?
Part 1
600,000 issued x 1,000 bond x .99 accrued interest = 594,000 bond proceeds
Part 2
600,000 issued x 10% * 3 /12 we are including the accured interest 15,000 accrued interest
Part 3
Here we will start off with 594,000 + 15,000 = 609,000
Calc, the accured interest payable for the note”?
Step 1 calc the CV
3,600,000 note - 1,200,000 first payment = 2,400,000
Step 2 calc the accured interest payable
2,400,000 x 10% x 9/12 = 180,000
The 9/12 is bc the first payment was made on OCT 1 year 2 - June 30 year 3
Calc, the proceeds on the sale of the bond?
800,000 issued PART 1
0.675560
540,448
800,000 PART 2
10%
6
12
40000 SEMI ANNUAL INTEREST PAYMENTS
40000
8.11090
324,436
864,884 PART 3
When the accrued interest is 97 what is this discounts or premium or face value?
Discount
When the accrued interest is 100 what is this discounts or premium or face value?
face value
When the accrued interest is 105 what is this discounts or premium or face value?
Premium
calc, the bonds payable at a discount?
So bond is issued at 400 x 1000 bonds x 97 = 388,000
If a 5 year bond was issued on Jan 1, year 1 at a discount. What will happen to the carrying amount on Dec 31, year 2?
The CV goes up
Good rule for discounts bonds
are everything goes up CV, interest Expense,
On a discounted bond when interest expense, what are the general entries and?
Interest Expense is greater than the discount and cash Examples of entries mentioned below
(Interest paid for Y1 )Debit Interest Expense 7361
Credit Discount 1361
Cash 6000
Calc, the unamortized premium bond reported for the balance sheet year 4?
Carrying amount 105,000 x 6% market rate = 6,300
Face Amount 100,000 x 7% stated rate = 7000
= 7000 - 6300 = 700
Premium Amortized 5000 - 700 = 4300 unamortized premium
Calc, the bonds payable on the bond discounts?
So we start off with the face amount 500,000 x 9% x 6/ 12 = 22,500
Next we use the Carrying amount 469,500 x 10% * 6 /12 = 23,475
23,750 - 22,500 = 975
Carrying amount 469,500 + 975 = 470,475 bond payable
Calc, the interest expense for the bond premium?
Using the Carrying amount of 103,288 x 10% market rate x 6/ 12 = 5,164
Calc, the unamortized discounts bond reported for the balance sheet for the year?
For year 1 Start off with the Carrying amount which is 939,000 x yield rate 10% = 93,900
Next we start off with the face value 1,000,000 x 9% = 90,000
93,900 - 90,000 = 3,900
Final step is to calc the subtract the discount unamortized 61,000 - 3900 = 57,100
calc the amount that is received upon issuing the bonds?
the carrying amount 363,600 - 3,600 amortized discount = 360,000
How to calc the bonds interest payable?
By using the face value of the bond at the beginning of the period by the contracual interest rate (Stated rate)
How to calc the bonds interest expense?
Carrying amount of the bond mutiplied by the effective interest rate ( Market rate)
calc, the interest expense for year 2?
for interest expense for using the carrying amount x by the effective interest rate
step 1
Carrying amount is 96,207 x 10% = Interest expense of 9621 for year 1 so now we need to calc the new carrying amount for year 2
So we use the interest expense of 9,621 - 9000 the cash paid (face value of 100,000 x 9% = 9000)
9,621 - 9000 = 621 discount amortized next we add the 621 with the prior year Carrying amount and we get a new carrying amount of 96,828
Step 2 - with the new carrying amount 96,828 x 10% = 9,683 interest expense for year 2
Calc, the Carrying amount of bond for year 8?
We just multiply the issued 1000 x 1000 = 1,000,000 and next we add the unamortized premium of 14,000 = 1,014,000
calc, the bond liability issued for a discount?
Start of with 1000 issued x 1000 face value x 99 = 990,000
Step 2 add the face value - discount - Bond issued cost (BIC)
1,000,000 Face value
10,000 Discount
35,000 Bond issued cost
= 955,000 net bond liability
calc, the issued expense dixon should report on the income statement for year end Dec 31, year 1?
incurred cost 3,300 x 4 x 55 months
Calc, the gain before income taxes on redemption of bonds?
\\step 1
face value 5,000,000
premium 30,000
bond issued costs 50,000
4,980,000 Step 2 face value 5,000,000 open market rate 0.98 4,900,000 STEP 3 4,900,000 4,980,000 80,000
Calc, the carrying amount that computing gain or loss on retirement of debt?
BOND ISSUED COSTS 6000
YEARS 15
AMORTIZED ISSUED COST 400
AMORTIZED ISSUED COST 400
5
2000
FACE VALUE 250,000
UNAMORTIZED COST 2000
DEFERRED COST ISSUED COSTS
248,000
Using the straight line method, calc, the gain or loss for the early extinguishment?
Step 1 - calc the cost of extinguishment
1000 x 1000 = 1,000,000 x 1.01 = 1,010,000
Step 2 -
1,040,000 - 1,000,000 = 40,000
Step 3
40,000 x 11/20 = 22,000
Step 4
1,040,000 - 22,000 = 1,018,000
Step 5
1,018,000 - 1,010,000 cost of extingushment = 8,000 gain
Calc, loss on extinguishment of debt on the income statement?
Step 1 - calc the Carrying amount of bond
8,000,000 face value
430,000
7,570,000 carrying amount
Step 2 - calc how much of the bond actually retired
8,000,000 / 4,000,000 = 50%
Step 3 - Income statement as loss on extinguishment debt
Unamortized debt 430,000 x 50% = 215,000 + 100,000 = 315,000 income statement loss on extinguishment
Calc, note payable for the balance sheet?
Step 1 calc the present value of the note issued
Note payable 10,000
Present Value. .944
= Present Value 9,444
Step 2 - annual rate of 3%
Note Payable 10,000
Annual rate 3%
Present Value .944
9 months bearing 9/12
= 212.4
= 9,444 + 212.4 = 9,652
Calc, the liability for accrued interest for the note?
Step 1 CALC THE Y1 INTEREST
FACE VALUE 10,000
NOTE BEARING 12%
INTEREST 1200
STEP 2 - CALC THE REMAINING INTEREST EXP
FACE VALUE 10,000
1200
12%
10/12
11,200
1120
ACCRUED INTEREST LIABILITY 2320 (1200 + 1120)
Calc, the interest expense on the income statement interest bearing note instead of noninterest bearing note?
Step 1 - calc the note payable building
400,000 face value x 0.79 = 316,000
316,000 x 0.08 = 25,280 interest expense
Step 2 -
Note bearing 250,000 x 0.79 = 197,500 + 15,000 x 2.58
= 236,200
Step 3 - Interest expense
236,200 x 8% = 18,896 interest expense
25,280 - 18,896 = 6,384 decrease
Calc, the accrued interest payable for the note payable?
Federal amount of 900,000 - annual principal payments 300,000 = 600,000 face amount
Next we will face amount 600,000 x 12% stated interest rate x 4 /12 = 24,000 accrued interest payable
Calc, the note payable that needs to be reported?
Calc the monthly interest rate 12% / 12 months = 1%
Face value 500,000 x 1% = 5000
Payment of 11,122 - 5000 = 6,122 reduce the note outstanding balance
500,000 - 6,122 = 498,878 note payable equal
493,878 x 1% = 4,939
11,122 payment - 4,939 = 6,183 payment was reduced by the outstanding balance
493,878 - 6,183 = 487,695 note payable balance for the year 2
Calc, the amount that should be reported as a gain from debt restructuring on the income statement?
Face value 500,000 + unpaid interest 75,000 = 575,000
575,000 - 410,000 cash payable = 165,000
Calc, the impact of the transaction of anchor net income
So if the gross receivable is 100,000 - 25,000 credit loss = 75,000 which is recognized as a gain on restructuring of payable
Calc, the gain on the troubled debt restructured agreement.
Carrying amount of 185,000 - 120,000 fair value = 65,000 gain on restructuring
Step 2
Fair Value 120,000 Carrying Amount 85,000 = gain on restructuring 35,000
65,000 + 35,000 = 100,000
calc, the loss of the Fair Value of land?
So the bank and debtor exchanged asset and funds so the Notes payable of 400,000 was paid bank 179,000 annual payments and also subtract 89,000
= 400,000 - 179,000 - 89,000 = 310,000
500,000 - 310,000 = 190,000
calc the issued price for the 1000 bond?
Stated interest rate 6%
Yield interest rate 9%
1000 x 0.422 = 422
1000 x 6% x 6.418 = 385
422 + 385 = 807
Calc, the asset retirement obgliation for the balance sheet?
Begin balance 257,000
New ARO (FV) 68,000
Partial settlement (87,000)
accretion exp. 26,000
Ending balance 264,000
An entity most likely account for an asset retirement obligation ARO by
recognized the FV of the liability using an expected present value technique
Calc, the interest implicit on the lease?
Full cost of equipment present value 15,192
minus (1st payment) 4,000 = 11,192
Amount financed PV ordinary annuity 4
11,192 / 4,000 = 2.798
calc, note payable to be credited on the balance sheet
10,000 note payable x .944 = 9440
10,000 x3% x.944 x 9/12 = 212.4
trade terms are 9 months so the reason we have 9/12
Calc, the noncurrent investment for the bond sinking fund requirement?
Beginning balance 450,000 Investment 90,000
Dividends received 15,000
interest earned. 30,000
costs (5,000)
= 580,000 noncurrent investment
Calc, the bond insurance that eagle receive?
Step 1 - calc the face amount with the disocunt
600,000 x 0.99 = 594,000
Step 2 - calc the accrued interest for 3 months
600,000 face amount x 10% coupon rate x 3/12 = 15,000 accrued interest
Step 3 - add the bonds proceeds and accrued interest
594,000 + 15,000 accrued interest = 609,000 bond insurance
Calc, the bond issue costs are unamortized at June 30, Year 4?
Using the straight line method
Here we will 250,000 / 10 years = 25,000 per year
+ 12,500
= 37,500
Bonds issue cost 250,000 - 37,500 = 212,500 bond issue costs
Calc, the unamortized discount the end of the first year?
Bond was issued 96,207 x 10% = 9,621 - 9000 = 621
Bond discounts 3,793 - 621 = 3,172
Change in the decommissioning liability be recognized ?
The change in the liability is recognized in profit or loss
How should a change in decommissioning liability be recognized?
The change in the liability is recognized in profit or loss
characterizes convertible debt?
no value is assigned to the conversion feature when the convertible debt is issued
Type of bonds particular bond issurance will not mature on the same date?
serial bonds will not mature on the same date
Calc, the amount casey report as gain in its income statement?
185,000 carrying amount
85,000 land
185,000 carrying amount
120,000 fair value
= 65,000
120,000 fair value
85,000 land
= 35,000
= 65,000 + 35,000 = 100,000
Calc, the note payable
initial payment 20,000 x 4.712 = 94,240
Present value of original annuity of $1 at 11%
Calc, the carrying amount for the bond?
Carrying amount - 363,600
amortized discount 3,600
Issued the bonds. 360,000
The amount determine 360,000 amount vole received - 3,600 = 360,000 received upon issued the bonds
Debenture are…
unsecured bonds and are bonds that secured by the full faith and credit of the issuing firm
Calc, the liability for the accrued interest?
Start off 10,000 with the borrowed funds multiply by 12%
10,000 x 12% = 1,200
Step 2 - calc the
10,000 borrowed
1,200
= 11,200 x 12% x 10 / 12 = 1,120
= 1,200 + 1,120 = 2320
When the effective interest method of amortization is used for bonds issued at a premium, the amount of interest payable for an interest period is calc by multiplying the
face value of the bonds at the beginning of the period by the contractual interest rate
how is the interest expense calc?
carrying amount of the bonds at the beginning of the period by the effective interest rates
The discount resulting from the determination of a notes present value should be reported on the balance sheet
direct deduction from the face amount of the note
Calc the net carrying amount payable at the end of the year for the bond discounts?
carrying amount 96,207 x 10% yield = 9,621
100,000 x 9% = 9,000
9,621 - 9000 = 621
carrying amount 96,207 +621 = 96,828
