Bond & restructuring debt

Question 1

Interest expense increases or decreases as the year passes in case of bond issued at discoount

Answer 1

interest expense increases as year passes since the carrying value increases due to the decrease in the discount amount.

Question 2

Benefit of callable bond for issuer

Answer 2

When interest rates move lower the issuer can call the bond and refinance at a lower rate.

Question 3

In Substance-Defeance

Answer 3

An In Substance-Defeance does not extinguish the liability itself, it merely freezes the payment of principal and interest until a later time

Question 4

sublease

Answer 4

when a lessee enters into a lease contract with another lessess, this is also a lease contract

Question 5

Finance lease criteria

Answer 5

OWNES, transfer of ownership by the end of lease, written consent to buy, net presnt value is more than 90% of fair value of asset , 75 % or more of the economic life is covered in the lease, specialised asset designed for the purpose of lease

Question 6

Lease term starts when

Answer 6

The Lessess receives the control of the asset, it is termed as commencement date

Question 7

Amortisation of asset if written purchase option which lessee is certain to exercise

Answer 7

The amortisation will be done taking the economic life of the asset , and in other case where the lessee is not certain then the amortisation will be done on whichever is shorter the lease term or the economic life.