Deck 14 Flashcards Preview

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Flashcards in Deck 14 Deck (19):
1

Non monetary exchanges that contain commercial substance:

Recognize gains and losses immediately

2

Interest incurred during the construction period should be (capitalized or expensed)?

Capitalized (interest incurred before or after will be expensed)

3

Non monetary items include:

Property, plant, and equipment and the related accumulated depreciation

4

Settlement price > face value of the debt

Loss would be recognized in continuing operations

5

What rate is used to calculate the unamortized premium?

Yield rate

6

How do warrants affect the financial statements?

They increase stockholders equity

7

Effect interest rate > stated interest rate

The bond is issued at a discount (which increases interest expense)

8

Issuance of a bond at a discount (journal entry):

Dr. Cash and Discount on bonds payable; Cr. Bonds payable for the face amount

9

Debenture bonds:

Unsecured corporate bonds

10

Net carrying amount of bonds =

Face amount - unamortized discount - unamortized bond issuance cost (or add unamortized premium)

11

Gain/loss on extinguishment =

The difference between the reacquisition price and the net carrying amount

12

FV of bond =

PV of future interest payments + PV of principal

13

Unamortized premium vs. discount

Add unamortized premium to face amount/subtract unamortized discount from face amount to get carrying amount

14

Bond issuance costs:

Amortized as interest expense over the life of the bond (reduce the carrying amount of the bond)

15

Interest expense (straight line method) =

(Face value x stated rate) - premium or + discount

16

Periodic amortization (straight line method) =

(premium/discount) over number of periods bond is outstanding

17

Effective interest method amortization =

Interest expense - interest paid

18

Interest expense =

Net carrying value x effective interest rate

19

Interest paid =

Bond face x coupon rate