Flashcards in Deck 15 Deck (20):
What amount do you pay off for bonds?
The Face amount
Journal entry to record bond sinking fund:
Dr. Bond sinking fund and Cr. Cash or interest revenue
Convertible bonds (book value method vs. market value method)
Book value method (GAAP): No gain or loss recognized; Market value method (Not gaap): recognize gain or loss
Journal entry for convertible bonds (book value method)
Dr. Cash and Premium on bond payable; Cr. C/S and APIC
Convertible bonds vs. detachable warrants
Convertible bonds have no recognition of the conversion feature while detachable warrants do
Effective interest method (calculate amortization) =
Income statement amount - balance sheet amount
What happens to interest expense when the effective rate is greater than the stated rate?
Interest expense will continue to increase
Material transactions that are "infrequent" but not "unusual should reported:
Separately as a component of continuing operations
When payment is made on the same day as a debt is incurred, no ______ is recognized
What is the difference between accumulated benefit obligations and projected benefit obligations?
The projected benefit obligation is the assumption of future compensation levels (use current salary for ABO)
Expected return on plan assets =
Beg. fair value of plan assets x expected rate of return
Net pension gain or loss =
Actual return on plan assets - expected return on plan assets (net of tax) or changes in actuarial assumptions
Overfunded plan assets occur when:
FV plan assets > PBO (record as noncurrent asset)
Underfunded plan assets occur when:
FV plan assets
Under a defined benefit pension plan, what is included in accumulated OCI?
Unrecognized prior service cost, unrecognized transition obligations, and unrecognized net gains or losses
Unrecognized gains or losses are recognized in pension expense as the greater of (The Corridor Approach):
10% of the PBO or FV of plan assets (take the excess amount and divide by the remaining service life)
Projected benefit obligation formula (BASE) =
Beg. PBO + service cost + interest cost + prior service cost + Actuarial losses - actuarial gains = ending PBO
Periodic Pension Cost (expense) formula (SIRAGE) =
Service cost + interest cost - return on plan assets + amortization of prior service cost - gains or + losses + amortization of existing net obligation or net asset
Difference between actual and expected returns must be recognized where?
In OCI and then amortize to pension expense over time with any actuarial gains/losses