F10: Other Liabilities and Debt Covenants Flashcards Preview

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Flashcards in F10: Other Liabilities and Debt Covenants Deck (9)
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1

Current liabilities are valued at ________, AKA ______.

Settlement value, AKA net realizable value

2

A purchase of goods/services on account may be recorded one of two ways:

1- Gross method
2- Net method

3

Gross method definition

-Record purchase without regard to discount
-If paid within the discount period, a purchase discount is credited

4

Net method definition

-Record purchase net of discount
-If paid within discount period, no adjustment necessary
-If paid after discount period, purchase discount is debited

5

How is the employer's share of payroll taxes accounted for?

Expensed

6

What is the statement presentation of a discount or premium?

Asset or liability is shown net of it on the balance sheet

7

Debt covenants are used why?

To protect creditors' interest by limiting/prohibiting actions of debtors that might negatively affect the positions of the creditors

8

Common debt covenants

-Limitation on issuing additional debt
-Restrictions of payment of dividends
-Limitations on disposal of assets
-Minimum working capital requirements
-Collateral requirements
-Limitations on how the borrowed money can be used
-Maintenance of specific ratios

9

Debt covenants should be:

Disclosed