F4 - Bonds: Pt. 1 Flashcards
(128 cards)
1
Q
The calculation to record Bonds Payable is?
A
Face Value of the bond x PV Factor using the Market Rate
Plus+
Coupon Payment
(Face Value x Stated Rate) x PV Factor using the Market Rate
2
Q
Criteria for a Financing Lease:
OWNES
A
Ownership transfers at the end of the lease
Written purchase option is reasonably certain to be exercised
NPV is >= 90% of the FV of the asset
(Lease Payments + Written Purchase Option)
Economic life of the asset is >= 75% of the lease term.
Specialized asset, it will not have an expected, alternative use to lessor when it is returned.
If NO to all of these, then it’s an Operating Lease.
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| Interest Payable = Coupon Payment
Interest Expense = Carrying x Eff Rate
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