F4 - PAYABLES & ACCRUED LIABILITIES

Question 1

ACCRETION EXPENSE

Answer 1

Is the growth in the Asset Retirement Obligation for the year

Question 2

Costs to relocate employees are costs associated with

Answer 2

Exit & disposal activities

Question 3

Any change in the value of the liability after the property has been fully depreciated

Answer 3

Will be recognized in profit or loss

Question 4

Accretion expense is the increase in the ARO liability due to the passage of time.

Answer 4

Beg ARO X Risk-Adjusted rate

Question 5

Rule: Only footnote disclosure is required for a

Answer 5

“reasonably possible” (not “probable”) loss.

Question 6

Gain contingencies are recorded

Answer 6

when the gain is realized.

Question 7

When a company revises its estimated future cash flows for an ARO, how is the asset retirement cost (ARC) affected?

Answer 7

The ARC, once recorded, remains unchanged. Only the ARO liability is adjusted to reflect changes in estimated future cash flows.

Question 8

When stated rate is lower than market rate

Answer 8

Discounted Bond

Question 9

When state rate is higher than market rate

Answer 9

Premium Bond

Question 10

Market Rate, is not known until the day the bond is issued

Market rate - affects the bond’s selling price
MR - Does NOT impact the amount of the cash interest payments, which are fixed by the stated rate

Answer 10

Effective Rate
Yield Rate

Question 11

Stated Rate, determines the exact amount of cash to the issuer

Answer 11

Coupon Rate
Nominal Rate
Contractual Interest Rate
Bond Rate
Face Rate

Question 12

A bond will sell at par value only when the coupon rate is

Answer 12

Equal to the Market Rate of Interest

Question 13

Serial Bonds

Answer 13

Mature in installments

Issuer may call and redeem a portion by calling on the serial number

Question 14

Operating Lease

Answer 14

More than 12 months but doesn’t rise to the level of a “Finance Lease” - Lessee must record assets and liability on BS at lease inception

Question 15

Finance Lease

Answer 15

Lessee must record asset and liability on BS at lease inception

1. Ownership Transfer
2. Purchase option
3. Remaining economic life of asset 75% rule
4. PV min lease payment = or exceeds 90% rule
5. Asset has no alternative use to the lessor at the end of the lease term

Question 16

Short Term Lease

Answer 16

Less than 12 mos - recognize exp monthly as time passes
DR Exp, CR Cash each month that a payment is made

Question 17

All leases greater than 1 year

Answer 17

Need to be shown on BS as both a Liability & ROU (Right of use) Asset

One income statement expense - Lease expense

ROU will be amortized (no expense) and the liability will involve payments and a portion of the payment will be interest (no exp)

Question 18

FOR OPerating Lease - PV

Answer 18

Use the Incremental Borrowing rate
UNLESS
The Lessor’s implicit rate is know to the Lessee
THEN
Use the Lessor’s Implicit INT Rate

Question 19

RULE: Amortization of leasehold improvements should be over the life of the improvements

Answer 19

OR the remaining life of the lease, whichever is shorter

If they decided to renew the lease then the renewal if shorter than the expected life of the improvements then it WOULD CONSIDER THE RENEWAL PERIOD AS WELL

Question 20

FOR Finance Lease ( For Lessee )

Answer 20

2 Expenses for Finance Lease
Interest Expense
AND
Amortization Expense

Question 21

An old building that is being actively marketed for sale

Answer 21

Will be valued at the lower of its book value or Net Realizable Value
(FV - Costs to sell)

Historical Costs