F5 Flashcards
(34 cards)
Under the effective interest method: How do you calc the amount interest payable for interest period @ a premium?
Face Value of the bond at the beginning of the period to the stated int rate
What is the calc for interest payment per period on a bond?
How do you calc interest pymt over life of the bond?
Int per period = Face Value * stated rate
Int over life = Int per period * PV factor @ mkt rate
How are remote related party transactions recorded?
Not accrued for - only disclosed since it is related party
When are gain contingencies recognized?
When gain is realized
What is the formula for present value
PV = Future Value * PV factor
How are employee FICA taxes treated for employeers?
As a liability NOT expense
How do you calculate the gain on debt restructuring?
- if FV received < CV of payable given up
- CV - FV
What is the criteria for recording exit and disposal activities?
- Event occurred
- Event results in present obligation to provide services in future
- entity has little/no discretion to avoid future transfer
What are the 4 things to add in disclosure of exit and disposal?
- Description of event,
- Amount of loss (FV)
- Reconciliation of amount
- Liab for cost associated with activity if FV not easily rec
What is an ARO and what is the JE when recorded
Asset retirement obligation - Legal obligation associate with retirement of LLA from constructing or development
JE: @ PV
DR: ARC
CR: ARO liab
What are the loss contingency rules?
- loss is PROBABLE and amount is REASONABLY ESTIMATED –> RECORD AND DISCLOSE
- Loss is Reasonable possible –> footnote disclosure (if range in amt can be determined –> disclose range)
- Loss Is remote –> Ignore
When is their a premium or discount issued on a bond?
Discount = MKT > Stated
Premium = Stated > MKT
What are Bond issuing costs and what is their impact on the CV of the bond?
Transaction fees when bonds are issued (legal, accting fees, underwriting, )
Decreases CV of the bond at issuance and is included in the amort of life of bond
how to calc gain on debt restructuring on a transfer of asset (from debtor to creditor) for the debtor?
- Debtor writes asset to FV –> FV of asset transferred - NBV of asset transferred = G/L on transfer
- Restructuring gain–> CV of payable - FV of asset transferred
Under the modification of terms for the debtor, how is a Gain rec?
Liability - Undiscounted cash flows at new rate
For the bank under debt restructuring - how do you calc the impairment and what is the JE?
Amt owed - FV amount Rec = Bad debt expense
DR: BDE
CR: Allowance for credit losses
How do you calc the G/L in extinguishment of debt before maturity?
Cash paid to extinguish bond
- Carrying value of the bond ( FV - Unamort discount +unamort preimum)
What is the JE to record loss on extinguishment of bond?
DR: Bond Payable (face value)
DR: Loss on Payable (plug)
CR: Discount on BP and BIC (unamort portion of discount and BIC)
CR: Cash (paid at reacquisition)
DR: BP (Face value)
DR: Premium on BP and BIC (unamort portion of preimum and BIC)
CR: Cash (reacquisition price)
CR: Gain on Extinguishment
If the bonds at redemption are Lower than when they were issued –> what is the result
Loss (in continuing ops)
If there is a loss on a loan guarantee after year end - will this be accrued/disclosed?
disclosed
Would a discount increase int expense?
Yes –> int exp increase amort for discount
IF there is a discounted note receivable at y/e - what is the value reported on the F/S at y/e and as what?
Report the maturity value as a contingent liability
How are loans and collection of loans to other entites/related parties reflected in the cash flow statement?
As investing activity
If a creditor has determined that a loan is impaired, what are the 3 ways to measure the impairment?
- PV FCF discounted @ the effective rate
- loans observable mkt price
- FV of collateral if loan is not collateral dependent
