F5: Liabilities

Question 1

Recognition and Measurment of Loss Contingencies

What to do if loss is probable?

Answer 1

it means that it is likely to occur and should be recorded in GL

Question 2

Recognition and Measurment of Loss Contingencies

What to do if loss is reasonably possible?

Answer 2

it means that it is less likely but more than remote, therefore, disclose it in the FS

Question 3

Recognition and Measurment of Loss Contingencies

What to do if loss is remote?

Answer 3

very slight change to occur therefore general rule is to ignore

Question 4

If loss is remote follow DOG?

Answer 4

D - Dog
O - Obligation
G - Guarantees

Question 5

Ordinary Annuity

Answer 5

Payments made at the end of each period

Question 6

Annuity due

Answer 6

Payments made at the beginning of each period

Question 7

Present Value of $1

Answer 7

Single Cash Flow used in:
* Bonds = PV principal
* Leases = PV Salvage value

Question 8

Method 1: Present Value Formula

Answer 8

Present Value = FV x PV Factor
PV Factor = 1/(1+r)^n

Question 9

Method 2: Present Value Formula

Answer 9

PV = FV / (1+r)^n

Question 10

PV of an Ordinary Annuity

Answer 10

PV = Annuity Pmts x Present Value of ordinary annuity of $1

Question 11

Imputing Interest

Answer 11

Interest expense must be recorded whether cash pmt is made or not