Far 4 Flashcards
(22 cards)
Asset retirement obligation (ARO) exists when an asset is __________ and there are legal requirements to incur _________ costs related to the constructed asset. An ARO increases the value of the asset and will be depreciated over time
constructed; removal-type
______ bonds mature in ___________ and will not mature on the same _____. _________ bonds, _____ bonds and ________ fund bonds all bonds that mature on the same date on a particular bonds issuance
SERIAL; INSTALLMENTS; DATE; DEBENTURE; TERM; SINKING
when a company issues stock with detachable stock warrants, __________ the warrant portion of the issuance to get the total long-term debt
subtract
when a company issues $4,000,000 of bonds at 101 premium, fair value is __________ *1.01. If there are cost associated with the issuance, you __________ to get the effective premium
$4,000,000; SUBTRACT
when calculating bonds take note of the _________ the interest is payable and if the interest rate is higher or lower than that of comparable bonds
FREQUENCY
when a bond is issued at a discount, the discount is a _______ and when a bond is issued at a premium, the premium is a ________
DEBIT; CREDIT
What happens to interest expense over the life of the bond under the effective interest rate method? (Increase or Decrease?)
INCREASE
when a premium on a bond payable is not amortized, interst expense would be ___________and stockholders’ equity would be __________
OVERSTATED; UNDERSTATED
when a bond is issued a discount and incurred a cost to issue the bond, the cost and cost of issuance will be __________ over the life of the bond
amortized
Interest is calculated based on the ______ amount of the bond
FACE
when the straight-line method is used instead of the effective interest method, on dec 31, the carrying amount of bond is ________ . At the maturity date, the bond carrying amount will not be affected as that is the maturity date (T or F)
OVERSTATED; TRUE
Amortization of a discount of a note is not reported as interest expense (T or F)
FALSE, AMORTIZATION OF A DISCOUNT OF A NOTE IS REPORTED AS INTEREST EXPENSE
When debt is issued at a discount, interest expense over the term of the debt _________ the cash interest paid plus amortization of the discount
EQUALS
Is a deferred tax liability arising from depreciation reported as a current liability?
NO, IT IS RECORDED AS A NON-CURRENT LIABILITY
When calculating amortization on a bond discount, you ________ on bonds payable and ________ on bonds payable when calculating amortization on a bond premium
a bond originally issued at a discount and is then extinguished at 102, a _____ would be recognized
LOSS
a lease classified as a finance lease would negatively impact cash flow from operations because the lease will change _________ at the end of the lease term
OWNERSHIP
for a lease to classify as a finance lease under GAAP is must meet these criteria (5) 1) ownership ___________ at the end of the lease 2) written purchase option the lessee is reasonable certain to _________ 3) PV of lease payments = ____ _______ of asset (approximately ___% of FV of leased property 4) lease term = major part of (___%) of asset useful life 5) asset is __________ such that it has no alternative use to the lessor
TRANSFERS; EXERCISE; FAIR VALUE; 90; 75; SPECIALIZED
At the beginning of a lease, lease payments are calculated based on ________ payments, __________ payments, exercise price of purchase option, termination penalties and probably amount owed of the guaranteed residual
FIXED; VARIABLE
An equal amount for premium on bond payable is credited for amortization each period under the straight-line method when amorting for a bond premium (T o F)
FALSE:
Gain on restructuring on debt is calculated based on FMV of the asset exchanged and not NBV (T or F)
True
Checks outstanding are Checks written and not
cashed
