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Financial Accounting Reporting > NONCURRENT LIABILITIES > Flashcards

NONCURRENT LIABILITIES Flashcards

1
Q

Calc, the amount should fine report as a liability for accrued interest at Dec 31, year 4?

A

Step 1 - Calc the First year interest for the 12 months

Step 1
Borrowed 10,000
note bearing interest 12% (10,000 x 12%)

1st year interest 1,200

Step 2
Borrowed 10,000
1,200
11,200
12%
10
12

the accrued interest for the next 10 months 1,120
March 1 Year 3 - Dec 31, Year 4

Step 3

                        1st year interest 1,200  Accrued interest for 10 months   1,120  Accrued interest                              2,320
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2
Q

Calc, the long term liabilities of the bond?

A

Step 1
face value 500,000
Present value of $1 five periods
0.7129860

                                                     356,493.00

Step 2
face value 500,000
PV of the 5 annual payments 8%

                                                           40,000

Step 3
face value 40,000
PV of oridinary annuity of $1, five periods
4.1002

                                                      164,008

Step 4 add the
356,493
164,008

long term liabilities 520,501

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3
Q

Calc, whether the trouble debt restructuring gain or loss?

A

Gross Receivable 100,000
Allowance for credit loss 25,000

The receivable transferred is 75,000

Part 2

Gross Receivable 100,000
The receivable transferred 75,000

Gain on restructuring 25,000

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4
Q

Calc, the total equity net increase of trouble debt restructuring?

A

Journal entries

debt trouble debt restructuring 1,200,000

                                   credit cash 400,000 
       credit gain on net increase 800,000
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5
Q

Are bonds carrying amount and Retained earnings affected by error occurred on bonds premium which they incorrectly used the straight line method?

A

No effect on either bonds carrying amount or retained earnings

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6
Q

When a bond retirement paid exceeded the carrying amount is that an loss or gain?

A

This is a loss in continuing operations

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7
Q

Calc, the accretion expense to the asset retirement obligation?

A

ARO 100,000 x interest rate 10% = 10,000

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8
Q

How should sinking funds be reported in classified Balance Sheet?

A

the entire balance in the sinking fund account should apear as noncurrent asset

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9
Q

Calc, the amount bond liability should be reported?

A

1000 bonds x 1000 face value x .99 = 990,000
paid bond issued costs 35,000

Bond Liability 955,000

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10
Q

calc, the issue expense that should be reported in the income statement?

A

incurred costs 3,300 x 4 x 55 months = 240 straight line amortization

4 is for the April 1, year 1

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11
Q

Calc, the interest expense that should be reported for the bond?

A

Issued 300,000
Interest 8%
June 1 7/12

= Interest expense 14,000

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12
Q

Calc, the acquisition cost for the frachisee?

A

periodic payment 40,000
times PV FACTOR 2.91
PV OF PERIODIC PAYMENTS 116,400
PLUS DOWN PAYMENT 80,000
PV OF FRACHISEE FEE 196,400.0

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13
Q

What is debendture bonds?

A

unsecured bond

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14
Q

What is a serial bond?

A

mature in installments at various dates

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15
Q

Examples of Serial bonds?

A

Registered bonds & Commodity bonds

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16
Q

Examples of Debenture bonds?

A

Registered bonds & convertible bonds

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17
Q

Calc, the total amount term bonds?

A

Registered Debentures 700,000
Collateral Trust Convertible 600,000

Registered and collateral are examples of debentures

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18
Q

Example if a machinery payment is due when it was purchased what kind of Present value concept is appropriate?

A

Present value of an annuity due of $1 for 5 periods

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19
Q

Example of Present value of $1

A

On September 1, Year 1 purchased a new machine and payment is due on September 1, year 3

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20
Q

If there is a semi-annually payments what periods?

A

increases

for an examples 20 years compound to 40 instead

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21
Q

Calc, the interest rate implicit in the lease?

A

Start off with the cost to purchase the equipment of 15,192 - payments made 4,000 = 11,192 / 4,000 = 2.798

The implicit lease is 16%

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22
Q

Calc, the acquisition cost of an a franchise?

A

periodic payment 40,000
times PV annuity 2.910

PV of periodic payments 116,400
plus 80,000

PV of franchise fee 196,400

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23
Q

Calc, the accumulated in 2 years using the PV of $1 discounted rate of 10%?

A

10,000 / .826 = 12,107

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24
Q

When the market rate is greater than stated rate, how is the bond issued?

A

it’s a discount

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25
Q

When the market rate is less than the stated rate, how is the bond issued?

A

it’s a premium

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26
Q

When the market and stated rate are the same the bond, how is the bond issued?

A

the bond is issued face value

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27
Q

If the bond are issued between interest rates, what will the bond holder do?

A

then the bond holder will pay the accrued interest and receive the full interest amount the next interest payment date

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28
Q

Calc, the interest payable for the balance sheet?

A

Issued price 800,000 x 8% stated rate 3/12 = 16,000 is the interest payable

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29
Q

Calc, the annual stated interest rate for the debenture bonds?

A

Look for how much interest payment is made and that will help you start off the problem

12,000 interest semi annually
x 2
24,000 / 200,000 debenture bonds

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30
Q

The entry the company should use to record the original issued of a bond. Using the information
Issused bond at 98 with maturity 50,000

A

Debt - Cash 49,000 50,000 x .98
Bond Discount 1,000

            Credit - Bond Payable  50,000
31
Q

Bond interest expense is figure out how?

A

When the bond was issued so June 1, Year 4
and the interest expense for the year ended is the period Dec 31st

7 Months would be the

Remember Bond interest expense we start the count from the point where the bond was issued

32
Q

Calc, the accrued interest payable report on balance sheet?

A

start off with the bond issued 300,000 x 12% x 6/12 = 18,000

The reason it’s 6/12 because the interest paid is semiannually mentioned on the problem

next we 9000 x 3/6 = 18,000 Interest paid from July 1 - Sept 30

18,000 x 3/6 = 9000

33
Q

Calc, the payable semiannually bond received bond issuance?

A

Part 1

600,000 issued x 1,000 bond x .99 accrued interest = 594,000 bond proceeds

Part 2

600,000 issued x 10% * 3 /12 we are including the accured interest 15,000 accrued interest

Part 3

Here we will start off with 594,000 + 15,000 = 609,000

34
Q

Calc, the accured interest payable for the note”?

A

Step 1 calc the CV

3,600,000 note - 1,200,000 first payment = 2,400,000

Step 2 calc the accured interest payable
2,400,000 x 10% x 9/12 = 180,000

The 9/12 is bc the first payment was made on OCT 1 year 2 - June 30 year 3

35
Q

Calc, the proceeds on the sale of the bond?

A

800,000 issued PART 1
0.675560

540,448

800,000 PART 2
10%
6
12

40000 SEMI ANNUAL INTEREST PAYMENTS

40000
8.11090

324,436

864,884 PART 3

36
Q

When the accrued interest is 97 what is this discounts or premium or face value?

A

Discount

37
Q

When the accrued interest is 100 what is this discounts or premium or face value?

A

face value

38
Q

When the accrued interest is 105 what is this discounts or premium or face value?

A

Premium

39
Q

calc, the bonds payable at a discount?

A

So bond is issued at 400 x 1000 bonds x 97 = 388,000

40
Q

If a 5 year bond was issued on Jan 1, year 1 at a discount. What will happen to the carrying amount on Dec 31, year 2?

A

The CV goes up

41
Q

Good rule for discounts bonds

A

are everything goes up CV, interest Expense,

42
Q

On a discounted bond when interest expense, what are the general entries and?

A

Interest Expense is greater than the discount and cash Examples of entries mentioned below

(Interest paid for Y1 )Debit Interest Expense 7361
Credit Discount 1361
Cash 6000

43
Q

Calc, the unamortized premium bond reported for the balance sheet year 4?

A

Carrying amount 105,000 x 6% market rate = 6,300

Face Amount 100,000 x 7% stated rate = 7000

= 7000 - 6300 = 700

Premium Amortized 5000 - 700 = 4300 unamortized premium

44
Q

Calc, the bonds payable on the bond discounts?

A

So we start off with the face amount 500,000 x 9% x 6/ 12 = 22,500

Next we use the Carrying amount 469,500 x 10% * 6 /12 = 23,475

23,750 - 22,500 = 975

Carrying amount 469,500 + 975 = 470,475 bond payable

45
Q

Calc, the interest expense for the bond premium?

A

Using the Carrying amount of 103,288 x 10% market rate x 6/ 12 = 5,164

46
Q

Calc, the unamortized discounts bond reported for the balance sheet for the year?

A

For year 1 Start off with the Carrying amount which is 939,000 x yield rate 10% = 93,900

Next we start off with the face value 1,000,000 x 9% = 90,000

93,900 - 90,000 = 3,900

Final step is to calc the subtract the discount unamortized 61,000 - 3900 = 57,100

47
Q

calc the amount that is received upon issuing the bonds?

A

the carrying amount 363,600 - 3,600 amortized discount = 360,000

48
Q

How to calc the bonds interest payable?

A

By using the face value of the bond at the beginning of the period by the contracual interest rate (Stated rate)

49
Q

How to calc the bonds interest expense?

A

Carrying amount of the bond mutiplied by the effective interest rate ( Market rate)

50
Q

calc, the interest expense for year 2?

A

for interest expense for using the carrying amount x by the effective interest rate

step 1

Carrying amount is 96,207 x 10% = Interest expense of 9621 for year 1 so now we need to calc the new carrying amount for year 2

So we use the interest expense of 9,621 - 9000 the cash paid (face value of 100,000 x 9% = 9000)

9,621 - 9000 = 621 discount amortized next we add the 621 with the prior year Carrying amount and we get a new carrying amount of 96,828

Step 2 - with the new carrying amount 96,828 x 10% = 9,683 interest expense for year 2

51
Q

Calc, the Carrying amount of bond for year 8?

A

We just multiply the issued 1000 x 1000 = 1,000,000 and next we add the unamortized premium of 14,000 = 1,014,000

52
Q

calc, the bond liability issued for a discount?

A

Start of with 1000 issued x 1000 face value x 99 = 990,000

Step 2 add the face value - discount - Bond issued cost (BIC)

1,000,000 Face value
10,000 Discount
35,000 Bond issued cost

= 955,000 net bond liability

53
Q

calc, the issued expense dixon should report on the income statement for year end Dec 31, year 1?

A

incurred cost 3,300 x 4 x 55 months

54
Q

Calc, the gain before income taxes on redemption of bonds?

A

\\step 1
face value 5,000,000
premium 30,000
bond issued costs 50,000

                                    4,980,000

Step 2  face value 	                  5,000,000 open market rate 	         0.98

4,900,000

STEP 3 
4,900,000
4,980,000

80,000
55
Q

Calc, the carrying amount that computing gain or loss on retirement of debt?

A

BOND ISSUED COSTS 6000
YEARS 15

AMORTIZED ISSUED COST 400

AMORTIZED ISSUED COST 400
5
2000

FACE VALUE 250,000
UNAMORTIZED COST 2000

DEFERRED COST ISSUED COSTS
248,000

56
Q

Using the straight line method, calc, the gain or loss for the early extinguishment?

A

Step 1 - calc the cost of extinguishment

1000 x 1000 = 1,000,000 x 1.01 = 1,010,000

Step 2 -

1,040,000 - 1,000,000 = 40,000

Step 3

40,000 x 11/20 = 22,000

Step 4

1,040,000 - 22,000 = 1,018,000

Step 5

1,018,000 - 1,010,000 cost of extingushment = 8,000 gain

57
Q

Calc, loss on extinguishment of debt on the income statement?

A

Step 1 - calc the Carrying amount of bond

8,000,000 face value
430,000
7,570,000 carrying amount

Step 2 - calc how much of the bond actually retired

8,000,000 / 4,000,000 = 50%

Step 3 - Income statement as loss on extinguishment debt

Unamortized debt 430,000 x 50% = 215,000 + 100,000 = 315,000 income statement loss on extinguishment

58
Q

Calc, note payable for the balance sheet?

A

Step 1 calc the present value of the note issued

Note payable 10,000
Present Value. .944

= Present Value 9,444

Step 2 - annual rate of 3%

Note Payable 10,000
Annual rate 3%
Present Value .944
9 months bearing 9/12

= 212.4

= 9,444 + 212.4 = 9,652

59
Q

Calc, the liability for accrued interest for the note?

A

Step 1 CALC THE Y1 INTEREST

FACE VALUE 10,000
NOTE BEARING 12%
INTEREST 1200

STEP 2 - CALC THE REMAINING INTEREST EXP

FACE VALUE 10,000
1200
12%
10/12
11,200
1120

ACCRUED INTEREST LIABILITY 2320 (1200 + 1120)

60
Q

Calc, the interest expense on the income statement interest bearing note instead of noninterest bearing note?

A

Step 1 - calc the note payable building

400,000 face value x 0.79 = 316,000

316,000 x 0.08 = 25,280 interest expense

Step 2 -

Note bearing 250,000 x 0.79 = 197,500 + 15,000 x 2.58
= 236,200

Step 3 - Interest expense

236,200 x 8% = 18,896 interest expense

25,280 - 18,896 = 6,384 decrease

61
Q

Calc, the accrued interest payable for the note payable?

A

Federal amount of 900,000 - annual principal payments 300,000 = 600,000 face amount

Next we will face amount 600,000 x 12% stated interest rate x 4 /12 = 24,000 accrued interest payable

62
Q

Calc, the note payable that needs to be reported?

A

Calc the monthly interest rate 12% / 12 months = 1%

Face value 500,000 x 1% = 5000

Payment of 11,122 - 5000 = 6,122 reduce the note outstanding balance

500,000 - 6,122 = 498,878 note payable equal

493,878 x 1% = 4,939

11,122 payment - 4,939 = 6,183 payment was reduced by the outstanding balance

493,878 - 6,183 = 487,695 note payable balance for the year 2

63
Q

Calc, the amount that should be reported as a gain from debt restructuring on the income statement?

A

Face value 500,000 + unpaid interest 75,000 = 575,000

575,000 - 410,000 cash payable = 165,000

64
Q

Calc, the impact of the transaction of anchor net income

A

So if the gross receivable is 100,000 - 25,000 credit loss = 75,000 which is recognized as a gain on restructuring of payable

65
Q

Calc, the gain on the troubled debt restructured agreement.

A

Carrying amount of 185,000 - 120,000 fair value = 65,000 gain on restructuring

Step 2

      Fair Value 120,000  Carrying Amount 85,000 = gain on restructuring 35,000

65,000 + 35,000 = 100,000

66
Q

calc, the loss of the Fair Value of land?

A

So the bank and debtor exchanged asset and funds so the Notes payable of 400,000 was paid bank 179,000 annual payments and also subtract 89,000

= 400,000 - 179,000 - 89,000 = 310,000

500,000 - 310,000 = 190,000

67
Q

calc the issued price for the 1000 bond?

Stated interest rate 6%
Yield interest rate 9%

A

1000 x 0.422 = 422
1000 x 6% x 6.418 = 385

422 + 385 = 807

68
Q

Calc, the asset retirement obgliation for the balance sheet?

A

Begin balance 257,000
New ARO (FV) 68,000
Partial settlement (87,000)
accretion exp. 26,000
Ending balance 264,000

69
Q

An entity most likely account for an asset retirement obligation ARO by

A

recognized the FV of the liability using an expected present value technique

70
Q

Calc, the interest implicit on the lease?

A

Full cost of equipment present value 15,192
minus (1st payment) 4,000 = 11,192

Amount financed PV ordinary annuity 4
11,192 / 4,000 = 2.798

71
Q

calc, note payable to be credited on the balance sheet

A

10,000 note payable x .944 = 9440

10,000 x3% x.944 x 9/12 = 212.4

trade terms are 9 months so the reason we have 9/12

72
Q

Calc, the noncurrent investment for the bond sinking fund requirement?

A

Beginning balance 450,000 Investment 90,000
Dividends received 15,000
interest earned. 30,000
costs (5,000)

= 580,000 noncurrent investment

73
Q
A

Financial Accounting Reporting (13 decks)

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