Notes Leases and Bonds Flashcards
(30 cards)
Credit risk req. Disclosures:
a. Supplemnt info to f/s
b. Notes to f/s
b. Notes to F/S
Write off Receivable
Dr Allow d/a
Cr A/R
Issuance of bonds
- Dr cash (face+accrued int-Bic)
- Dr bic
- Dr disct (plug)
- Cr B/P (face)
- Cr accrued int payable (face x stated rate x time since last int paid)
- Cr premium (plug)
- BV method convertible bond No g/l Gaap
Debt is being converted into Equity. Thus SE Increases
Same for MV method
Dr. B/P (face)
Dr. Premium
Cr. Bic
Cr C/S (par value)
Cr APIC (plug)
MV method convertible bond G/l Non gaap
Dr. B/P (face)
Dr. Premium
Dr. Loss (plug)
Cr. Bic
Cr C/S (par)
Cr. APIC (sh x mkt p p/sh)
Cr. gain (plug)
IFRS BIC
- ⬇ ️CV of bonds - Amortz thru effective int method
Bonds w detachable stock purchase warrants (2 securities)
Dr. cash 900
Dr. disct (calc) 80
Cr. B/P Face value: $800
Cr. APIC - warrants : paid $900 x 20% = $180
Report $800 vs record at CV $800-$20= $720
Capital or Finance (IFRS) lease:
TT BPO
75 lease term of useful life at inception
90 PV MLP (90 FMV of prop at inception)
If meet any 4, use TT/BPO
Depreciation for cap/finance lease TT and BPO 75 or 90
TT and BPO:
- Useful life,
- Salvage value or Fair Value of A at end of useful life
75 or 90: no ownership:
- Shorter of usful or legal life, and
- Ignore salvage value
Lease record at lowest of
1. FMV
2. PV of MLP:
- Annual pmt +
- BPO +
- Guaranteed residual value
Not: exec costs tax insurance
Dr expense and cr cash
Lease JE
Yr 1:
Dr lease asset
Cr lease liab
Dr. lease liab
Cr cash
Dr depreciation
Cr AD
Yr 2:
Dr lease liab
Dr int exp
Cr cash
Non operating lease
- Sales type
- Direct financing
- Sales type:
FV differs from cost
- profit/loss in period of sale, and
- int revenue earned over lease term using effective int method
CAFR sections
- Intro Letter of transmittal
- Financial
- Statistical
Sales lease type je or non-operating lease
Dr gross invest in lease receivable (face x pmt)
Cr. Deferred int. (PV of pmts- gross invt in lease rcvable)
Cr. Asset
Cr. Gain
Dr. cash
Cr lease pymt receivable
Dr deferred interest
Cr. Interest income
Sales involving real estate
Land lives forever
Sale-leaseback Sale asset and lease back
1. Record the gain or sale:
Dr cash
Cr asset
Cr Deferred gain
2. Defer the gain to rent exp or dep. Bec not really a gain: A. Cap lease:
Dr dep exp
Cr a/d
Dr. deferred gain
Cr exp
B. If op lease:
Dr rent exp
Cr cash
Dr deferred gain
Cr rent exp
Dr deferred gain
Cr dep exp (if cap lease)
Cr rent exp (if op lease)
Payroll taxes
Dr er wages- payroll expense
Dr er-payroll tax expense (fica + whldg)
Cr cash
Cr ee-payroll tax liability (fica7%+futa2%)x wage ex
Cr er+ee W/hldgs due to IRS (fedwhldg+7%wage exp)
Contingencies: Loss and Gains
- reasonably POSSIBLE
- PROBABLE + estimable
Gain contingencies:
-no accrue until realized, just disclose
Loss:
- Reasonably possible…. NO
- Probable: Yes
Subsequent events -type 1 -type 2
- type 1: existed at b/s: accrue and disclose
- type 2: did not exist at bs. No recog/accrue, only disclose
Refi from ST to LT
Gaap: intent and ability (before iss of bs)
IFRS: rollover at least 12 mos, and signed k
Contingency and provision
Gaap: same IFRS:
- contingency: disclose only
- provision: provide. Acrue/recognize
Debt restructuring: - concession - financial difficulties 3-ways:
- Transfer of property:
- Equity interest in debtor
- Modification of terms:
- Transfer of property
A. Debtor: diff betw fmv and bv, and fmv and cv
B. Creditor: records new asset at fmv and recog loss
Cv debt: 600
Fmv: 500
BV: 300
Debtor:
Dr np 600
Cr asset 300
Cr gain 100
Cr gain 200
Creditor:
Dr loss 100
Dr asset 500
Cr nr 300 …
- Equity interest in debtor is issued Equity is recorded as if issued for fmv.
Gain for diff betw cv of debt and fmv
Tfer equity Debtor:
Dr np 600
Cr cs 200
Cr apic 100
Cr gain 300
Creditor:
Dr invesmt stock 300
Dr asset 300
Cr nr 600
