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19 Cards in this Set
- Front
- Back
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what do you do with executory costs? |
literally nothing. if they're included, take them out |
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Lessee: if theres a bargain purchase price, how do you depreciate the asset? |
use economic life with salvage value |
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Lessee: if there is a transfer of ownership, how do you depreciate |
normal depreciation with economic life and salvage value |
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Lessee: if there's a guaranteed residual value, how do you depreciate |
use lease term and depreciate down to residual value (salvage value is irrelevant) |
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Lessee: if there's no bargain, transfer of ownership, or resid value, how do you depreciate asset |
use lease time and depreciate to 0 |
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Lessee: what rate do you use? |
if you know the lessor's rate, use the lower of the two. or else you have to use the lessee's rate |
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effective interest rate |
uses constant interest rate to calculate interest expense on CV of bond |
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entry to initially record bond |
dr cash cr bond payable (face value) ( dr discount ) ( cr premium ) |
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entry to record interest at the end of the year |
dr interest expense cr interest payable (dr premium) (cr discount) |
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entry for interest payments on payment date |
dr interest payable cr cash |
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entry to retire bond |
dr interest expense dr bond payable cr cash (dr premium) (cr discount) |
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initial bond entry with bond issue cost |
dr cash dr unamortized issue cost cr bonds payable (dr discount) (cr premium) |
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adjusting entry for bond issue cost |
dr bond issue expense cr unamortized issue cost use s-l to split issue cost over the life of bond and amortize that much each period |
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zero interest bearing notes |
note doesn't have interest payments, but interest expense is still recorded. they're issued at a steep discount |
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the stated interest rate on a note is assumed to be fair for exchange of PGS unless |
1-no interest rate is given 2-stated rate is unreasonable 3-stated rate is materially different from (a) current cash sales price for similar PGS or (b) current fair value of debt instrument |
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fair value option for bonds/notes: market rate increases |
gain |
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fair value option for bonds/notes: issuer creditworthiness increases |
loss |
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journal entry for debt settlement |
dr notes payable dr interest payable dr AD - equipment (dr loss on disp of equipment) cr equipment cr gain on restructure (cr gain on disp of equipment) |
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how to check for gain on modification of terms troubled debt restructure |
total CFs < carrying value pre modification write debt down to total CFs and credit gain, making it 0% interest |
