F4

Question 2

Front

Answer 2

Back

Question 3

What is a current liability?

Answer 3

Obligation due within 1 year or operating cycle, whichever is longer.

Question 4

What are accrued liabilities?

Answer 4

Expenses incurred but unpaid (e.g., wages, interest). JE: Dr Expense / Cr Liability.

Question 5

Accounts payable recorded at?

Answer 5

Invoice amount (gross or net method).

Question 6

When recognize exit/disposal liabilities?

Answer 6

When announced + plan committed + costs estimable.

Question 7

Asset Retirement Obligation (ARO) rule

Answer 7

Record at PV; create ARC (asset).

Question 8

ARO accretion expense formula

Answer 8

ARO × discount rate.

Question 9

ARO accretion JE

Answer 9

Dr Accretion Expense / Cr ARO Liability.

Question 10

ARO ARC depreciation rule

Answer 10

Depreciate ARC over useful life.

Question 11

Loss contingency rule

Answer 11

Probable + estimable = accrue; reasonably possible = disclose.

Question 12

Gain contingency rule

Answer 12

Do not accrue; disclose only if probable.

Question 13

Warranty accounting rule

Answer 13

Expense + liability at time of sale.

Question 14

Time value of money concept

Answer 14

Money today > money later due to earning power.

Question 15

PV of $1 formula

Answer 15

PV = FV/(1+r)^n.

need breakout further explanation of the formula with examples

Question 16

FV of $1 formula

Answer 16

FV = PV(1+r)^n.

need breakout further explanation of the formula with examples

Question 17

PV of ordinary annuity formula

Answer 17

PVOA = PMT × (1 - 1/(1+r)^n)/r.

need breakout further explanation of the formula with examples

Question 18

Long-term liability measurement

Answer 18

PV of future cash flows.

Question 19

Notes payable at discount

Answer 19

Cash < face; record discount & amortize to interest.

Question 20

JE: Note at discount

Answer 20

Dr Cash / Dr Discount / Cr Note Payable.

Question 21

What are debt covenants?

Answer 21

Lender restrictions to protect borrower default risk.

Question 22

Covenant violation effect

Answer 22

Debt becomes current unless waiver obtained.

Question 23

Bond definition

Answer 23

Long-term debt: pay interest + principal.

Question 24

Bond at par rule

Answer 24

Coupon = market rate.

Question 25

Bond discount rule

Answer 25

Coupon < (less than) market rate (interest expense > (greater than) cash paid).

Question 26

Bond premium rule

Answer 26

Coupon > (greater than) market rate (interest expense < (less than) cash paid).

Question 27

Bond JE at par

Answer 27

Dr Cash / Cr Bonds Payable.

Question 28

Bond JE at discount

Answer 28

Dr Cash / Dr Discount / Cr Bonds Payable.

Question 29

Bond JE at premium

Answer 29

Dr Cash / Cr Premium / Cr Bonds Payable.

Question 30

Bond issuance costs rule

Answer 30

Reduce bond CV, amortize using effective interest method.

Question 31

Straight-line amortization formula

Answer 31

Disc/Prem ÷ # periods.

Question 32

Effective interest expense formula

Answer 32

CV × market rate.

Question 33

Cash interest formula

Answer 33

Face value × coupon rate.

Question 34

Amortization effect

Answer 34

Discount ↑ CV; premium ↓ CV. ## Footnote need clarification on formula

Question 35

Bond issued between interest dates

Answer 35

Buyer pays accrued interest to issuer.

Question 36

Year-end interest accrual JE

Answer 36

Dr Interest Exp / Cr Interest Payable.

Question 37

Troubled Debt Restructuring rule

Answer 37

Compare PV of new CFs to CV; gain if reduced.

Question 38

Debt settlement gain rule

Answer 38

Gain if asset value < CV of debt settled.

Question 39

Debt extinguishment gain/loss

Answer 39

Compare cash paid to CV of debt.

Question 40

Lease definition

Answer 40

Contract giving right to control asset for a period.

Question 41

Finance lease criteria

Answer 41

Transfer ownership, bargain option, life major portion, PV substantially all, specialized asset.

Question 42

Operating vs Finance lease

Answer 42

Finance lease: interest + amortization; operating: single lease expense.

Question 43

ROU asset initial rule

Answer 43

PV of lease payments + direct costs.

Question 44

Lease liability measure

Answer 44

PV of lease payments using implicit or incremental rate.

Question 45

Short-term lease rule

Answer 45

≤ 12 months → expense as incurred, no ROU.

Question 46

Lease payments PV includes

Answer 46

Fixed PMTs, options if reasonably certain, residual guarantees, termination fees.

Question 47

Finance lease initial JE

Answer 47

Dr ROU Asset / Cr Lease Liability.

Question 48

Finance lease expense

Answer 48

Interest + amortization.

Question 49

Operating lease expense

Answer 49

Single straight-line lease cost.

Question 50

Lease disclosures examples

Answer 50

ROU assets, liabilities, lease term, discount rate.