Cheat Sheet_aditi

Cheat Sheet_aditi - Long-Term Debt -amt of...

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Long-Term Debt -amt of interest/compounding period = amt of loan x interest rate p.a. x interval/12 (1) note Issuance : PV of future payments w/ historical interest rate; Dr. Cash, Cr. Note Payable Interest : Dr. Interest Expense (NBV x interest rate), Cr. Note Payable -liability increasing over time since interest was not being paid out -for first four years, noncurrent liability; w/i one year of maturity, reclassify as current Reclassify as current : Dr. Note Payable, Cr. Current Portion of Long-Term Debt (2) mortgage Issuance : PV of future payments; Dr. Cash, Cr. Mortgage Payable Interest : Dr. Interest Expense (NBV x historical interest), Cr. Mortgage Payable Payment : Dr. Mortgage Payable, Cr. Cash -liability decreases after mortgage payment to: MP – (Payment – Interest); at end = 0 Reclassify Current Portion : Dr. Mortgage Payable, Cr. Current portion of LT Debt * PV at 2001 – PV at 2002 = current portion in 2001 (3) bonds -coupon payment = par value x coupon rate / # coupon payments per year -NBV = Par Value + Unamortized Premium (- Unamortized Discount) -Interest Expense = NBV at start x historical interest rate Issuance : Dr. Cash, Cr. Bonds Payable (full amount including premium); or Dr. Cash, Cr. Bonds Payable, Cr. Premium on Bonds Payable Interest : Dr. Interest Expense (BP x historical rate), Cr. Bonds Payable (BP includes prem/dis) Payment : Dr. Bonds Payable, Cr. Cash (payment of coupon) -difference between expense and coupon payment = reduction of liability (amortization of the premium) Reclassify Current Portion : at end of each year – Dr. Bonds Payable, Cr. Current Portion (PV bond in 01 – PV bond in 02 = current portion) -early retirement of debt: gains and losses included in operating results: Dr. BP, Cr. Cash, Cr. Gain on Early Retirement of Debt Leases : owner of PPE permits lessee to use prop for period of time for cash payments 1) Capital Lease Method – like a purchase (sale) – financing transaction -ownership transferred to lessee at end of term, “bargain purchase” option, term >= 75% of estimated useful life, start of lease PV(min. lease payments) >= 90% of fair value - At agreement (lessee): Dr. Leased Asset – Truck, Cr. Lease Obligation - At payment (lessee): Dr. Interest Expense, Dr. Lease Oblig (PLUG), Cr. Cash - Reclassify Current Port : Dr. Lease Oblig, Cr. Current Port of Lease Oblig (PVnow – PVone year from now) - Amortize leased asset : Dr. Amortization Expense, Cr. Accum Amortization -amortization of the cum cost of the asset (lease obligation) -NBV = lease obligation – accum amortization - At expiration : Dr. Accum Amortization, Cr. Leased Asset – Truck -lease obligation is PV of contract payments on the lease – liability 2) Operating Lease Method – like a rental contract -if none of the above criteria are held Dr. Lease Expense, Cr. Cash (lessee) -operating leases have less adverse impact on book leverage (debt/equity) ratio -total expenses same but in early years less for operating (lease payment vs. amortization +
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This note was uploaded on 02/21/2009 for the course ACCT 101 taught by Professor Armstrong during the Fall '09 term at UPenn.

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Cheat Sheet_aditi - Long-Term Debt -amt of...

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