ACC327_EXAM1_StudyGuide

ACC327_EXAM1_StudyGuide - ACC327 EXAM 1 Study Guide 1. What...

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ACC327 – EXAM 1 – Study Guide 1. What are the similarities between U.S. GAAP & iGAAP regarding: Accounting for long-term debt? Both report premiums and discounts and amortize them at the effective interest method. Reporting requirements? Issuance of stock, purchase of treasury stock, and the declaration and payments of dividends 2. What is a fair value alternative? It is the option to report their liabilities at year end fair value with changes in fair value during the year flowing through income. 3. An increase in the fair value of a liability results in a ___loss_____. 4. A decrease in the fair value of a liability results in a ______gain__. 5. What is the difference between U.S. GAAP & iGAAP in relation to recording liabilities for AROs? US GAAP requires a present legal obligation, iGAAP does not, a legal obligation may only be probable for the future. 6. In years to come, what will be the standard for publicly traded companies and what will be the standard for not publicly traded companies? Igaap- publicly ; US Gaap- not publicly 7. What is the difference between U.S. GAAP & iGAAP regarding the terminology and presentation of stockholder’s equity in financial statements? Igaap sometimes uses a SoRIE (statement of recognized income and expense) and it reports items that were charged to the revaluation account and adds the net income for the period giving total recognized income and expense.
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ACC327 – EXAM 1 – Study Guide 8. How is the Effective Interest Method calculated? Interest Expense = CV of bond x Effective Interest (or market rate) 9. How is the Carrying Value of a bond calculated? CV of bond = Face Value +premium or –discount 10. How is the straight line method calculated and when is it used? Total discount or premium/# of intereste payments 11. $100,000, 10%, 10 year bonds paying interest semiannually is issued when the market rate of interest is 8%. Calculate the premium/discount and give the journal entry when the bond is issued. 100,000 x .10 x 6/12 = 5000 cash interest PV of principal 100,000 x .45639 = $45,639 PV of interest 5,000 x 13.59033 = 67,591.65 Total Proceeds = 113,590.65 Cash 113,590.65 Premium on bond payable 13,591 Bond Payable 100,000
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ACC327 – EXAM 1 – Study Guide 12. What is the difference in the journal entry if it was a bond discount? 13. On June 30, 2010 M. Company issued $5,000,000 face value of 13%, 20 year bonds @ $5,367,150, a yield of 12%. M. Company uses the effective interest method to amortize bond premium or discount. The bond pays semiannual interest on June 30 and December 31. a. Prepare journal entries for the issuance of the bonds on June 30, 2010. b. Prepare the journal entry for the payment of interest and the amortization of the premium on Dec. 31, 2010. c.
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This note was uploaded on 04/10/2011 for the course ACC 327 taught by Professor Sign during the Spring '11 term at S. Alabama.

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ACC327_EXAM1_StudyGuide - ACC327 EXAM 1 Study Guide 1. What...

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