Exam 1 Review
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This 2 page Study Guide was uploaded by Emily McIlhattan on Monday February 16, 2015. The Study Guide belongs to MGMT 351 at Purdue University taught by Byong Ro in Winter2015. Since its upload, it has received 340 views. For similar materials see Intermediate Accounting II in Accounting at Purdue University.
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Date Created: 02/16/15
MGMT 351 Review for Exam 1 Current Lecture Practice Exam Questions 1 Current Liabilities Bonds and Notes 1 Classi cation of certain debt as longterm debt and vice versa depending on how the repayment of the shortterm debt is going to be re nanced If you have a shortterm debt and you plan to pay it off with longterm nancing borrow money for longterm or issuing common stock then report it as a longterm liability 4 Retirement of longterm debt how to compute gain or loss on retirement of longterm debt Gain or loss is computed by comparing the book value of the debt and the price you pay to retire the debt Gain BVgt Price paid Loss BVlt Price paid you do not consider unpaid interest because the gainloss is only on the bond debt itself ordinary retirement For troubled debt restructuring then you include unpaid interest in the gain or loss Gain value of debt BV of debt itself unpaid cash interestgt price Workout problem If you get a completed amortization table questions will be about the table you will have to interpret it A 5 months has passed take 56 cash intlExp and Amort assuming here that 12312008 is the FYE 7 Effective interest rate based on yield rate total discount total PV 2 Noninterest bearing bond 1000 issued at discount prepaid interest expense reduces income for each year If Premium then its like interest revenue collected in advance increases lexp each year Questions 2 Leases 7 Payments made at the beginning of the year or period annuity due either use PV of Annuity due table or do 70000 R PVOA906 either way 8972 9amp10 Lessor always includes the residual value PVee total liability what he or she should pay so if residual value is not guaranteed then they do not have to pay for it so you do not include it PVor Net Investment in Leased Asset which is the Fair Value of the leased asset which includes residual value rather guaranteed or not Check all 4 criteria for a CL Current liability amortization within one year or one operating cycle whichever is longer 13 no correct answer because it depreciation should be calculated using the economic life of the asset 300k12 25kyear Workout Problem When rv is guaranteed treat it like salvage value so for BV PV grv Also once you satisfy one of the CL criteria you can stop and it is a CL Gross lnvestment gross receivabe Rent Payment payments grv
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