3.10 Non-Current Liabilities

interest expense and interest payment

under the effective IR method, the interest expense is determined by applying the effective IR to the bond’s carrying amount and amortization = the difference between __________________

market IR

the IR determined by bond buyers

effective IR

the IR that’s the market rate at the time of the bond issue and equates selling price to cash flows

historical cost +/- amortized amount

balance sheet amount of a bond =

= and =

if issued at par, a bond’s carrying amount __ face value and interest expense ___ interest payment

> and <

if issued at premium, a bond’s carrying amount __ face value and interest expense ___ coupon payment

< and >

if issued at discount, a bond’s carrying amount __ face value and interest expense ___ coupon payment

carrying amount, gain and loss

if bonds are redeemed early, the bonds payable amount decreases by the ___________ and the difference between the carrying amount & money paid to redeem is recorded as a ________ or __________

lease

has a specific underlying asset, obtains almost all economic benefits, and they decide what asset is used for are the 3 criteria for a _____________

less upfront money, lower risk and cost effective

3 advantages of a lease

finance leases

the 5 criteria for ______________ are 1) transfer of ownership 2) purchase option 3) term for most of asset’s life 4) PV(sum of payments) > fair value and 5) no alternative asset use

present value of future lease payments

at a lease’s inception, the lease payable and ROU asset are recorded, = to the _______________

effective IR

the lease payable liability is reduced by each lease payment using the ______________ method

straight line

the ROU asset is amortized with the ______________ method

defined contribution plan

pension plan where company pays an agreed upon amount right now, which is pension expense and an operating cash outflow

defined benefit plan

pension plan where company has promises for future payments and is funded through a separate legal entity

pension asset

fair value of pension entity > PV(estimated obligation) =

pension liability

fair value of pension entity < PV(estimated obligation) =