In a debt restructuring, the gain is measured as a) The difference between carrying amount and fair value b) The total amount of debt forgiven c) The present value of new payments d) The face value of new debt
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- AnswerDebt issuance costs are: Accounted for as a deduction from the equity balance on the balance sheet Recognized initially as a current liability on the balance sheet Amortized over the term of the related debt liability Expensed on the income statement when the transaction occurs Which one is the correct answer please?What is the effective interest rate of a bond or other debt instrument measured at amortized cost? Select the correct response: The interest rate currently charged by the entity or by others for similar debt instruments (i.e., similar remaining maturity, cash flow pattern, currency, credit risk, collateral, and interest basis). The interest rate that exactly discounts estimated future cash payments or receipts through the expected life of the debt instrument or, when appropriate, a shorter period to the net carrying amount of the instrument. The basic, risk-free interest rate that is derived from observable government bond prices The stated coupon rate of the debt instrument.
- Which of the following would be included in the financing section? A. loss on sale of investments B. depreciation expense C. increase in notes receivable D. decrease in notes payablewhat of the following is the correct calculation for interest cover : a- total debt / interest payable b- interest payable / total debt c- operating profit / interest payable d- interest payable / operating profitIn the context of handling debt - like items in M&A, what is the most buyer-friendly approach for items representing a hard claim that must be paid post-close? a. Purchase price adjustments b. Escrow accounts c. Insurance policies d. Working capital adjustments e. Debt refinancing
- Gains or losses from the early extinguishment of debt that is refunded can theoretically be accounted for in three ways: 1. Amortized over the life of old debt 2. Amortized over the life of the new debt issue 3. Recognized in the period of extinguishment Required: A. Discuss the supporting arguments for each of the three theoretical methods of accounting for gains and losses from the early extinguishment of debt. B. Which of the three methods would provide a blance sheet measure that reflects the present value of the future cash flows discounted at the interest rate that is comensurate with the risk associated with the new debt issue? why? C. Which of the three methods is generally accepted and how should the appropriate amount of gain or loss be shown in a company's financial statements?Use IFRS 9 to determine how to subsequently measure the following financial assets. Three choices of measurement basis are amortized cost, fair value through other comprehensive income, and fair value through profit or loss. Provide justification for your choice. Long-term loans that are held for collecting contractual cash flows till their maturities, but may be subsequently sold if the loans’ credit risk substantially increases. Investments in bonds that are held for collecting contractual cash flows, and may be subsequently sold to re-invest the cash in financial assets with a higher return. Subprime (high risk) mortgage loans that were originated by a mortgage-broker firm that always sell these loans to banks right after their origination. Forward contracts that an EU bank purchased to hedge the exposure to changes in fair value of US$-denominated loans. Investment in bonds that are convertible into common stock of the bond issuer. Investment in bonds that pay a variable market…Explain the nature of long term debt.
- Balance sheet values are calculated using compound interest (present value) calculations for all of the following except a.bonds payable. b.long-term notes receivable. c.long-term lease liabilities. d.deferred income taxes.The debt-to-assets ratio is the: Multiple Choice ratio of current liabilities to current assets. same calculation as the current ratio, but with total assets instead of short-term assets. ratio of total liabilities to total assets. proportion of total liabilities financed by creditors.Loans and receivable should be measured subsequent to initial recognition at * a. Amortized cost using the straight line method b. Fair value c. Fair value plus transaction cost d. Amortized cost using the effective interest method