Intermediate accounting 14th edition chapter 6 solutions

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Long-term liability; classification; definitions. Issuance of bonds; types of bonds. Premium and discount; amortization schedules. Retirement and refunding of debt. Imputation of interest on notes. Fair value option. Disclosures of long-term obligations.

Troubled debt restructuring. Describe the formal procedures associated with issuing long-term debt. Identify various types of bond issues. Describe the accounting valuation for bonds at date of issuance. Apply the methods of bond discount and premium amortization. Describe the accounting for the extinguishment of debt. Explain the accounting for long- term notes payable. Describe the accounting for the fair value option. Explain the reporting of off-balance-sheet financing arrangements.

Indicate how to present and analyze long-term debt. Describe the accounting for a debt restructuring. Simple 15—20 E Classification. Simple 15—20 E Entries for bond transactions. Simple 15—20 E Entries for bond transactions—straight-line. Simple 15—20 E Entries for bond transactions—effective-interest. Simple 15—20 E Amortization schedule—straight-line.

Simple 15—20 E Amortization schedule—effective-interest. Simple 15—20 E Determine proper amounts in account balances. Moderate 15—20 E Entries and questions for bond transactions. Moderate 20—30 E Entries for bond transactions. Moderate 15—20 E Information related to various bond issues. Simple 20—30 E Entry for redemption of bond; bond issue costs. Simple 15—20 E Entries for redemption and issuance of bonds. Simple 12—16 E Entries for redemption and issuance of bonds. Simple 10—15 E Entries for zero-interest-bearing notes.

Simple 15—20 E Imputation of interest. Simple 15—20 E Imputation of interest with right. Moderate 15—20 E Fair value option. Simple 10—15 E Long-term debt disclosure.

Moderate 20—25 P Analysis of amortization schedule and interest entries. Simple 15—20 P Issuance and redemption of bonds. Moderate 25—30 P Negative amortization. Moderate 20—30 P Issuance and redemption of bonds; income statement presentation. Simple 15—20 P Comprehensive bond problem. Moderate 50—65 P Issuance of bonds between interest dates, straight-line, retirement. Moderate 20—25 P Entries for life cycle of bonds.

Moderate 20—25 P Entries for zero-interest-bearing note. Simple 15—25 P Entries for zero-interest-bearing note; payable in installments. Moderate 20—25 P Comprehensive problem; issuance, classification, reporting. Moderate 20—25 P Effective-interest method. Moderate 40—50 4. Complex 40—50 CA Bond theory: balance sheet presentations, interest rate, premium. Moderate 25—30 CA Bond theory: price, presentation, and redemption. Moderate 15—25 CA Bond theory: amortization and gain or loss recognition.

Simple 20—25 CA Off-balance-sheet financing. Moderate 20—30 CA Bond issue, ethics. Moderate 23—30 5. CE According to FASB ASC Disclosure of Long-Term Obligations : The combined aggregate amount of maturities and sinking fund requirements for all long-term borrowings shall be disclosed for each of the five years following the date of the latest balance sheet presented.

See Section for disclosure guidance that applies to securities, including debt securities. See Example 3 Paragraph for an illustration of this disclosure requirement. If a covenant violation occurs that would otherwise give the lender the right to call the debt, a lender may waive its call right arising from the current violation for a period greater than one year while retaining future covenant requirements.

Unless facts and circumstances indicate otherwise, the borrower shall classify the obligation as noncurrent, unless both of the following conditions exist: a A covenant violation that gives the lender the right to call the debt has occurred at the balance sheet date or would have occurred absent a loan modification. See Example 1 paragraph for an illustration of this classification guidance. The bond indenture contains covenants or restrictions for the protection of the bondholders.

The mortgage accompanies a formal promissory note and becomes effective only upon default of the note. If the entire bond matures on a single date, the bonds are referred to as term bonds. Mortgage bonds are secured by real estate.

Debenture bonds are unsecured. The interest payments for income bonds depend on the existence of operating income in the issuing company. Callable bonds may be called and retired by the issuer prior to maturity.

Registeredbonds are issued in the name of the owner and require surrender of the certificate and issuance of a new certificate to complete the sale. A bearer or coupon bond is not recorded in the name of the owner and may be transferred from one investor to another by mere delivery. Convertible bonds can be converted into other securities of the issuing corporation for a specified time after issuance.

Commodity-backed bonds alsocalledasset-linkedbonds are redeemable in measures of a commodity. A discount on bonds payable results when investors demand a rate of interest higher than the rate stated on the bonds.

The investors are not satisfied with the nominal interest rate because they can earn a greater rate on alternative investments of equal risk. They refuse to pay par for the bonds and cannot change the nominal rate. However, by lowering the amount paid for the bonds, investors can alter the effective rate of interest.

A premium on bonds payable results from the opposite conditions. That is, when investors are satisfied with a rate of interest lower than the rate stated on the bonds, they are willing to pay more than the face value of the bonds in order to acquire them, thus reducing their effective rate of interest below the stated rate.

Discount premium on bonds payable should be reported in the balance sheet as a direct deduction from addition to the face amount of the bond. Both are liability valuation accounts. Bond discount and bond premium may be amortized on a straight-line basis or on an effective- interest basis. The profession recommends the effective-interest method but permits the straight- line method when the results obtained are not materially different from the effective-interest method.

The straight-line method results in an even or average allocation of the total interest over the life of the notes or bonds. The effective-interest method results in an increasing or decreasing amount of interest each period. This is because interest is based on the carrying amount of the bond issuance at the beginning of each period. The straight-line method results in a constant dollar amount of interest and an increasing or decreasing rate of interest over the life of the bonds.

The effective- interest method results in an increasing or decreasing dollar amount of interest and a constant rate of interest over the life of the bonds. The annual interest expense will decrease each period throughout the life of the bonds. Under the effective-interest method the interest expense each period is equal to the effective or yield interest rate times the book value of the bonds at the beginning of each interest period.

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I can recommend a site that has helped me. Show More. Views Total views. Actions Shares. No notes for slide. Ch19 kieso intermediate accounting solution manual 1. Reconcile pretax financial income with taxable income. Identify temporary and permanent differences. Determine deferred income taxes and related items— single tax rate. Classification of deferred taxes. Determine deferred income taxes and related items— multiple tax rates, expected future income.

Determine deferred taxes, multiple rates, expected future losses. Carryback and carryforward of NOL. Change in enacted future tax rate. Tracking temporary differences through reversal. Income statement presentation. Conceptual issues—tax allocation. Valuation allowance—deferred tax asset. Disclosure and other issues. Identify differences between pretax financial income and taxable income.

Describe a temporary difference that results in future taxable amounts. Describe a temporary difference that results in future deductible amounts. Explain the purpose of a deferred tax asset valuation allowance. Describe the presentation of income tax expense in the income statement.

Describe various temporary and permanent differences. Explain the effect of various tax rates and tax rate changes on deferred income taxes.

Apply accounting procedures for a loss carryback and a loss carryforward. Describe the presentation of deferred income taxes in financial statements.

Simple 15—20 E Two differences, no beginning deferred taxes, tracked through 2 years. Simple 15—20 E One temporary difference, future taxable amounts, one rate, beginning deferred taxes. Simple 15—20 E Three differences, compute taxable income, entry for taxes. Simple 15—20 E Two temporary differences, one rate, beginning deferred taxes. Simple 15—20 E Identify temporary or permanent differences.

Simple 10—15 E Terminology, relationships, computations, entries. Simple 10—15 E Two temporary differences, one rate, 3 years. Simple 10—15 E Carryback and carryforward of NOL, no valuation account, no temporary differences. Simple 15—20 E Two NOLs, no temporary differences, no valuation account, entries and income statement. Moderate 20—25 E Three differences, classify deferred taxes. Simple 10—15 E Two temporary differences, one rate, beginning deferred taxes, compute pretax financial income.

Complex 20—25 E One difference, multiple rates, effect of beginning balance versus no beginning deferred taxes. Simple 20—25 E Deferred tax asset with and without valuation account. Moderate 20—25 E Deferred tax asset with previous valuation account. Complex 20—25 E Deferred tax liability, change in tax rate, prepare section of income statement. Complex 15—20 E Two temporary differences, tracked through 3 years, multiple rates.

Moderate 30—35 E Three differences, multiple rates, future taxable income. Moderate 20—25 E Two differences, one rate, beginning deferred balance, compute pretax financial income. Complex 25—30 E Two differences, no beginning deferred taxes, multiple rates. Moderate 15—20 E Two temporary differences, multiple rates, future taxable income. Moderate 20—25 E Two differences, one rate, first year. Simple 15—20 E NOL carryback and carryforward, valuation account versus no valuation account.

Complex 30—35 E NOL carryback and carryforward, valuation account needed. Moderate 15—20 4. Complex 40—45 P One temporary difference, tracked for 4 years, one permanent difference, change in rate. Complex 50—60 P Second year of depreciation difference, two differences, single rate, extraordinary item. Complex 40—45 P Permanent and temporary differences, one rate. Moderate 20—25 P NOL without valuation account.

Simple 20—25 P Two differences, two rates, future income expected. Moderate 20—25 P One temporary difference, tracked 3 years, change in rates, income statement presentation. Complex 45—50 P Two differences, 2 years, compute taxable income and pretax financial income. Complex 40—50 P Five differences, compute taxable income and deferred taxes, draft income statement. Complex 40—50 CA Objectives and principles for accounting for income taxes.

Simple 15—20 CA Basic accounting for temporary differences. Moderate 20—25 CA Identify temporary differences and classification criteria. Complex 20—25 CA Accounting and classification of deferred income taxes. Moderate 20—25 CA Explain computation of deferred tax liability for multiple tax rates. Complex 20—25 CA Explain future taxable and deductible amounts, how carryback and carryforward affects deferred taxes. Complex 20—25 CA Deferred taxes, income effects. Moderate 20—25 5.

A deferred tax asset is measured using the applicable enacted tax rate and provisions of the enacted tax law. A deferred tax asset is reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized. A deferred tax liability is measured using the applicable enacted tax rate and provisions of the enacted tax law.

CE According to FASB ASC Income Taxes—Initial Measurement : The following basic requirements are applied to the measurement of current and deferred income taxes at the date of the financial statements: a The measurement of current and deferred tax liabilities and assets is based on provisions of the enacted tax law; the effects of future changes in tax laws or rates are not anticipated.

In such an event, a note must 1 disclose the aggregate dollar and per share effects of the tax holiday and 2 briefly describe the factual circumstances including the date on which the special tax status will terminate. The term more likely than not means a likelihood of more than 50 percent; the terms examined and upon examination also include resolution of the related appeals or litigation processes, if any.

For example, if an entity determines that it is certain that the entire cost of an acquired asset is fully deductible, the more- likely-than-not recognition threshold has been met. The more-likely-than-not recognition threshold is a positive assertion that an entity believes it is entitled to the economic benefits associated with a tax position. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold shall consider the facts, circumstances, and information available at the reporting date.

Pretax financial income is reported on the income statement and is often referred to as income before income taxes. One objective of accounting for income taxes is to recognize the amount of taxes payable or refundable for the current year. A secondobjective is to recognize deferred tax liabilities and assets for the future tax consequences of events already recognized in the financial statements or tax returns. Therefore, a permanent difference is caused by an item that: 1 is included in pretax financial income but never in taxable income, or 2 is included in taxable income but never in pretax financial income.

Item 3 , like item 2 , is an expense which is not deductible for tax purposes.