MGMT 1B Study Guide - Midterm Guide: Standard Deduction, Accrual, Retained Earnings
Document Summary
Conversion of bonds: similar to retirement, no cash paid, instead stock issued, no gain or loss recorded. Pricing a bond (appendix 14a: the concept of present value, lump sum a single payment, annuity an equal stream of payments, bond commitments, principal. Investment: present value tables tables b1 and b3 in the back of our textbook (pages b-10, 11). Effective interest method of amortization: straight-line method: a constant amount of interest expense every six months, effective interest method: a constant rate of interest expense every six months (another example of substance over form). Interest expense = carrying value of the bonds x market % x 1 2: cash = face value x bond rate x 1 2, difference = amount of discount/premium amortization. Chapter 12: marketable securities: temporary investments in highly marketable stocks, bonds, and notes. Entry on 1/2/x3: debit cash = (stock price, debit realized loss on sale = (cost - stock price, credit marketable securities = (cost bought for)
