MGMT 351 1st Edition Lecture 10Current LecturePractice Exam Questions 1 – Current Liabilities, Bonds, and Notes 1. Classification of certain debt as long-term debt and vice versa, depending on how the repayment of the short-term debt is going to be refinanced. If you have a short-term debt and you plan to pay it off with long-term financing, borrow money for long-term, orissuing common stock – then report it as a long-term liability. 4. Retirement of long-term debt, how to compute gain or loss on retirement of long-term debt. Gain or loss is computed by comparing the book value of the debt and the price you pay to retire the debt. -Gain: BV> Price paid// Loss: BV< Price paid; you do not consider unpaid interest because the gain/loss 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 interest> price)Work-out 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 5/6* cash int/I-Exp/ and Amort—assuming here that 12/31/2008 is the FYE 7. Effective interest rate: based on yield rate  total discount/ total PV2. Noninterest bearing bond $1,000- issued at discount; prepaid interest expense- reduces income for each year If Premium- then its like interest revenue collected in advance, increases I/exp each year Questions 2: Leases These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.7. Payments made at the beginning of the year or period—annuity due; either use PV of Annuity due table, or do; 70,000= R +®(PVOA,9,.06) either way= $8,9729&10 -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 CLCurrent 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—300k/12= 25k/yearWorkout 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 Investment/ gross receivable= (Rent Payment)* (#payments)+