ACG 4111 test 1 | Exam Elaborations
trade notes payable *** different from notes payable because they are recognized by
a written promissory note
characteristics of a liabilitiy *** -are probable, future sacrifices
-arise from present obligations
-result from past transactions or events
accounts payable *** obligations to suppliers of merchandise or services purchased
on open account
notes payable *** -bank loans
-most are short term but they become renewed becoming long-term
line of credit *** -allows a company to borrow cash without having to follow formal loan
proedures and paperwork
-noncommitted-informal
-committed-the company must pay a committement fee to the bank to keep it available
interest *** face amount*annual rate*time to maturity
secured loans *** a specified asset of the borrower is pledged as collateral or security
for the loan
commercial paper *** unsecured notes by other companies as ST investment, sold in
small amounts of 25,000 and usually backed by a line of credit
sales tax *** -represent liabilities until remitted (paid)
-comes out of the cash we receive from the customer
to be a callable bond *** -creditor can demand it at any time even if they won't
-there is an existing violation
you can refinance short-term obligations to long-term *** 1) the firm must intend to
refinance on a long-term basis
2) the firm must actually have demonstrated the ability to refinance on a long-term basis
GAAP categorizations for liability *** -probable: confirming event is likely to occur
(accrue)
-resonably possible: the chance the confirming event will occur is more than remote but
less than likely (disclose)
-remote: the chance the confirming event will occur is slight
trade notes payable *** different from notes payable because they are recognized by
a written promissory note
characteristics of a liabilitiy *** -are probable, future sacrifices
-arise from present obligations
-result from past transactions or events
accounts payable *** obligations to suppliers of merchandise or services purchased
on open account
notes payable *** -bank loans
-most are short term but they become renewed becoming long-term
line of credit *** -allows a company to borrow cash without having to follow formal loan
proedures and paperwork
-noncommitted-informal
-committed-the company must pay a committement fee to the bank to keep it available
interest *** face amount*annual rate*time to maturity
secured loans *** a specified asset of the borrower is pledged as collateral or security
for the loan
commercial paper *** unsecured notes by other companies as ST investment, sold in
small amounts of 25,000 and usually backed by a line of credit
sales tax *** -represent liabilities until remitted (paid)
-comes out of the cash we receive from the customer
to be a callable bond *** -creditor can demand it at any time even if they won't
-there is an existing violation
you can refinance short-term obligations to long-term *** 1) the firm must intend to
refinance on a long-term basis
2) the firm must actually have demonstrated the ability to refinance on a long-term basis
GAAP categorizations for liability *** -probable: confirming event is likely to occur
(accrue)
-resonably possible: the chance the confirming event will occur is more than remote but
less than likely (disclose)
-remote: the chance the confirming event will occur is slight
