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U.S. GAAP Codification of Accounting Standards |
| U.S. GAAP Codification | Accounting Standards, ASC |
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U.S. GAAP
Codification of Accounting Standards |
| U.S. GAAP Codification Updates |
| Principles of Accounting, Intermediate Accounting, Advanced Accounting |
| Accounting Terms |
| Codification Topic 835-30 Imputation of Interest Interest on Receivables and Payables APB Opinion 21, August 1971 "Interest on Receivables and Payables" Note exchanged for cash 1. Present value of the note = cash proceeds exchanged 2. If present value of the note < face amount of the note --> the difference is discount --> discount is amortized using "interest method" 3. Amortization of discount --> interest expense for note payable --> interest income for note receivable Example 1: Note payable Received $1,000 in cash and issued a $1,100 note payable Present value = $1,000 Face amount = $1,100 Discount on note payable = $100 $100 is recognized as interest expense over the period Example 2: Note receivable Paid $1,800 in cash and received a $2,000 note receivable Present value = $1,800 Face amount = $2,000 Discount on note receivable = $200 $200 is recognized as interest income over the period Note exchanged for noncash assets 1. Cost of the asset = (1) or (2) whichever is more clearly determinable (1) fair value of the asset (2) market value of the note 2. If cost of the asset < face amount of the note --> the difference is discount --> discount is amortized using "interest method" 3. Amortization of discount --> interest expense for note payable --> interest income for note receivable Example 3: Note payable Purchased a property with $3,000 fair value and issued a $3,300 note payable Cost of the asset = $3,000 Face amount = $3,300 Discount on note payable = $300 $300 is recognized as interest expense over the period Example 4: Note receivable Sold a property with $4,000 fair value and received a $4,400 note receivable Fair value of the asset = $4,000 Face amount = $4,400 Discount on note receivable = $400 $400 is recognized as interest income over the period Balance Sheet Presentation 1. Discount is deducted from the face amount of the note --> Contra-asset account for note receivable --> Contra-liability account for note payable 2. Premium is added to the face amount of the note |
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Codification Topic 835 Interest |
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Subtopics of Codification Topic 835 835-10 Overall 835-20 Capitalization of interest 835-30 Imputation of interest |
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Accounting Terms of Codification Topic 835-10 |
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Accounting Terms of Codification Topic 835-20 Activities Capitalization rate Expenditures Intended use Interest cost |
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Accounting Terms of Codification Topic 835-30 Discount Imputed interest rate Interest method Premium |
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