20

Question 1

how is a bond purchased at par treated?

Answer 1

it remains as par until maturity

Question 2

what is the JE for a bond with a discount at YE?

Answer 2

Dr: Cash
Dr: discount on bonds
Cr: interest revenue

*discount is amortization for the year

Question 3

how are reclassifications of securities treated?

Answer 3

TS -> any = no adj b/c already recog'd
any -> TS = recog. in IS
HTM -> AFS = record in OCI
AFS -> HTM = amortize G/L from OCI to NI
TS -> HTM = ineligible

Question 4

how do you record and calc a liquidating dividend? (for equity method)

Answer 4

Dr: Cash
Cr: DI
Cr: invest in sub

*Cash = amt rec’d
DI = REown%
invest in sub =
excess divown%

Question 5

how do you calculate inventory for the eliminating JE at YE?

Answer 5

inventory = I/C profit (GP%*I/Csales) * EI%

*COGS elim = COGS in I/C trans + new COGS

Question 6

what is the JE to eliminate dividends paid in the IS?

Answer 6

Dr: DI from sub
Cr: div. paid

Question 7

what is included in the GW calculation at the acquisition date under IFRS?

Answer 7

(acq cost - legal fees) - (FV NA * P%)

Question 8

how do you calculate EB NCI?

Answer 8

BB + NCI NI - NCI div = EB

Question 9

in a vertical chain consolidation, does a portion of the 3rd company’s activities get included in the consol’d FS’s?

Answer 9

yes, a portion would be included

Question 10

how do we calculate SE EB?

Answer 10

BB + NI - div = EB

Question 11

how do we calculate GW in equity method?

Answer 11

acq cost - (FV NA purch’d*%own)

Question 12

what is the equation for EB investment account under equity method?

Answer 12

initial investment + sub’s NI - full div. rec’d - DE = EB

Question 13

is total NI including NCI used in reconc. of NI by CFO?

Answer 13

yes

*div’s paid by sub are a use of cash, NOT to P

Question 14

does the investment account under cost method increase if stock prices increase at YE?

Answer 14

yes, only under cost method

*equity method = unrealized G/L, but no change to investment account

Question 15

what is required to be classified as HTM sec?

Answer 15

there needs to be intent to hold the bonds to maturity. If there is no intent, then it is AFS

Question 16

can a parent obtain control if they have 50%+ownership of a sub being controlled in a bankruptcy trustee?

Answer 16

no, parent should not consol.

*parents also should not consol. if their investment is temporary

Question 17

can the equity method be used for 50%+ control of a company using internal accounting?

Answer 17

yes, the equity or cost method may be used

Question 18

how should a company with 50%+ ownership account for its investment in a sub undergoing a legal reorg.?

Answer 18

they should use the equity method internally and externally b/c they are most likely exercising sig. infl. but cannot consol. b/c of reorg.

Question 19

what are some exit/disposal activities?

Answer 19

severance pay, landlord demands payment (not termination of cap. lease), moving employees + equip

Question 20

what are is the criteria for recognizing a liability assoc’d w/ exit/disposal activities?

Answer 20

(1) an obligating event has occurred
(2) the event results in a present obl. to transfer assets or to provide svc’s in the future
(3) the entity has little/no discretion to avoid the future transfer of assets or providing of svc’s

Question 21

what is the treatment on A/P when reversing a debit bal. to record a PPD asset and reversing unmailed checks?

Answer 21

they both increase the adj’d A/P balance