22 Flashcards
deck 22
how do you calculate price-to-earnings ratio?
mkt price/sh / EPS = ratio
how are speculative forward contracts treated?
they do not qualify as hedges and change in FV is recog’d immediately in NI
*forward rate entrance price is compared to other forward rate exit price
what amount do you recognize for a cont. L that is probable and estimable?
the lowest amount in the range of measurement if all are equally likely
what is the formula for box top redemptions?
total est. box top redemptions
- box tops redeemed
= box tops to be redeemed
*divide by box tops per glass, then multiply by amt of cost to get est’d L
how are related party transactions reported?
they are always disclosed, even if the cont. L is remote
how are gain contingencies reported?
they are not accrued til the trans. generating the gain is complete
what is the cont. L for a discounted N/R?
its maturity value
how are insurance proceeds to cover a loss contingency reported?
they are treated as a gain contingency and not recorded til received
what is the JE when a co. incurs warranty costs under the expense warranty accrual method?
Dr: warranty L
Cr: inventory
what is the reporting for a cont. L that is prob. but not reas. est’d?
only disclosure req’d
does threatened litigation being known to mgt. determine whether an accrual is necessary?
no
- loss cont. is charged to income if
(1) probable it has incurred as of FS date and
(2) amt is reas. est’d
what is the equation for PV?
PV = future amt * PV factor
what is the JE for a N/R sold at a discount?
Dr: N/R
Dr: def’d charge
Cr: cash
Cr: disc. on N/R
*def’d charge is charged to discount
what is the treatment for the discount resulting from det. of a N/P’s PV on the BS?
treat the discount as a direct reduction from the face amt of the note
how is int. rev. calc’d?
total cash to be rec’d
- PV of note
= total int. rev.
how is interest income calculated?
*face amt of loan - nonrefund fee = CV
**CV * effective yield * months O/S = interest income
how is the CV of a note calculated?
*payment - int. = “P”
** face of note - “P” = CV
***int = face * rate * months O/S
*also, face - discount = proceeds
**proceeds + amort. of disc = CV
is imputed int. on non-int. bearing note reported as int exp?
yes
- int incurred to fin. constr of FA for own use is cap’d
- pen cost incurred = comp. of pen plan exp
- post retirement ben int = part of post retirement ben exp.
how is PV of a note calculated?
*“P” + int = maturity value
** maturity value * PV factor = PV of note
what does the effective int. rate include?
all costs charged by the bank
*(stated rate + loan fee%) / (100% face of N/P - loan fee %) = effective rate
what is the trick with notes with payment on the date it is rec’d?
the PVOA will be 1 less period
what is the JE for the purch. of a FA in exchange for cash and a non int. note w/ a disc?
Dr: FA
Dr: discount on N/P
Cr: N/P
Cr: cash
