30 sets of MCQ That I'm getting Wrong Flashcards
Restudy and understand why I'm getting many questions wrong
1
Q
Long term obligations that are callable by the creditor because of the violation of provision of the debt agreement at the balance sheet should be classified by
A
current liability bc it’s being classified by the balance sheet date meaning in a year which would fall under the current liability
current liability unless the creditor has waived the right to demand repayment for more than 1 year from the balance sheet date
2
Q
Calc, the deferred income tax expense?
A
Here we need to calc the deferred tax asset and the deferred tax liability
Deferred tax asset
AR - 1,400 X 25% = 350 Profit from instal 2,600 x 25% 650
650 - 350 = 300
3
Q
Calc, the debit to credit its capital accounts?
A
2000 shares x 25% x 50 par = 25,000
30,000 x 25% = 7,500
10,000 - 7500 = 2500 credit
4
Q
Calc, the report as payable for consigned goods?
A
500 x 100 sales = 50,000
500 x 100 x 10% consigned goods = 5000
= 50,000 - 5000 = 45,000
5
Q
Calc, the net income or loss for the 6 month interim period ended June 30?
A
100,000 net loss from disposal of a component
40,000 was paid for property taxes x 6/12 = 20,000
100,000 + 20,000 = 120,000
6
Q
Does Group Depreciation & composite depreciation uses straight line depreciation method?
A
both group depreciation and composite depreciation uses straight line method
7
Q
A gain or loss from a transaction that is unusual in nature or infrequent in occurrence should be reported separately as a component of income
A
before results of discontinued operations
8
Q
What amount should be added as an adjustment to the numberator available to common shareholders?
A
Annual preferred Dividends
9
Q
Does COGS go up or down when there is a decrease in ending inventory?
A
increase in COG’S
10
Q
Does COGS go up or down when there is an increase in beginning inventory?
A
increase in COG’S
11
Q
Calc, the AVG number of days to collect accounts receivable?
A
Net credit sales / AVG accounts receivable
net credit sale which is given 7200
next we need to calc the AVG Accounts receivable
1200 - 400 = 800
1200 + 800 = 2000 / 2 = 1000
Step 2 -
We need to subtract the 7200 credit / 1000 = 7.2
Final step -
365 days / 7.2 = 50.7 days
12
Q
What amount should be reported as COGS?
A
Inventory for Year 1 - 290,000
Inventory for Year 2 - 260,000
Decrease on inventory shows us that COGS was 30,000 more than purchase so we would add that to COGS of 30,000
Step 2 -
AP for year 1 - 50,000
AP for Year 2 - 75,000
an increase in AP would be increase COGS purchase must have been 25,000 higher
Paid in supplies 490,000 + 25,000 + 30,000 = 545,000 COGS
13
Q
Calc, the net carrying amount of Rose inventory?
A
Begin inventory 8000 x 8.20 = 65,600
12,000 - 10,000 = 2000 x 7.90 = 15,800
65,600 + 15,800 = 81,400 / 10,000 = 8.14 units
8.80 - 1.00 = 7.80 units
10,000 units x 8 replacements cost = 80,000
14
Q
Calc, the bonds interest expense for year 2? uses the effective interest method of amortizing bond discounts?
A
Year 1 - 96,207 x 10% yield = 9620 interest expense - cash paid 9000
= 9620 - 9000 = 620.7
96,207 + 620.7 = 98,827.7
Year 2 - 98,827.7 x 10% yield = 9882.7 interest expense - cash paid 9000 9882.7 - 9000 = 882.77
9882.7 is the interest expense for Year 2
15
Q
Calc, the depreciation expense on the consolidated income statement?
A
Pirn’s Dep Expense 40,000
Scrolls Dep Expense 10,000
Depre expense 12,000 / (3,000)
Consolidated depreciation expense 47,000
16
Q
Calc, the COGS when beginning inventory was understated and ending merchandise is overstated?
A
Increase in beginning inventory and decrease in ending inventory will increase the overall COGS
COGS - 1,050,000 + 12,000 BEGIN INVENTORY + 20,000 ENDING INVENTORY
= 1,082,000 COGS
Remember just like the formula for COGS basically this is what it is
ex
begin inventory 100
purchase 500
ending inventory -300
which increases COGS 300 is still UP overall
(Think logical)
17
Q
Calc, the consignment of inventory
A
Cost of merchandise to consignee 72,000
7,500 freight cost for shipping
2/3
= 53,000
Consignee 80,000 - 53,000 = 27,000
27,000 - 4,500 adverstsing cost - consignee cost 8000
= 14,500 net profit
18
Q
Calc, the net income using the income operations and discontiniued operations?
A
Income operations 72,000
discontinued operations 70,000 (1-40) = (42,000)
income from operations 72,000 - 42,000 = 30,000 Net income
19
Q
Calc, the realize net cash receipts for the bond issuance?
A
200 bonds x 1,000 face amount = 200,000 x 103% premium rate = 206,000
200,000 x 9% x 2/12 = 3000 accrued interest
206,000 bond proceeds + 3,000 accrued interest - 10,000 Bond issue costs
206,000 + 3000 - 10,000 = 199,000
20
Q
Are gains or losses recognized for a nonmonetary asset in a nonreceiprocal transfer?
A
Another Entity and a shareholder of the entity are both recognized gains and losses
21
Q
When the parent acquires 75% of the outstanding common stock and if the sub had RE should they include that as well?
A
No it would be 0 because the parent would be report not the sub so that would be 0
22
Q
Earnings-per-share data must be reported on the face of the income statement for
A
the income from continuing operations but not for cumulative effect of a change in Accounting principle
23
Q
What would be the total interest cost capitalized in year 4 equals the interest rate on the specific new borrowing?
A
AVG Accumulated expenditures for the asset in Year 3 and Year 4
24
Q
Calc, the APIC for the business combination?
A
200,000 shares x 12 market value - 5 par value - 35,000 direct issuance costs = 1,365,000
25
Calc, the COGS beginning inventory was understated by 26,000 and ending inventory was overstated by 52,000
26,000 + 52,000 = 78,000 understated
26
Are consignee used as payable or receivables?
Accounts receivable
27
Calc, the diluted earnings per share (DEPS) for the year?
Net Income - 550,000
20,000 shares x 20 per share = 400,000
400,000 / 25 = 16,000 shares
20,000 - 16,000 = 4,000
100,000 shares x 10% = 10,000
100,000 + 10,000 + 4,000 = 114,000
550,000 / 114,000 = 4.82 DEPS
28
What are the characterizes the convertible debt?
No value is assigned to the conversion feature when the convertible debt is issued
not seperateable
29
When the recoverability of the building carrying is determined to be impaired, the building FV is the best measured as the
Price used is the principal market NOT FV or the advantageous market
Note : FV is for the asset is used at the exit price not the price to construct a similar asset
30
Cost and expense other than product costs should be either charged to the income in interim periods as incurred
Add the depreciation expense and the bonus
Depre expense 60,000
bonus to employees 120,000
= 180,000 / 12 months x 6 months (interim income statement) = 90,000
31
Calc, the net loss securities that needs to be included in the income statement at year end?
Debt Security A COST 39,000 - Fair Value 36,000 = 3,000
Debt Security B COST 50,000 - Fair Value 55,000 = 5,000
Debt Security C COST 96,000 - FAIR VALUE 85,000 = 11,000 Loss on C
3000 - 5000 + 11,000 = 9,000
32
Calc, the trademark of asset recognition criteria and how the entity should recognize the asset?
Trademark Purchase Price 100,000 + 5000 value added taxes + 10,500 of legal costs
100,000 + 5000 + 10,500 = 115,500
33
When asset acquires the fair value bu discounting future cash flows of the asset which Fair value measurement approach?
The income approach deal with anything future cash flows
34
Calc, the decline balance method of depreciation for the tax purpose of the straight line method?
purchased 100,000 / 10 years = 10% straight line rate
100,000 x 10% = 10,000 depreciation expense
10,000 x 10% x 150% declining balance depreciation =.1500
35
Calc, the cash basis consulting revenue?
Consulting fee revenue 25,000
Consulting fees recei. (3,500)
Unearned consulting 2,000
Cash basis consulting revenue 23,500
The consulting revenue received is is earned however NOT received so we subtract it from consulting revenue
The unearned revenue fees is NOT earned but received so when there is cash basis of accounting revenue is received NOT earned
36
Should dividends arrears be disclosed or accrued liability account?
They are always DISCLOSED because we need to disclose them in the notes of the financial statements and face of the balance sheet
3,000 shares x 100 par x 5% x 2 years - 10,000 dividends paid
3000 x 100 par x 5% cumulative preferred stock outstanding 2 years - 10,000 dividends paid
= 20,000 disclosed
37
Calc, the sales for the consolidated
Remember we are just removing the entries
Revenues 400,000 + 280,000 = 680,000 - 616,000 = 64,000 sales from Mussel to Shel
38
The amount recorded intially by the lessee liability should normally
equal the present value of the lease payment at the beginning of the lease
39
Calc, the Cost of Goods available for Sales?
Net Sales 900,000
COGS rate 60%
540,000
Ending inve. 200,000
COGS 740,000
40
Calc, the depreciation expense should be financial statements?
a change in accounting estimated for prospectively 1-5 years
Purchased machine 48,000 / 12 years estimated useful life of machine = 4,000
4000 x 5 years = 20,000
Purchased machine 48,000 - 20,000 accumulated depreciation = 28,000 / 10 years = 2800
41
Calc, the bond liability?
1,000,000 x .99 = 990,000
1,000,000 - 990,000 = 10,000 discount on the bond and the bond issue costs 35,000
1,000,000 - 35,000 - 10,000 = 955,000 bond liability
42
Calc, the bonds liability?
1,000,000 bonds x .99 = 990,000
Next we calc the discount we we subtract the face value 1,000,000 -990,000 = 10,000 discount and the bond issued costs is given 35,000
Step 3 - 990,000 - 10,000 discount cost - 35,000 bond issue cost =
955,000 bond liability
43
Calc, the accrued interest receivable that should be included for December 31, year 4 balance sheet?
200,000 x 12% x 1 / 12% = 2,000 accrued interest receivable
44
Calc, the net income or loss for the 6 month interim period ending?
100,000 + 40,000 property tax x 6/12 = 120,000
Property taxes are allocated 6/12
45
Calc, the retained earnings reported?
remember that Retained earnings is increased by net income
decreased by net losses, dividends, and treasury stock
Total income incorporation 420,000
Total cash dividends paid
130,000
Total value of dividends distribution cost of treasury stock
30,000
420,000 - 130,000 - 30,000 = 260,000 retained earnings
46
Calc, the moving average method maintains a perpetual inventory system?
Bal begin 1000 x 1 = 1000
purchase 600 x 3 = 1800
= units 1600
= costs/units 1.75 (2800/1600)
= 900 sold x 1.75 = 1575
begin bal 1000 + purchase 1/7 1800 - COGS 1575 + purchased 2000
47
Calc, the purchase commitment at the current year?
200,000 units x 3 years = 600,000 - 80,000 units = 520,000 units x .10 = 52,000
48
For interim financial reporting following may be accrued or deferred to provide an appropriate cost in each period?
Interest and rent are both be accrued and deferred
49
What would create deferred tax asset?
requiring prepayment for service contracts
50
When a entity receives a donation of an asset how is that recorded on the financial statements? Nongovernmental entity
Credit to contributed capital accounts
51
Calc, the common stock outstanding for the retired by the board of diretors?
Board of directors canceled 50,000 shares x 2.50 par value = 125,000
Common Stock 540,000 - 125,000 = 415,000 common stock outstanding
52
Where are unrealized holding gains and losses recorded on the remeasurement to Fair Value of the investment in equity?
reported in income statement
53
Calc, the estimated cost of the June inventory?
Inventory June 1 - 18,000
Purchase of inventory - 16,000
Goods avail for sale - 34,000
COGS. (20,000)
Ending Inventory 14,000
COGS is calc by A/R 25,000 + A/R JUNE 30th 15,000 - A/R JUNE 1ST 10,000 = 30,000 / 1.5 = 20,000
54
Calc, LTTI report as loss related to purchase commitment at December 31?
Since the buyer signed a noncancelable contract the buyer gurantees least 200,00- units 200,000 units x 3 years = 600,000 - 80,000 units = 520,000 x .10 per unit = 52,000
55
Calc, the current sales tax payable?
800,000 retail sales x 5% state sales tax = 40,000 sales tax collected during the year
4500 beginning bal + 40,000 sales taxes collected during the year - 39,500 sales taxes remitted during the year
4500 + 40,000 - 39,500 = 5000 in sales tax payable
56
Following methods of inventory valuation is allowable at interim dates?
Estimated gross profit is allowable at interim but not at year end
57
Calc, pretax income for the year end?
Depreciation Expense which is understated 64,000 + 30,000 overstated = 94,000
Pretax income 152,500 - 94,000 = 58,500 pretax income
58
Calc, the welling pay bond?
1000 face value x .3855 = 385.50
80 interest payment x 6.1446 = 491.56
385.50 + 491.56 = 877.06
877.06 x 100 = 87,707
59
Calc, the other comprehensive reported for the current year?
Unrealized AFS - 8100
Foreign current translation- 3,400
8100 - 3400 = 4700
4700 x 0.30 = 1410
4700 - 1410 = 3290
60
Calc, pay the bonds?
1,000 x 8% = 80 interest payment
80 x 6.1446 = 491.56
1000 x 0.4632 = 463.2
61
Which depreciation method claims to provide the greatest amount of depreciation?
the double decline balance
62
Is goodwill amortized?
Goodwill is tested for impairment at the reporting unit level
63
Retirement of bonds and cash transferred to the sinking fund and subsequently used to purchase investments. What happens to bond sinking funds?
increase by revenue earned on the investments
64
Calc, the restriction of retained earnings as result of treasury stock?
Treasury Stock 20,000 shares x 12 per share = 240,000
15,000 reissurance x 12 per share = 180,000
240,000 - 180,000 = 60,000
65
In a periodic inventory systems uses the weighted avg cost flow method the beginning inventory is considered
Total goods available for sale minus the net purchase
66
What happens to quick and current ratio when cash is used and to reduce AP?
Current ratio goes up and Quick ratio decreases
67
Calc, the recognize as amortization expense of the right to use asset?
Present Value of the lease payment 240,000 - 20,000 salvage value / 8 years economic life
240,000 Present Value - 20,000 salvage value / 8 years useful life = 27,500
68
Payment of acquire debt instruments of other entires other than cash equivalent and debt instruments are what type of activity?
Investing activity bc it's lending someone money
69
Calc, the investment in bonds by using the effective interest method?
946,000 bond
40,000 accrued interest
= 906,000 bond original balance
= 906,000 x 10% x 6/12 = 45,300
= 1,000,000 x 8% x 6/12 = 40,000
906,000 + 45,300 - 40,000 = 911,300
70
Calc, the accrued payable that should be reported for the balance sheet?
300,000 face amount x 12% rate x 6/12 = 18,000
semiannually on June 30 to December 31
18,000 x 3/6 = 9000
71
During the direct write off method to account for uncollected receivable, how are Accounts written off" & "Increase in Accounts receivable balance?
Accounts written off are deduction
Increase in Accounts receivable balance is also deduction
72
Calc the inventory that should be reported at year end balance sheet? for the dollar value LIFO method inventory valuation?
Base Layer 50,000 x 1.0 = 50,000
Second layer 30,000 x 1.1 = 33,000
50,000 + 30,000 = 80,000
50,000 + 33,000 = 83,000
73
when as asset is indebtedness associated with property how is that event presented in the financial statement?
When the event of such nature that nondisclosure causes the statements to be presented unfairly. Which means that pro forma financial statements is the best method
74
When reporting for consolidated retained earnings in the consolidated statements of financial position how much is reported?
Parent for 600,000 Retained earnings while the sub retained earnings are removed
75
Calc, the operating lease rent expense for the month?
Year 1 - 36,000
Year 2 - 54,000
Year 3 - 72,000
Year 4 - 72,000
234,000 / 4 years for the operating lease = 58,500 / 12 months
= 4,875 rent expense
76
Calc, the supplement disclosures in the statement of cash flows prepared using the indirect method?
Income taxes paid 325,000 + Dividends paid 200,000
= 545,000
77
Decommissioning liability to be recognized
The change in the liability is recognized in profit or loss
Remember Decommissioning liability is basicially ARO which is recognized right away
78
What causes a decrease to current ratio of 2 to 1?
Borrows cash on a 6-month note
79
Calc the revenue from the contract recognized by Year 1?
150 machines - 20 machine = 130 x 75 = 9,750
80
When is the equity method not used?
classified the investment as held for sale
81
Using the effective interest method of amortization for the bond held to maturity bonds?
Long term investment 500,000 x 8% = 40,000
Bond 456,200 x 10% = 45,620
45,620 - 40,000 = 5620
456,200 + 5620 = 461,820 Year 1
500,000 x 8% = 40,000
Bond 461,820 x 10% = 46,182
46,182 - 40,000 = 6182
461,820 + 6182 = 468,002 Year 2
82
When an investor uses the equity method to account for investments in common stock, the investment account will be increased when the investor recognizes
A proportionate interest in the net income of the investee
83
Calc, the lease liability after the first required payment?
13,000 annual payment x 4.240 annuity due = 55,120
10,000 x 0.650 Present value of $1 = 6500
55,120 + 6500 = 61,620 - 13,000 annual payment = 48,620 payment reduce the amount
84
Calc, the weighted avg COGS using the weighted AVG cost and periodic inventory?
Total units
1250 Total costs
116.00 May 4th costs
440.00 May 17th costs
1806 total costs
Total units
200 units
20 May 4th units
80 May 17 units
300 units
1806 cost / 300 units = 6.02 x 10 units = 60.20
85
Calc, the issue price for 1000 bonds?
1000 face amount x .422 (Present value of 1 for 10 periods) = 422
1000 face amount x 6% x 6.418 = 385.08
422 + 385 = 807 issued price
86
Calc, the consolidated balance of equity?
Common Stock 1,000,000 + 250,000 Retained earnings
= 1,250,000
87
Are periodic payment of interest and secured by collateral associated with payable classified as AP?
NO neither "Periodic payment of interest" & "Secured by collateral" are classified as AP
88
What type of activity is bond discounted on long term debt?
it's a noncash item which should be "In operating activities as an addition to income"
89
Calc, report as income tax expense in its interim income?
1st Q Pre-tax income 10,000
2nd QPre-tax income 20,000
Total year to date income 30,000
30,000 x 25% = 7500 total tax expense
7500 tax expense - income tax expense for 1st Q (1,500)
Income tax expense for 2ndQ 7500 - 1500 = 6000
90
Calc, the record sales revenue?
60,000 Cash received x 4.36 PV of an ordinary annuity of 1 at 10% for 6 periods
60,000 x 4.36 = 261,600 +60,000 = 321,600
91
Calc, the consolidated financial statements for the subsidiares?
100,000 declared x 10% noncontrolling interest
only dividends declared by the subsidiaries are reported to noncontroling
92
calc, the estimated cost of june inventory?
Begin inventory 18,000
Purchase. 16,000
Goods Avail 34,000
COGS 20,000
25,000 collection of AR + AR June 30th 15,000 - AR June 1 10,000
25,000 + 15,000 - 10,000
Ending inven 14,000
93
What is correct considered in accounting for income whether a valuation allowance is needed?
the effects of a change in the opening balance of valuation allowance that results from a change of circumstances ordinary in income from operations
94
If company wants to retain the most cash in a business which inventory method should they choose?
LIFO Last In First Out
95
The interest receivable for notes are always equal to the face amount of note times the coupon or nominal rates times the fraction of the year?
Yes
96
Amount that should be subtracted to calc consolidated net income?
Issue Costs of Debt & Direct Issue Costs of Equity are both not used to calc net income for consolidated statements
However the Issue Costs of Debt & Direct are used as a deduction from carrying amount of the debt and amortized
Direct costs of equity underwriting, legal fees, etc which are debited from carrying amount
97
Are retained earnings for subsidiary reported fro the consolidated statement?
NO, they are eliminated during the consolidated process
98
Calc, the liability for compensated absence required to be reported?
North's employees earns an AVG of 100 per day x 150 vacation days = 15,000 liability
99
When changes are made for decommissioning liability (ARO) how are they recognized?
They are recognized right away and on the profit and loss statements
100
Calc, the gain on the condemnation of the property which had a Carrying amount of 575,000?
We start off with 575,000
we add appraisal fees to support of 2500
we also add the attorney fees for the closing with the state 3500
575,000 + 2500 + 3500 = 581,000 gain on condemnation
101
Calc, the net adjustment to net income for the net cash operating activities?
Prepaid expenses Current year 10,000 - 20,000 = -10,000 which we would ADD
Account Payable 50,000 - 30,000 = 20,000 would be added as well
20,000 + 10,000 = 30,000
cash loss of 40,000 + 30,000 = 70,000
102
Calc, the term bonds ?
We need to add both the term bonds which are registered bonds and collateral trust bonds are term bonds
700,000 + 600,000 = 1,300,000
103
The most appropriate reason for new principals to be used?
improvement on financial reporting
104
Calc, the net value of the investment?
Calc the purchased of shares and sold
Purchased 1,100 + 2,500 + 1,400 = 5000
Sold 4000 + 750 = 4750
Purchased 5000 - Sold 4750 = 250 x 10 per share = 2,500 net value of investment
105
Which Inventory method causes a decrease in income?
FIFO
106
Calc, the gain or loss before income taxes on redemption of bonds?
Step 1 - calc the carrying amount of the bonds
5,000,000 + 30,000 unamortized bonds - 50,000 bond issue costs = 4,980,000
Step 2 - 5,000,000 x 98 = 4,900,000
4,900,000 - 4,980,000 = 80,000 gain on taxes redemption
107
Calc the gross profit to be recognized using the input method based on costs incurred
Step 1 - calc the percentage
Cost incurred 700,000 / estimated total cost 2,000,000 = 35%
step 2 - calc the gross profit
contract price 3,000,000 - estimated total cost 2,000,000 = 1,000,000 x 35% = 350,000
108
Is equity decreased at the begin or end of the period?
when dividends are declared
109
Calc, the carrying amount of the leasehold improvements?
Cost of the improvements 540,000 / estimated useful life of 15 years 36,000
540,000 - 36,000 = 504,000 carrying amount
110
Calc, the probable loss from the purchase commitment that card should report on the income statement?
purchased 200,000 units x .01 = 20,000
200,000 x .02 = 4000
20,000 - 4000 = 16,000
111
If NFP receives donation of free electricity from a local utility company. How is that recognized?
revenue without donor restrictions and an expense
112
Calc, finance lease liability net for current portion?
Carrying amount 75,000 x 10% lessor's implicit rate = 7,500
Cash 9000 - 7,500 = 1,500 principal component
75,000 non-current portion - 1500 = 73,500
113
Calc, the computing diluted earnings per share (DEPS) for the year end Dec 31?
300,000 shares
July 1 50,000 shares x 6/12 = 25,000
40,000 shares x 15 per share = 600,000 / 20 = 30,000
40,000 - 30,000 = 10,000
300,000 + 25,000 + 10,000 = 335,000
114
Calc, the loss reported in earnings for trading debt securties?
Trading securities are record at Fair Value and unrealized gains and losses are included in earnings
Investment Fair Value 575,000 - 530,000 at june 30th = 45,000 loss should be reported at earnings
115
Calc, the amount Brad should credit Common Stock and APIC?
CASH 5000 shares x 110 per share 550,000 Common Stock
Preferred Stock 5000 shares x 100 par value 500,000
APIC Preferred Stock 50,000
Brad recorded the conversion as follows
Preferred Stock 500,000
APIC Preferred Balance 50,000
C/S 5000 X 3 X 25 PAR VALUE 375,000
APIC 175,000 DIFF FROM TOP
116
Calc, the deferred revenue for the sales for the gift certifications sold?
Year 2 sales 500,000
Redemption of year 350,000
= 150,000 of cards are unredeemed at year end
150,000 x 10% = 50,000
150,000 - 50,000 = 100,000
117
Calc, the interest payable for the bond?
800,000 bond x 8% x 3/12 = 16,000
118
Calc, the inventory that should be reported for the manufacturing 1,000 units of products and sold 800 units?
Direct Material and Direct labor 7,000
Indirect materials and indirect labor 2000
Insurance on manufacturing equipment 3000
= 12,000
Units 1,000 - 800 = 200 units
12,000 x 200 / 1000 = 2400 should report at balance sheet
119
Calc, the interest capitalized for the year end?
Interest incurred for Construction needs to be capitalized using the weighted AVG accumulated expenditures
purchase land 120,000 x 12 months / 12 months = 120,000
progress payments to contractors 150,000 x 9 / 12 = 50,000
= 120,000 + 50,000 = 170,000
170,000 10% = 17,000
120
Calc, the bonus for the current year?
Since branch income over 100,000 he received a bonus of 25% of his income which was 160,000
160,000 x 25% = 40,000
100,000 x 25% = 25,000
60,000 - 25,000 = 15,000
15,000 / 1.25 = 12,000 bonus
121
When AFS securties are remeasured to Fair Value and report as part of OCI, what amount is recorded for as unrealized gain or loss?
0
122
What is bond sinking funds?
They 're are long term investment where revenue is earned on investments
123
Calc, the retired Common Stock and the balance in APIC?
Step 1 - we need to calc the amount the common stock was repurchased for 20,000 shares x 24 a share = 480,000
Next we need to subtract the 400,000 (20,000 x 40 share)
480,000 - 400,000 = 80,000
APIC 2,550,00 - 80,000 = 2,470,000
124
Calc, the Goodwill for considered statements?
cash 60,000
Inven 180,000
PPE. 380,000
liabilites (120,000)
Fair Value Net Assets 470,000
620,000 - 470,000 = 150,000 goodwill
125
What amount is capitized for building?
the interest cost incurred on the construction is capitalized
126
Calc, the amount that should be reported as credit loss expense on the income statement?
To start off first we
Allowance for credit card loss 30,000
Wrote off ( 40,000 )
Accounts receivable 300,000 x 8% = 24,000
Credit Loss expense is 24,000
my way to to subtract the allowance for Credit loss 30,000 - 40,000 wrote off = -10,000
Next we -10,000 - 24,000 which equals 34,000 credit loss expense
Good way to check is to
allowance CL 30,000
written off (40,000)
Credit loss 34,000
allowance for credit losses 24,000
127
What causes a decrease in net income and no effect in noncurrent assets ?
When there is a decline in the fair value for AFS securities
128
Calc, the APIC for the consulting services expense performed?
Step 1 - calc the consulting expense fee
1000 shares for the service compensation
Market value per shares is 40 per shares
40,000 - Debit Consulting expense
Step 2 - credit the common stock do we can the difference for APIC
1000 shares for the service compensation
10 par value common stock
10,000 Credit additional paid in capital
30,000 Difference
129
Do subsidiaries report dividends on the financial statement?
No it's always the parents who reports the dividends however, the only way subsidiaries report noncontroling interest is by those who paid to noncontroling interest
130
Calc, the revenue on the contract recognized for income statement?
Year 1
Costs incurred each year 700,000
Year 2
Costs incurred each year
500,000
= 700,000 + 500,000 = 1,200,000
Year 1
Costs incurred each year 700,000
Year 2
Costs incurred each year
500,000
Year 3
Costs incurred each year
800,000
= 700,000 + 500,000 + 800,000 = 1,850,000
1,200,000 / 1,850,000 = 64%
Step 2 -
Contact of the bridge for the land 2,500,000 x 100% - 64% =
900,000
131
for bonds what determines interest expense?
The carrying amount and the effective interest method
132
for bonds what determines interest payable?
Fair Value of the bond at the beginning and the contractual interest rate
133
When you have to calc the
First calc the NRV so that would be Selling price of 40,000 - further processing costs 12,000 = 28,000 which is the NRV
for the Lower of cost market rule we don't use the NRV we however use to calc what needs to be reported
Selling price of 40,000 x 10% = 4000
28,000 NRV - 4000 = 24,000
134
Calc, the balance amount that should be using the equity method?
Investment in Breva
To calc the percentage
10,000 shares / 40,000 shares outstanding = 0.25
Net Income 200,000 x25% = 50,000
Dividends is 160,000 x 25% = 40,000
balance on the income statement 150,000 + 50,000 - 40,000 = 160,000
135
Calc, the oridinary gain or loss on transfer of real estate?
Fair Value 90,000
Carrying 100,000
= (10,000) ordinary loss
136
When the par method of accounting is used what happens to acquisition of treasury stock and reissurance of treasury stock?
when the acqusition of treasury stock is treated as a resale as a new issuance of stock which causes a decrease in equity
reissuance of treasury stock is increased in equity
137
Are gain or losses recognized for a nonreciprocal transfer of nonmonetary asset to shareholders?
Nonreciprocal transfer should be recorded of a nonmontary asset to shareholders or to another entity
138
Are rights are issued and rights lapse increase common stock?
No
139
A deferred tax liability resukts from
From expense or losses when they are deducted for tax purposes
140
For the interim financial reporting, is interest and rent may be accrued or deferred as appropriate cost?
Yes both rent and interest are both may be accrued or deferred
141
Calc, the historical cost, per unit effect on gross profit of measuring ending inventory?
Under FIFO measurement subsequent acqusition at LCM or NRV
Selling price 100 - 10 completion cost - 5 selling cost = 85 NRV
Historial cost is 91 - 86 NRV = reduction of $6
142
According to the guidance for recognition of revenue from contracts with customers the incremental costs of obtaining a contract with customers?
recognized as an asset and amortized in subsequent periods
143
The Weighted AVG cost for the year cost flow method reflects to which inventory system?
periodic
144
The moving AVG cost for year cost flow method reflects to which inventory system?
perpetual
145
Calc the paid in capital related in treasury stock on the balance sheet? using the cost method
using the cost method
500 shares x 6 per share = 3,000
500 shares x 10 per share = 5000
5000 - 3000 = 2000
146
Is equipment purchased with a note payable posted in the statement of cash flows ?
No bc it's a Non-cash financing and investing item
147
Are all business combination acquisition method created via Fair Values exchange method?
Yes only Fair Value
148
Calc, the book value per common shares dividends for the consolidated statement?
Step 1 - CALC THE LIQUIDATING VALUE
50,000 SHARES X 110 PER SHARES = 5,500,000 LIQUIDATING VALUE
STEP 2 - DIVIDENDS ARREARS
50,000 SHARES X 100 PAR X 6% CUMULATIVE PREFERRED STOCK = 300,000
ADD THE TOTAL = 5,500,000 + 300,000 = 5,800,000
STEP 3 - ADD ALL THE EQUITY TOGETHER
5,000,000 + 2,000,000 + 1,000,000 = 8,000,000
STEP 4 - SUBTRACT THE TOTAL EQUITY & DIVIDENDS ARREARS
8,000,000 - 5,800,000 = 2,200,000
STEP 5 - CALC THE BOOK VALUE FOR COMMON STOCK
2,200,000 / 400,000 SHARES OUTSTANDING = 5.50 BOOK VALUE
149
adjustments are needed for statement of equity of the opening balance in retained earnings ?
correction of an error in previously issued financial statements
150
When would a debtor recognize a liability?
1) When the debtor pays the creditor and relieves the liability
2) debtor is released from being a a primary obligor
151
What happens when there is a temporary difference between depreciation for income tax purposes and financial statement purposes?
When the depreciation for income tax exceeds the financial statements reporting then we in result have a temporary difference
Once there is a temporary difference and the Deferred tax are classified as noncurrent amounts
152
Entry to write off uncollectible account under the allowance method of recognizing credit loss?
allowance for credit losses is decreases while while Net income has no affect
Net income isn't affected during the time of the write off an uncollected account
153
Goods and sales required to be adjusted on the consolidated financial statements?
Yes the goods and sales are required to be adjusted because it reduces the intraentity sales
154
do interest , dividends, capital gains increase net assets without restrictions?
No they don't increase net asset with donor restriction because
155
Calc, the long term liability for the bond that pays annually?
If a long term bond pays annually remember we need to use the "Ordinary annuity"
Step 1 - Calc interest payment using the present value
500,000 face value
0.71299 PV OF 1 5 PERIODS using the interest rate of 7%
500,000 x 0.71299 = 356,493
Step 2 - calc the present value of face amount
500,000 face value
8%
500,000 x 8% = 40,000
Step 3 -
40,000 x 4.100197 = 164,008
Step 4 -
Add the totals from Step 1 & step 3 which will 356,493 + 164,008 = 520,501
156
Cost to calc the gain on condemnation?
Includes the Carrying amount of 575,000
Carrying amount 575,000
Appraisal fees 2,500
Attorney fees 3500
= 581,000
Note we don't add the acquire replacement property
157
When we get the straight line depreciation problem where we have the total cash payment and equivalent price of machinery of 110,000
we would use the cash equivalent price of machinery present value bc they reduce the salvage value
158
Calc, the accumulated depreciation for the equipment using the double decline method?
First we need to calc the rate so 100% / 5 years = 0.20 x 2 = 0.40 40%
50,000
40%
20,000 YEAR 1
50,000
20,000
40%
30,000
12,000 YEAR 2
50,000
20,000
12,000
3
18,000
6,000 YEAR 3
ACCUMULATED DEPRECIATION
38,000
159
For AFS debt securities acquired what are included in net income?
Impairment for credit loss is recognized in net income and
realized gains during the period when securities are sold at a higher amount than the cost
160
When calc the lease liability do you need to subtract the initial payment?
Yes
161
What is the formula of inventory turnover ratio?
COGS / AVG Inventory
162
Which fund are restricted and benefits the government or it's citizens?
Permanent funds
Ex- would be income to support local library and fund to support public cemetery
162
Calc, the unamortized premium on the bond for year 4?
Step 1- 100,000 face value
x 7% stated rate
= 7000
Step 2 - 105,000 carrying amount x 6% yield
= 6,300 periodic interest
= 700
Step 3 -
163
Calc the total current assets?
PART 1 CALC THE INCOIME TAX EXPENSE
REVENUES 3,600,000
EXPENSES 2,600,000
TAX RATE 30%
NET INCOME 1,000,000
INCOME TAX EXPENSE 300,000
PART 2 CALC THE CURRENT ASSETS INCLUDING THE NON CURRENT
AR 1,650,000
NON CURRENT AR 250,000
CASH 550,000
CURRENT ASSETS 1,950,000
164
Items included in OCI?
1) unrealized gains and losses on investments in debt securities
2) gains and losses on cash flows hedges
3) certain foreign current items
165
Calc, the current year income tax expense?
STEP 1 - CALC THE CURRENT INCOME TAX EXPENSE
TAXABLE INCOME 120,000
TAX RATE 35%
CURRENT TAX EXPENSE 42,000
STEP 2 - CALC THE DIFF OF DEFERRED ASSETS & LIABILITIES
CURRENT TAX LIABILTIES ENDING 55,000
CURRENT TAX LIABILTIES BEGIN 50,000
CURRENT TAX LIABILTIES (INCREASE) 5,000
CURRENT TAX ASSETS ENDING 16,000
CURRENT TAX ASSETS BEGIN 10,000
CURRENT TAX ASSETS (INCREASE) 6,000
STEP 3 - CALC THE INCOME TAX EXPENSE
CURRENT TAX EXPENSE 42,000
CURRENT TAX LIABILTIES (INCREASE) 5,000
CURRENT TAX ASSETS (INCREASE) 6,000
INCOME TAX EXPENSE 42,000 + 5,000- 6000 = 41,000.00
166
When are warranty costs recognized?
When the item is sold the warranty is recognized
167
Are per share amount reported on the income statement from continuing operations?
both basic and diluted are reported on the income from continuing operations
168
Calc, the notes payable by reducing the principal?
CALC THE NOTES PAYABLE
STEP 1 - CALC THE INTEREST COMPONENT
FACE AMOUNT 1,000,000
RATE 9%
90000
1
4 QUARTERS 4
0.25
INTEREST COMPONENT EQUALS 22500
STEP 2 - REDUCE THE PAYMENT BY INTEREST
QUARTERLY PAYMENT 264,200
INTEREST COMPONENT EQUALS 22,500
241,700
STEP 3 - CALC THE NOTES PAYABLE
PRINCIPAL 1,000,000
PRINCIPAL REDUCTION 241,700
NOTE PAYABLE 758,300
169
Calc, the deferred tax expense?
STEP 1 - CALC THE DEFERRED TAX LIABILTIIES
CUMULATIVE TAX DIFF 70,000
TAX RATE 30%
DEFERRED TAX LIABILITIES 21,000
STEP 2 - ADD THE NET DEFERRED TAX ASSET
DEFERRED TAX LIABILITIES 21,000
DEFERRED TAX ASSET 9,000
DEFERRED TAX EXPENSE 30,000
170
When there is current ratio greater than 1:1 and quick ratio is less than 1:1 and all cash is sued to pay AP how would that affect the ratios?
Current ratio would increase bc it's a ratio greater than 1:1 while the quick ratio would decrease because the ratio which is 1:1
171
Calc, the interest for the bond?
STEP 1 - CALC THE INTEREST OF THE BOND
100,000 FACE AMOUNT
9% RATE STATED RATE
9,000 INTEREST FOR THE BONDS
172
STEP 1 - CALC THE DISCOUNT FOR THE NOTE
200,000 MATURITY
10% DISCOUNT RATE
6 JULY 1ST
12
10,000 DISCOUNT RATE
STEP 2 - SUBTRACT THE MAURITY AND THE DISCOUNT RATE
200,000 MATURITY
10,000 DISCOUNT RATE
190,000 DISCOUNT FOR THE NOTE
173
When should a nongovernmental NFP entity should recognize a conditional promise to give?
when the barrier is overcome bc in order to receive the donation they need to overcome the donor imposed condition
174
Calc, the compensation expense for the year end?
Step 1 - calc the compensation expense which is given and add bonus, and officers salaries
490,000 COMPENSATION EXPENSE
18000 SALARY ACCRUAL
75,000 BONUS
583,000 OFFICERS COMPENSATION EXPENSE
175
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