ACG 4111 FINAL Flashcards
Sale of land.
I+
Issuance of common stock for cash.
F+
Purchase of treasury stock.
F-
Conversion of bonds payable to common stock.
Noncash
Lease of Equipment
Noncash
Sales of Patent
I+
Acquisition of building for cash.
I-
Issuance of common stock for land.
Noncash
Collection of note receivable (principal amount).
I+
Issuance of bonds.
F+
Issuance of stock dividend.
X
Payment of property dividend.
Noncash
Payment of cash dividends.
F-
Issuance of short-term note payable for cash.
F+
Issuance of long-term note payable for cash.
F+
Purchase of marketable securities (“available for sale”).
I-
Payment of Note Payable
I-
Cash Payment for 5 year insurance policy
I-
Revenue Reported In Statements Before Return
DTL
Revenue Reported In Tax Return Before Statement
DTA
Expenses Reported In Statement Before Return
DTA
Expenses Reported In Return Before Statement
DTL
Payment of note payable.
F-
Cash payment for five-year insurance policy.
X
Sale of equipment.
I+
Issuance of note payable for equipment
N
Acquisition of common stock of another corporation.
I-
Repayment of Long Term debt by issuing common stock
N
Payment of semiannual interest on bonds payable.
x
Retirement of preferred stock.
F-
Loan to another firm.
I-
Sale of inventory to customers.
X
Purchase of marketable securities (cash equivalents).
X
Accrual of loss contingency, tax-deductible when paid.
Liability - Loss Contingency
Newspaper subscriptions; taxable when received, recognized for financial reporting when the performance obligation is satisfied
Liability—deferred subscription revenue
Prepaid rent, tax-deductible when paid.
Prepaid Rent
Accrued bond interest expense, tax-deductible when paid.
Accrued bond interest payable
Prepaid insurance, tax-deductible when paid.
Prepaid Insurance
Unrealized loss from recording investments at fair value (tax-deductible when investments are sold).
Unrealized Loss on investments
Warranty expense; estimated for financial reporting when products are sold; deducted for tax purposes when paid.
Warranty liability
Advance rent receipts on an operating lease (as the lessor), taxable when received.
Liability - Deferred Rent Revenue
Straight-line depreciation for financial reporting; accelerated depreciation for tax purposes.
Acc. Depreciation and depreciable assets
Accrued expense for employee post-retirement benefits, tax-deductible when subsequent payments are made.
Liability - post-retirement benefits
Advance payments on insurance, tax-deductible when paid.
DTL
Estimated warranty costs; tax-deductible when paid.
DTA
Rent revenue collected in advance; cash basis for tax purposes.
DTA
Interest received from investments in municipal bonds.
N
Prepaid expenses, tax-deductible when paid.
DTL
Net operating loss carryforward.
DTA
Net operating loss carryback.
N
Straight-line depreciation for financial reporting; MACRS for tax purposes.
DTL
Organization costs expensed when incurred; tax-deductible over 15 years.
DTA
Life insurance proceeds received upon the death of the company president.
N
Valuation Allowance
Deferred tax asset is reduced by a valuation allowance if it is “more likely than not” that some portion or all of the deferred tax asset will not be realized.
Income Tax Expense 3
Valuation Allowance DTA 3
Dealing With Uncertainty
Step 1. A tax benefit may be reflected in the financial statements only if it is “more likely than not” that the company will be able to sustain the tax return position, based on its technical merits.
Step 2. A tax benefit should be measured as the largest amount of benefit that is “cumulatively greater than 50 percent likely to be realized”
-For the Step 1 decision as to whether the position can be sustained, companies must assume that the position will be reviewed by the IRS or other taxing authority and litigated to the “highest court possible,” and that the taxing authority has knowledge of all relevant facts.
When it is “Not More Likely Than Not”
There is an 8 million tax benefit that would reduce tax payable by $8 million. It is more likely than not that it will not be accepted by the IRS. Would record (a) current income tax payable that reflects the entire $8 million benefit of the deduction, (b) an additional tax liability that represents the obligation to pay an additional $8 million of taxes under the assumption that the deduction ultimately will not be upheld, and (c) tax expense as if the deduction had never been taken.
Income Tax expense (To Balance) 32
Income Tax Payable (With $8 tax Benefit) 24
Liability - Projected addt’l tax 8
Resolution of uncertainty (Full 8 Million is disallowed)
Liability- Projected Addt’l tax 8
Tax Payable 8
Resolution of Uncertainty (8 Million is allowed)
Liability- Projected Addt’l tax 8
Income Tax Expense 8
AOCI Includes:
- Net holding gains (losses) on available-for-sale investments in debt securities
- Gains (losses) from and amendments to postretirement benefit plans
- Deferred gains (losses) on derivatives
- Adjustments from foreign currency translation
IFRS Shareholder’s equity
Share Capital: Ordinary Shares Preference Shares Share Premium, Ordinary Shares Share Premium, Preference Shares Reserves: Investment revaluation reserve Translation reserve Revaluation Reserve Retained Earnings Total Equity: Often presented before liabilities
Fundamental Share Rights
- Right to vote
- Right to share in profits in the form of dividends
- Right to share in distribution of assets when liquidated
- Preemptive right
IFRS Preference Shares
Under IFRS, most non-mandatorily redeemable preferred stock (preference shares) also is reported as debt as well as some preference shares that aren’t redeemable. Under IFRS (IAS No. 32), the critical feature that distinguishes a liability is if the issuer is or can be required to deliver cash (or another financial instrument) to the holder.
Preferred Stock
Arrears
Redemption privileges, rights of conversion
Preference in liquidation
- Mandatorily redeemable shares are classified as liabilities.
Shares Issued for Noncash Consideration:
- Even without a receipt of cash to establish the fair value of the shares at the time of the exchange, the transaction still should be recorded at fair value. Best evidence of fair value might be one or more of the following:
o A quoted market price for the shares
o A selling price established in a recent issue of shares for cash
o The amount of cash that would have been paid in a cash purchase of the asset or service
o An independent appraisal of the value of the asset received
o Other available evidence
Stock Dividends
distribution of addt’l shares of stock to current stockholders. Small stock dividend is typically less than 25% and the fair value of the additional shares distributed is transferred from retained earnings to paid-in capital.
RE 120
Common Stock 10
Paid-In Capital - Excess 110
Stock Splits
Stock Distribution over 25%, no entry
Large stock Dividends
PIC - Excess 100
Common Stock 100
Increase in the fair value of available-for-sale debt securities
OCI
Gain on sale of land
NI
Loss on pension plan assets (actual return less than expected)
OCI
Adjustment for foreign currency translation
OCI
Increase in the fair value of investments in common stock securities
NI
Loss from revising an assumption related to a pension plan
OCI
Loss on sale of patent
NI
Prior service cost in defined benefit pension plan
OCI
Increase in the fair value of bonds outstanding due to change in general interest rates; fair value option
NI
Gain on postretirement plan assets (actual return more than expected)
OCI
