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All other For-Profit Flashcards

F4-F8

1
Q

The amount of dividend revenue that should be reported on the investors income on dividends for this year is the portion that is ??? the investor’s share of the investee’s undistributed earnings.

A

less than

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2
Q

What do Stock Dividends do?

A

Increase shares held, not counted as income. Reduce RE by par if greater than 20-25%, or by FMV if smaller than 20-25%

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3
Q

What does Accrued Interest do to the CV of a bond?

A

Increases proceed of the bond when issued, does nothing to the bond unless it is included in the CV, which you must remove

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4
Q

Effective Interest Method for Bonds

A

Face x Coupon Rate = Int Payable
Cv x Yield (mkt) = Int Expense
Find the difference and allocate that to amortized premium or discount

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5
Q

Selling Price of the Bond

A

[Face x PV$1 (mkt yield)] + [(Face x Coupon %) x PVOA (mkt yield)]

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6
Q

If bond proceeds are used to retire a Bond Payable, how does it effect LT Liabilities?

A

LT Liabilities increases by the difference between the CV of the old bond and the Face Value (or Issue Price if Premium/Discount) of the new bond

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7
Q

What is the Carrying Value of the Bond equivalent to?

A

Bond Liability

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8
Q

If detachable warrants are included with the sale of the bond, what does it do?

A

It deducts the CV of the bond (LT liability) by the FV of the warrants

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9
Q

Interest Expense incurred on a bond will always be equal to the number of ???

A

Months outstanding, it does not matter even if they are between interest dates

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10
Q

What does Accrued Interest from months prior to the bond issuance do?

A

Increases the amount of cash receipts at issuance, WILL NOT AFFECT THE BONDS THEMSELVES

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11
Q

If effective interest rate for bonds is not given, how do I calculate amortization?

A

Use Straight-Line Method based on number of months

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12
Q

What to look for to determine the category of a lease?

A

OWNES - Any one = Finance Lease
Ownership Transfer?
Written purchase option (that are reasonably certain to be excersized)
Net PV of minimum lease payments > 90% of FV
Estimated economic life >75% of Useful Life
Special Use Asset

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13
Q

If a sale-leaseback is treated as a finance lease, how should the lease be treated?

A

As a failed sale

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14
Q

If a sale-leaseback is successful, what does the lessee (seller) record as a financing liability?

A

Sale Price - FV of asset

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15
Q

Which should always be used if both are given for leases? Implicit Interest Rate or Incremental Interest Rate?

A

Implicit Interest Rate

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16
Q

If the lessee intends to purchase the leased equipment, should the lessor still depreciate the asset?

A

Yes, for the benefit paid

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17
Q

What should the residual be multiplied by to determine its PV?

A

PV Factor ($1)

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18
Q

How should initial direct costs be treated for leases?

A

Added to the PV of the lease at inception

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19
Q

How do you find the annual lease payments if not given?

A

1) FV of leased asset - PV of residual = PV of all lease payments
2) PV of all lease payments / PVF(OA or AD)= Annual Lease Payments

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20
Q

How should intercompany inventory transactions be eliminated? (JE)

A

DR: Intercompany Sales (Seller)
CR: Intercompany COGS (Seller)
CR: COGS (Purchaser)
CR: Inventory (Purchaser)

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21
Q

How should you account for bond issue costs?

A

Bond issue costs are deducted from Cash and
1) Deducted from Premium
OR
2)Added to Discount

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22
Q

For Troubled Debt: Assets

A

1) Mark to FV (G/L)

2) CV of Payable - FV of Asset transferred (G/L)

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23
Q

For Troubled Debt: Equity

A

CV of Payable - FV of Equity transferred (G/L)

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24
Q

Participating Stocks

A

Share equally between PS and CS then Pro-Rata

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25
TS: Cost Method
T/S Gained based on Cost @ Reissue
26
TS: Par Method
T/S Gained based on Par @ Repurchase
27
Foreign Currency: Steps before Remeasurement and Translation
1) Adjust to GAAP | 2) Determine Functional (primary economic environment) and Reporting Currency
28
Foreign Currency: Remeasurement Method
``` Local ---> Functional "Remeasure due to a BS IS" BS First - Monetary = Current Year End Exchange - Nonmonetary = Historical - PIC = Historical - RE Plug IS Last - COGS, Depr, and Amort = Historical - Else = Weighted Average - G/L Plug in order to get BS RE ```
29
Foreign Currency: Translation Method
``` Functional ---> Reporting "Translating IS BS" IS First - All Weighted Average - Total = Ending RE on BS BS Last - All Assets and Liabilities = Current Year End ER - PIC = Historical - End RE is from IS - AOCI = Plug ```
30
Intercompany Sales Calculation
Revenue Parent + Revenue Sub - Consolidated Rev
31
Intercompany Profit Calculation
Inventory Parent + Inv Sub - Consolidated Sub
32
Intercompany Payable Calculation
AR Parent + AR Sub - Consolidated Sub
33
Intercompany COGS Calculation
COGS Parent + COGS Sub - Consolidated Sub
34
Unrealized Profit Elimination
Intercompany Profit x % of Inventory still on hand
35
What should assets finance leases be depreciated for?
"OW! The Economy hurts!" OW = Economic Useful Life No OW= Lease Life
36
What should lease improvements be depreciated for?
Lesser of useful life or lease remaining
37
What is the dealers profit on a leased asset?
FV of leased asset - CV of leased asset
38
What happens if Current Liabilities are refinanced prior to the Issue Date?
They should become LT Liabilities
39
Cost to relocate an employee should be included in what type of activity?
Exit & Disposal
40
Should AP be used for an interest payment or be secured by collateral?
No
41
Is "commitment to an exit plan" criteria for recognizing a liability as an Exit & Disposal activity?
No
42
How do we capitalize ARO?
At its FV, not Undiscounted CF
43
Should any portion of a balloon note be considered a CL?
Only if it is due within the next year.
44
For Software Costs: What expenses should be capitalized?
Expense until Technological Feasibility is reached, Capitalize until Production, then after production its inventory costs
45
Current Income Tax Liability Equation
Taxable Income x Current Tax Rate
46
Deferred Tax Asset/Liability Equation
Temporary Difference x Future (Enacted) Tax Rate
47
Total Tax Expense Equation
Current Tax Liability + DTL or - DTA - Payments Made
48
What type of differences are not included in the DTA/L calculation?
Permanent (non-taxable, nondeductable, special tax allowance)
49
When should Valuation Allowances reduce DTAs?
When it is more likely than not part or all of a DTA will not be recognized
50
How are NOLs treated?
2018-2020: Can be carried back 100% for 5 yrs and forward indefinitely (no income limitation) 2021+: Can only be carried forward 80% of income for the period
51
Derivatives are reported at ???
Fair Value
52
Changes in Hedges Based on Speculation
G/L on IS
53
Changes in Hedges Based on FV
G/L offset by changes in FV
54
CF hedge (ineffective)
IS
55
CF hedge (effective)
OCI
56
If there is not enough APIC to absorb a loss in TS transactions, what account should be hit?
RE should be DR. | RE WILL NEVER BE CR IN TS TRANSACTIONS!
57
When the purpose for appropriated RE is achieved, what happens to the remainder?
The reminder is returned to unappropriated.
58
Dividends in arrears should be reported where?
In the footnotes, NOT IN THE F/S
59
Where do gains on TS transactions go?
APIC NOT RE
60
Sale of TS at less than cost causes what to happen to Assets and SE?
Nothing happens to asses, and SE increases
61
Participating Dividend Calculation
1) PS: No. x $ x % of PS Participating 2) CS: No. x $ x % of PS Participating 3) Add the two together, remainder is allocated based on the fraction of the above calculation (which went to PS and which went to CS)
62
How should proceeds of Convertible PS be allocated?
% of FV
63
How is a property dividend recorded at the date of declaration?
At FV, DR RE and CR Liability
64
Small Stock Dividend Effects
<20-25%: transfers FMV at date of declaration from RE to CS and APIC, NO CHANGE IN ASSETS OR TOTAL SE
65
Large Stock Dividend Effects
>20-25%: transfers PAR value from RE to CS, NO CHANGE IN ASSETS OR TOTAL SE
66
What is a liquidating dividend?
Excess of dividend declared over current RE
67
If collectability is reasonably assured, subscription price in excess of stated value should be recorded as APIC when the subscription is ???
Received
68
Stock Rights only affect CS and APIC when ??? and they NEVER affect ???
Exercised; NEVER RE
69
Where do Proceeds from Sale of Equipment (Including Gain) go on the Stmt of CF?
All proceeds are found in Investing Activities
70
Where does the Gain go from Sale of Equipment?
ONLY THE GAIN/LOSS goes on Operating Activities, the entire proceed is found in Investing
71
Where are Capital Lease Payables found on the Stmt of Cash Flows?
In the Disclosure
72
Cash equivalents (are/are not) reported on Stmt of CF
ARE NOT
73
Where are Dividends Paid and Received found in the Stmt of CF?
Dividends Paid = Financing | Dividends Received = Operating (AS PART OF NI)
74
Where are Trading Securities found in the Stmt of CF?
``` Trading = Operating HTM/AFS = Investing ```
75
Pensions: (S)ir age
Service Costs
76
Pensions: s(I)r age
Interest = (PBO x Interest)
77
Pensions: si(R) age
= (FV Plan Assets x Expected Return %)
78
Pensions: sir (A)ge
Amortization of Unrecognized Prior Service Cost = (Unrecognized Prior Service Cost / Avg Service Life)
79
Pensions: sir a(G)e
or Losses = [Unrecognized G/L - (GREATER OF: 10% Beg PBO or 10% Beg FV of Plan Assets)] / Avg Service Life
80
Pensions: sir ag(E)
Existing Asset or Obligations = Asset or Obligation / (GREATER OF: 15 yrs or Avg Service Life)
81
Calculation of PBO
PBO = Interest Cost + Service Cost - Pension Benefits
82
Net Pension G/L
Actual Return on Plan Assets - Expected Return on Plan Assets
83
Equation for Net Periodic Pension Cost
SI A*G*E *Gains/Assets are subtracted; Losses/Obligations are Added (G and E- Also have GREAT rules)
84
Pension Fund Status Equation
FV of Plan Assets - PBO = + Overfunded (non-current asset), - Underfunded (current/non-current liability)
85
Defined Contribution Plan F/S are reported at ???
FV
86
What components of pensions are found in OCI?
AGE Unrecognized Prior Cost - Amortization Unrecognized G/L Existing Asset or Obligations
87
How is Non-Cumulative Stock treated in calculation for EPS?
Dividends declared only (regardless what was paid)
88
How is Cumulative Stock treated in calculation for EPS?
Dividends accumulated in the current period are used (regardless if one has been declared in the current year)
89
Basic EPS Equation
(NI - *PD) / WACSO
90
What kinds of shares are calculated in Basic EPS WACSO besides Common Stock?
Contingent Shares and Common Stock ONLY (NO PREFERRED)
91
Comprehensive Income Tax Problem Overview (4 Steps)
1) Remove permanent items from Books to back into Income (Pretax -> Income) 2) Remove temporary items to solve for Taxable Income, then multiply by tax rate (Tax Income x Rate = Current Income Tax Portion) 3) Multiply Temporary Differences by ENACTED rate to get DTA or DTL 4) Current Income Tax Liability + DTL - DTA - Payments = Total Tax Expense
92
Journal Entry for a Valuation Allowance
DR: Income Tax Expense CR: Valuation Allowance
93
If a pension is underfunded, how do you determine whether its a current or noncurrent liability?
If the FV of the plan assets is sufficient to pay off the benefits payable in the following year, then it is a NON-Current liability
94
Consolidation: NCI Calcuation @ Acquisition
GAAP: (Investment / Own %) x NCI % IFRS: FV of Sub x NCI %
95
Consolidation: NCI Calcuation @ Year-End
NCI at Acquisition + NCI % NI - NCI % Dividends
96
What is current maturity for a lease?
It is the amortization following the year requested
97
Journal Entry for Issuance of Stock Options
THERE IS NONE
98
Journal Entry for Stock Options during Vesting Period
DR: Compensation Expense (FV / Vesting Period) CR: APIC- Stock Options (FV / Vesting Period)
99
Journal Entry for Exercising
DR: APIC- Stock Options (Reverse from Vesting Period) DR: Cash (Selling Price x # of shares) CR: Common Stock (Par x # of shares) CR: APIC - Common Stock (Plug)

FAR- Accounting (6 decks)

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