Assignment 2 & 3 Formulas & Notes Flashcards
Contract Revenue Recognition (Service/product paid once work complete & services that are paid overtime)
Amount customer paid
Times: Percent of the aggregate price for completed service.
Equals: Revenue for services completed
Percent of Aggregate Price
Stand-alone price of service/product
Divide: Aggregate price
Equals: Percent of aggregate price
Percent Complete Method
Cumulative cost incurred
Divide: Total estimated cost
Equals: Percent complete
Percent Complete Method Revenue Recognition
Contract price
Multiply: Percent completed
Equals: Revenue
Variable Consideration
See Q4 on Assignment 2
Recognizing Revenue w/ Estimated Return
Cash received
Multiply: (1- Estimated return %)
Equals: Revenue
Calculating Return Allowance Liability
Cash received
Multiply: Estimated return %
Equals: Liability for return allowance
Cost of Sales w/ Estimated Return
Carrying value of inventory given to customer
Multiply: (1 - Estimated return %)
Equals: Cost of sales
Calculating Inventory Return Allowance
Carrying value of inventory given to customer
Multiply: Estimated return %
Equals: Inventory return allowance
Revenue Recognition w/ Gift Cards
Amount redeemed
Divided by: Redemption rate
Equals: Revenue
Calculating Ending Balance for Allowance Account
Beginning balance of allowance
Plus: Bad debt expense
Minus: Write-offs
Equals: Ending balance of allowance
Converting LIFO Inventory to FIFO Inventory
LIFO inventory
Plus: LIFO reserve
Equals: FIFO inventory
Converting LIFO Cost of Sales to FIFO Cost of Sales
LIFO cost of sales
Plus: LIFO beginning reserve
Minus: LIFO end reserve
Equals: FIFO cost of sales
Leases
See week 10 slides 23-45.
Inventory, FIFO, LIFO
See week 9
Calculating Goodwill
Total purchase consideration
Minus: Fair value of net indentifiable assets
Equals: Goodwill
Calculating the Increase in Assets as a result of consolidation
Fair value of net identifiable assets
Plus: Goodwill
Minus: Cash consideration
Equals: Increase in assets
Calculating Goodwill w/ Non-controlling Interest
Total consideration (including the fair value of non-controlling interest)
Minus: 100% Fair Value of the aquiree’s net identifialbe assets
Equals: Goodwill
(see week 11 slide 23)
Net Identifiable Assets (NIA)
Identifiable assets
Minus: Identifiable liabilities
Equals: Net identifiable assets
(see week 11 slides 31-32)
Calculating Goodwill with previously held equity interests
1) Total consideration (including the fair value of non-controlling interest)
Minus: 100% Fair Value of the aquiree’s net identifialbe assets
Equals: Goodwill
2) Total consideration & value to be allocated to net assets
Plus: Non-controlling interest
Minus: Net identifiable assets
Equals: Goodwill
(see week 11 slides 26-30)
Calculating Consideration with previously held equity interests
Fair value of items transferred by acquirer
Plus: Fair value of contingent consideration
Plus: Fair value of non-controlling interests
Plus: Fair value of previously held equity interests
Equals: Total consideration
(see week 11 slide 30)
Calculating Ending ESO Obligation
Beginning ESO obligation
Minus: Fair Value of ESOs exercised
Plus: Fair value of ESOs granted
Plus: Revaluation loss
Equals: Ending ESO obligation
Options Exercised
Options exercised equal the intrinsic value when time value equals 0. Time value equals 0 when the options expire.
Intrinsic value
Stock price
Minus: Exercise price
Equals: Intrinsic value
Intrinsic value cannot be negative, so if the stock price is less than the exercise price the intrinsic value is 0.
Inputs for calculating the fair value of options
- Stock price at grant date
- Exercise price
- Expected stock price volatility
- Expected life of the options
- Risk free rate
- Expected dividends on common stock
Pension Expense
Service cost
Plus: Interest cost
Minus: Expected return on plan assets
Equals: Pension expense
Pension Benefit Obligation at the end of the year (When there is complete certainty)
PBO at the beginning of the year
Plus: Service cost
Plus: Interest cost
Minus: Benefits paid during the year
Equals: PBO at the end of the year
Fair Value of Plan Assets at the end of the year (When there is complete certainty)
FVPA at the beginning of the year
Plus: Contributions made during the year
Plus: Actual return on plan assets
Minus: Benefits paid during the year
Equals: FVPA at the end of the year
Pension Liability or Asset
PBO at the end of the year
Minus: FVPA at the end of the year
Equals: *Pension liability at the end of year
*Liability if positive. Asset if negative.
Service cost, interest cost, & expected return on plan assets. components of operating or financial expenses?
Interest cost: Financial expense.
Expected return on plan assets: Financial expense.
Service cost: Operating expense.
Effect on Net Income from Pension
Net financial expense before tax
Minus: Net operating profit before tax
Equals: Net income
Taxable Income
US Federal
Divide: US statutory rate
Equals: Taxable income
(For all tax questions see week 13: Ford Case slides 48-80).
Effective Tax Rate
GAAP tax expense
Divide: GAAP pre-tax income
Equals: Effective tax rate
