Balance Sheet & Statement of Financial Position Part 2 Flashcards
in a consolidated balance sheet (assuming parent owns 80% of the subsidiary)…
consolidated assets (parent and 100% of sub) - consolidated liabilities (parent and 100% of sub) = SE (parent and 80% of sub)
non-controlling interest equity (20% not owned by parent)
what is non-controlling interest based on?
the FV of the subsidiary on the date of acquisition and later adjusted for changes due to income or distributions after that date
what is the objective of financial reporting?
to provide useful information to users that impacts the decision making process
ie. creditors, investors and other lenders
if a prepayment is refundable…
it is an asset on the balance sheet
if the prepayment is nonrefundable…
it is an expense on the income statement
if a prepayment is refundable and due within one year…
it is a current asset
if a prepayment is refundable and due in more than one year…
it is a non-current asset
what does the balance sheet show?
- assets and liabilities
- the magnitude and ability to pay obligations in short and long run
- degree of leverage
- ability to adapt to changing financial conditions
- how to manage future cash flows when conditions change
what is the historical cost method for appropriate financial reporting?
the original purchase price of an item
ex. fixed assets
what is the fair value method for appropriate financial reporting?
determining an item’s value based on objective market transactions between unaffiliated third parties
ex. trading debt securities
what is the replacement cost method for appropriate financial reporting?
the amount required to obtain an asset that is the same or equivalent to an existing asset
ex. inventory
what is the net realizable value (NRV) method for appropriate financial reporting?
estimated selling price of an asset less estimated disposal costs
ex. AR
what is the present value (PV) method for appropriate financial reporting?
current amount of a future sum of money
ex. bonds payable
what type of account is unearned revenue and deposits received from customers?
liability
what is Retained Earnings made up of?
BB
+/- Net income (loss)
-Treasury stock
-Dividends declared
+EB
=RE
cash basis recognizes revenue when… and expense when…
cash received
cash paid
accrual basis recognizes revenue when… and expense when…
earned
incurred
what are current liabilities (CL)?
settled with a current asset (cash) or another liability
settled within the longer of one year or the operating cycle
what are long term liabilities (LTL)?
all liabilities that are not current
