Becker F3 Flashcards
What’s the definition for Equity Securities?
- securities that represent ownership interest in enterprise
- right to acquire OR
- dispose of ownership interest at fixed or determinable
What does Equity securities not include?
DOES NOT INCLUDE:
- preferred stock redeemable by investor
- treasury stock
- or convertible bonds
What is Trading securities?
- current assets
- include debt and equity
- bought with the purpose of selling in the near future
What is Available for Sale securities?
- non-current assets
- (GR): those securities not meeting trading or held-to-maturity definitions
- may be classified as current or non-current depending on the INTENT of corporation
What is Held to Maturity securities?
- debt securities only
- non-current assets
- (GR): must have positive intent and ability to hold to maturity
What’s the JE for Trading Securities unrealized gains and losses?
Included in earnings
DR: Unrealized loss on trading securities
CR: Valuation account (fair value adjustment)
What’s the JE for Available for Sale Securities unrealized gains and losses?
-Reported in OCI
DR: unrealized loss on available-for-sale securities
CR: Valuation account (fair value adjustment)
What’s IFRS exception for foreign exchange gains and losses on debt securities?
- reported directly on the income statement
F3.6 MCQ - 2
Which of the following fees should be included in the determination of net income of the combined corporation for the period in which the expenses are incurred?
A. Finders and consultants fees
B. Registration fees for equity securities issued
How should each fees be treated or recorded?
A. YES
B. NO
A. Finder’s fees are expensed in the period inccurred
B. Registration fees for equity securities decrease additional paid in capital (SHE account)
F3.6 MCQ - 4
What’s the JE for parent’s investment in sub via issuance of stock?
DR. Investment in subsidiary : 465
CR. Common stock (par) :
CR. Add’l paid-in capital :
F3.6 MCQ - 5
What steps are required when subsidiary is acquired with an acquisition cost
- Balance sheet is adjusted to FV (which creates negative acquisition account balance)
- Identifiable intangible assets are recognized at FV (which increases the acquisition account balance)
- Total negative balance in the acquisition account is recorded as a gain
F3.6 MCQ - 6
How should direct costs of business combination acquisition be treated?
Deducted in determining the NET INCOME of the combined corporation for the period in which costs were incurred
F3.6 MCQ - 7
Up to 6/30/x3 parent only own 20%, post 7/1/x3 parent acquired another 75%. How much of sub’s net income should be reported as accruing on the parent’s books?
20% Net Income up to 6/30/x1 and 95% post 7/1/x3
Rule: in an acquisition, the Net Income of a newly acquired subsidiary will only be included in consolidated net income from the ‘date of acquisition’
