Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Financial Accounting Reporting > Cash & Investments > Flashcards

Cash & Investments Flashcards

1
Q

When reporting cash on the balance sheet what balance would be used?

The checkbook balance
bank statement balance

A

The checkbook balance would be used for the ‘cash” for the balance sheet bc it closely shows what is the cash that is unrestricted at the balance sheet date

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
1
Q

What should the cash account on the balance sheet consist of?

A

1 - Coin & Currency on hand
2 - demands deposits checking accounts
3 - time deposits
4 -near cash assets deposits in transit or checks written to creditors

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

When calc the cash bank balance always remember the following?

A

The deposit transit are always added

Outstanding checks are always (subtracted)

Watch out for other adjustments

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Calc the adjusted cash balance at June 30th?

A

For this problem remember we start off with the cash balance of 10,012

next we subtract the check issued 95 - 59 = 36
interest earned 35
Subtract 35

10,012 - 36 + 35 - 50 = 9,961

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Calc, ending balance reported bank statement?

A

So we start off with balance
Bal per book 40,500
Minus transit (2,500)
add:outstand check 1,500
Minus bank charge (100)
Minus check error. 900

Balance per bank = 38,500

The process is the opposite from cash balance calc

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

How to calc the amount of income or loss investment should be reflected in earnings?

A

Year 3
Common Stock 40,000
Common Stock 35,000
5,000
Dividends (900)

= 4100 loss

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

How are measurement alternative for an investment in equity securities measured?

A

Cost minus subsequent impairment plus or minus changes resulting from observable prices changes for the identical or similar investment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Calc investment using the equity method?

A

Very important point to use the significant influence over the company is a huge sign to use the equity method

Investment 400,000
Share Net Income 50,000
Share of Dividends (15,000)

Investment 12/31. 435,000

Net Income 500,000 x 10% = 50,000
Dividends 150,000 x 10% = 15,000

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

how to calc the gain on sale for year 2 of the investment since half of it was sold?

A

We also need to calc the investment for year 1

Year 1

iNVESTMENT Y1 200,000
EARNINGS 24,000
DIVIDENDS 15,000
209,000

EARNINGS FOR Y2.
100,000 X 30% =. 30,000
= CV for Y2 239,000

For year 2

239,000 / 2 = 119,500
150,000 - 119,500 = 30,050

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Calc, the carrying value amount for the investment in Devon year end?

A

Investment 200,000
Dividend (100,000)
400,000 x 25%

Net Income 150,000

= 200,000 + 150,000 NI - Dividends = 250,000 Carrying Amount

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

How to calc the investment of income in the income statement?

A

Net Income 120,000 x 30% x 6 months / 12 months = 18,000

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

How to calc the income statement investment?

A

So here we would always start off net income because this problem is asking us to calc the investment for the income statement

So here we start off with
120,000
FV adjustment. 10,000
5,000

= 42,000

90,000 difference / 18 years = 5000

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

An investor uses the equity method to the account for an

A

neither the cash dividends from investee and a change in fair value of the investee common stock has no affect on the investment in the securities under the equity method

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Whenever they ask for calc the revenue and income of an investment all how to calc it?

A

Look for the net income and the percentage of stock owned

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Are dividends reported under equity or fair value method?

A

No, because however, they are reported as 0 on the income statement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Is the equity method required when the investment is “Held for Sale” ?

A

No

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

calc the Goodwill of the acquisition using the equity method?

A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Calc the CV of the bonds under the effective interest method?

A

Step 1 first we need to calc the interest income

Interest 456,200 x 10% = 45,620
Face Value 500,000 x 8% = 40,000 = 5,620

CV for Year 1 456,000
discount Y1 5,620
= 461,820 CV for Year 1

Step 2 first we need to calc the interest income for Y2

Interest 461,820 x 10% = 46,182
Face Value 500,000 x 8% = (40,000) = 6,182

             Year 2 CV   461,820  Discounted amorti.       6,182  = 468,002 CV for year 2
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Calc the CV of the bonds?

A

Step off by using the effective method we will calc the reported CV for the bond by the following steps

Step 1 calc the interest received
Step 2 calc the interest expense
Step 3 get the diff between interest received & expense
Step 4 Subtract the paid fir the bonds by

Step 1 - Calc the interest received

Start with Paid 1,198,000 x 8% yield paid 6/12 = 47,920

Step 2 - Calc the interest exp
1,000,000 x 10% x 6/12 = 50,000

Difference = 50,000 - 47,920 = 2080

Paid 1,198,000 - 2080 = 1,195,920 is the CV of the balance sheet

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

calc the cash that should be reported in the balance sheet?

A

remember that cash is what is available for use there might be some cash that needed to be used for Receivables

So here we need to first find the checkbook balance which is 10,000 - 1,000 check payable to Rune which would equal = 9,000

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

when AFS are reported and there is decline in FV what affects does that cause Non current & net income?

A

Non-current asset there are no change however, the Net Income there would be a decrease in Net Income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Using the equity method account how do excesses of FV over carrying amounts reported equity earnings for the year?

A

Inventory Excess would a “Decrease”

Land Excess would be “No Effect”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

When there is investment in equity securities that does not result in control or significant influence over the investee how is that measured ?

A

at FAIR VALUE

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

A measurement alternative may be elected for an investment in equity securities if

A

FV of the investment is not readilty determine and the investment does not result in control or significant over the investee

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

When the equity method is being used to account investment in common stock does goodwill or cash dividends affects the reported investments income?

A

goodwill amortization does not reduce investment

cash dividends doesn’t affect the equity account

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

What is trading for securities?

A

bought and held for sale in the near term meaning not for too long of a time

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Calc, the balance sheet bonds that should be reported? using the straight line method

A

We are using the straight line method of amortization

Step 1 calc the premium

We have 15,000 as our premium
calc by purchased bond 215,000 - 200,000 = 15,000 premium

Step 2 calc the amortized months

15,000 premium x 200 = 3000

Step 3 subtract the CV - amortzation

215,000 CV - 3000 amortization
= 212,000 ending value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

investments classified as held to maturity are measured at

A

Amortized costs with no unrealized gains or losses reported

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Where are Investments reported as held to maturity gains or losses reported?

A

amortized cost with no unrealized gains or losses reported

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

calc the revenue that needs to be reported for the bonds?

A

Remember for the discounted bond you need to first calc the interest income for the bonds issued at a discount amortization during the interest period

Step 1 - calc the periodic cashflows

500,000 face amount
8%
6 July 1, year 4
12

20,000 periodic cash flows are equal
1,800 discounted amortization (given)

21,800 revenue reported for the discounted bond

30
Q

Calc, the carrying amount of the bond using the effective interest method?

A

Step 1, Whether if the bond is premium or discount

Amount paid for the bond 1,198,000 x 8% x 6/12 = 47,920

Step 2 - Face value 1,000,000 x 10% x 6/12 = 50,000

Step 3 - subtract the difference of 50,000 - 47,920 = 2080

Step 4 - Paid 1,198,000 - 2098 = 1,195,920

31
Q

Calc, the amount reported as gain from the sale of half an investment?

A

Step 1

Year 1

200,000.00
80,000 30%
50,000 30%

24,000
15,000

209,000 INVESTMENTS

Step 2

209,000 iNVESTMENTS
30000 earnings from Year 2 June 30th
239,000

119,500

150,000 sold half of stock
119,500
30,500

32
Q

An entity should report an investment in marketable equity securities that does not significant or control over the investee at

A

FV, with holding gains and losses including in earnings

33
Q

Where are Available for Sales debt securities reported?

A

Other Comprehensive Income (OCI) NOT in Income Statement so meaning in the Balance Sheet

34
Q

Where are realized loss on sale of AFS securities & Unrealized holding gain on appreciation of FS securities reported on the Financial statements?

A

Income statement (realized loss on sale of FS securities) are reported bc they are included in the calculation of current period earnings

Balance Sheet (Unrealized holding gain on appreciation of AFS securities) are reported excluded from earnings and are reported on OCI

35
Q

Calc, the depreciation exp?

A

Step 1. Start off with the equipment

reported equipment
379,000
344,000
increase in equipment 35,000

accumulated depreciation
153,000
128,000
25,000

purchase equipment 50,000
increase in equipment 35,000
15,000

                                  15,000 carrying amount 	             9,000
                                      6,000


                                    25,000
                                       6,000
                                     31,000
36
Q

Calc the depreciation expense using the Double Decline depreciation for Year 8?

A

Year 6 80,000 x .50 = 40,000
Year 7. 40,000 x .50 = 20,000
Year 8. 20,000 x .50 = 10,000

37
Q

Calc the stock investment to be reflected for Gilmans earnings using the Fair Value option?

A

common stock 35,000
investments 32,000

                          3,000		 received dividends 	 
                          1,800.00

earnings 1,200.00

when using the FV option dividends received and unrealized gains and losses
on remeasurement if financial assets FV are reported in earnings

38
Q

Investments that have the ability and positive intent to hold until maturity how are they measured?

A

amortized cost

39
Q

calc, the OCI to be credited AT DECEMBER 31?

A

Year 3 Fair Value
120,000 - 90,000 = 30,000

40
Q

Calc, the AFS securities comprehensive income for Year 2?

A

calc the following

530,000 June 30 year 2
490,000 Dec 31, year 2

= 40,000 OCI Other Comprehensive Income

41
Q

When available for sale is transferred to trading securities how is that recognized?

A

in earnings

42
Q

Calc, the bonds issued at a discount interest expense?

A

We use the Initial book value 980,000 x the effective interest rate 6% = 58,800 is the interest expense

Remember we use the book value and we multiple the effective interest rate to calc the interest expense

43
Q

Calc, the interest payment for the bond issued at a discount?

A

To calc the interest payment we need to use the investment 1,000,000 and multiple that by stated interest rate of 5% = 50,000 interest payment

44
Q

Calc, the interest expense for the bond issued at premium?

A

Book value 1,020,000 x 4% effective interest rate = 40,800 is the interest expense

45
Q

Calc, the interest payment of bond issued at a premium?

A

1,000,000 investment x 5% = 50,000 interest payment

46
Q

Calc, the amount that should be reported as investment in bonds?

A

We are using the effective interest method of amortization First step is to calc the CV

Price 946,000 - 40,000 accrued interest = 906,000

47
Q

Does the fair value or equity method recognized cash dividends by increasing the investment balance?

A

Neither the fair value or the equity method recognize the cash dividends

48
Q

What is the most likely cause of bonds decline in the FV?

A

Interest rates have increased when the bonds especially when it’s a premium bond

49
Q

A measurement alternative may be elected for ana investment in equity securties if the

A

FV of the investment is nor readily determinable and the investment does not result in control or significant influence over the investee

50
Q

Calc, the revenue for the bonds from long term investment for discounted bond?

A

Bonds face value 500,000
Coupon rate 8%
coupon rate. 6/12

         =                                20,000 Discounted amortization     1,800 Revenue reported.              21,800
51
Q

The decisions to elect the fair value option (FVO)

A

Is irrevocable until the next election date, if any meaning the decision to elect the FVO is final and cannot be revoked unless a new election date occurs

52
Q

Calc, the net income using the Fair Value option?

A

Under the fair value option when dividends are paid they are accounted as “Income” so we use that for the Fair Value option

step 1 - difference between the investment and investment at fair value

410,000 - 400,000 = 10,000 investor recognize a unrealized gain

Step 2 - use the dividend income of 20,000 x 30% = 6,000

Step 3 - we add the unrealized gain of 10,000 + 6,000 dividend income = 16,000

53
Q

For interim financial statement when the net inventory how is market price recorded?

A

decrease market price in the first Quarter and increase the 3rd quarter by the amount of decrease in the first quarter

54
Q

calc, the the recognized loss? in the equity security

A

A gain or loss is recognized when an individual equity security is sold or otherwise disposed of

To start off common stock 31,500 - 29,500 FV of the investment = 2000

Step 2 -

We Start off with 2000 shares x 14 - 29500 carrying amount - 1400 = 2900

55
Q

Following statement with regard marketable securities are incorrect?

A

AFS portfolio of marketable debt securities unrealized gains are recorded on the income statement

which is incorrect they are reported on other comprehensive income

56
Q

Calc, the carrying amount using the straight line method for the bond investment?

A

Using the straight line method

Start off with the 220,000 - 5,000 = 215,000

Step 2

15,000 x 15 months / 75 months = 3,000

200,000 + 15,000 - 3,000 = 212,000 bond reported

57
Q

Calc, the long term investment pell should report year 4 revenue?

A

Face amount 500,000 x 8% coupon rate x 6/12 = 20,000

Pell recorded bond discount amortization 1800

20,000 + 1,800 = 21,800

58
Q

How to cal the warranty expense?

A

Sales multiply by the warranty cost by sale

59
Q

When an investor uses the equity method to account for investments in common stock, the investment account will be increased when the investor recognizes

A

a proportionate interest in the net income of the investee

60
Q

calc, cash balance per books at April 30?

A

Balance per bank statement
46,500
+ Deposits 58,400
Disbursement (49,700)
outstanding check (7,000)

= balance per books 48,200

61
Q

if the investment in debt securities has the ability and intent to hold until maturity must be classified as held to maturity and measured at amortized cost?

A

it’s amortized costs

62
Q

Calc, the investment account using the equity method?

A

200 shares x fair value 150 = 30,000

18,000 net loss Year 1 x 2 /12 = 3000 x 0.25 = 750

200 x 1.20 = 240

2,000 x 25% = 500

30,000 - 750 - 240 - 500 = 28,510

63
Q

The most likely causes of the decline in the bonds Fair value when it’s acquired at a premium?

A

The increase in interest cause a decrease on the price of the bond

64
Q

When is the equity method not required?

A

When the investment is held for sale

65
Q

A measurement alternative may be elected for an investment in equity securities if the?

A

Fair Value of the investment is not really determinable and the investment does not result in control or significant influence over the investee

66
Q

The amount of income or loss that is attributable to the meteor stock investment in Gilman earnings?

A

Common Stock 35,000 - 32,000 = 3,000 dividends income received

3,000 dividends - 1,800 of dividends from investment = loss of 1,200

67
Q

When is the equity method not required for an investment?

A

held for sale

68
Q

Do cash dividends from investee & a change in fair value of the investee’s common stock affect equity based earnings?

A

Neither of them are affected

A changed in fair value of the investee’s common stock have no effect in the investment in securities account

69
Q

Does the fair value or the equity method are used for cash dividends?

A

Neither the fair value or equity method uses the dividends

70
Q

Decrease in FV of an investment in debt securities was amortized cost and due to credit losses?

A

earnings section of the income statement and writing down the amortized cost basis to FV

71
Q

If Goll Co has common stock in two companies one is 25% and the other is 18%, however neither investment gave him the ability to exercise significant influence either company operating and financial policies. Can goll account either company using the equity method

A

No because the key point in this problem is neither company gave ability to exercise influence

72
Q
A

Financial Accounting Reporting (24 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions