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CPA Cram > Conceptual Framework > Flashcards

Conceptual Framework Flashcards

1
Q

How many years of selected financial data are required by the Securities and Exchange Commission (SEC)?

A

5 Years

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2
Q

How many years of cash flow data are required by the Securities and Exchange Commission (SEC)?

A

3 Years

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3
Q

How many years of income statement data are required by the Securities and Exchange Commission (SEC)?

A

3 Years

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4
Q

How many years of balance sheet data are required by the Securities and Exchange Commission (SEC)?

A

2 Years

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5
Q

What does the Securities and Exchange Commission (SEC) do?

A

It administers the US securities laws, most notably the Securities Act of 1933 and the Securities Exchange Act of 1934 as well as others.

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6
Q

What is the main purpose of the Securities and Exchange Commission (SEC)?

A

The main purpose of the SEC is to promote efficient allocation of capital by maintaining open, orderly, and fair securities markets.

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7
Q

What authoritative body has jurisdiction over private not-for-profit organizations?

A

FASB

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8
Q

What comprises GAAP?

A
  1. FASB Accounting Standards Codification

2. SEC pronouncements

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9
Q

What is the role of the Financial Accounting Foundation (FAF)?

A

The FAF exercises oversight of the Financial Accounting Standards Board (FASB), appoints the members of the FASB, and ensures funding.

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10
Q

How are changes to the Financial Accounting Standards Board (FASB) Accounting Standards Codification accomplished?

A

Accounting Standards Updates (ASU).

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11
Q

What year did the International Accounting Standards Board (IASB) begin taking control of standard setting?

A

April, 2001

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12
Q

What is the fourth objective of the International Financial Reporting Standards (IFRS) Foundation?

A

To promote and facilitate adoption of IFRs issued by the International Accounting Standards Board (IASB), through the convergence of national accounting standards IFRS.

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13
Q

Does the International Accounting Standards Board (IASB) have enforcement power over companies?

A

No, it does not have enforcement power.

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14
Q

How many members does the International Accounting Standards Board (IASB) have?

A

16

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15
Q

Who appoints members of the International Accounting Standards Board (IASB), International Financial Reporting Standards (IFRS) Advisory Council, and IFRS Interpretations Committee?

A

IFRS Foundation

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16
Q

How long are the terms for Board Members of the International Accounting Standards Board (IASB)?

A

Five years, renewable one term.

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17
Q

Describe the formula for quick or acid test ratio.

A

(Cash + short-term investments + Accounts Receivable)/Current Liabilities.

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18
Q

What kinds of transactions are recorded in special journals?

A

High volume similar transactions are recorded in special journals.

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19
Q

What do control accounts report?

A

The aggregate balance of several subsidiary accounts.

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20
Q

What is the order of income statement presentation?

A
  1. Income from Continuing Operations;
  2. Income from Discontinued Operations (net of tax);
  3. Extraordinary Items (net of tax);
  4. Net Income.
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21
Q

How are unusual or infrequent items reported?

A

They must be separately reported if material as a component of income from continuing operations.

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22
Q

How are expenses classified under International Financial Reporting Standards (IFRS)?

A

by business function or nature of the expense.

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23
Q

What is comprehensive income?

A

Net income + other comprehensive income items.

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24
Q

Are extraordinary items allowed in International Financial Reporting Standards (IFRS)?

A

No, extraordinary items are not allowed.

25
Q

What type of account is accumulated other comprehensive income (AOCI)?

A

Owner’s Equity

26
Q

What is comprehensive income?

A

Net income plus or minus unrealized gains and losses on securities available for sale, unrealized pension cost, certain unrealized gains and losses on derivatives, and foreign currency translation adjustments.

27
Q

List the required categories for the Statement of Cash Flows.

A
  1. Operating Activities;
  2. Investing Activities;
  3. Financing Activities;
  4. Effects of Foreign Currency Translation;
  5. Reconciliation of net cash inflows/outflows with the reported change in cash and cash equivalents on the Balance Sheet;
  6. Non-cash Investing/Financing Activities.
28
Q

What is the cash flow category for collections of principal amounts on loans made to other entities?

A

Investing

29
Q

What is the cash flow category for interest paid and received?

A

This category is Operating Activities.

30
Q

What are some examples of cash outflows classified as Investing Activities?

A
  1. Purchase of long-term assets;
  2. Lending to others;
  3. Investment in debt and equity securities held to maturity and available for sale);
  4. Purchase of productive assets (not inventory).
31
Q

What is the cash flow category for principal payments on short-term and long-term loans from suppliers made to acquire inventory for resale?

A

Operating

32
Q

Where are non-cash investing and financing activities reported?

A

They are reported on the face of the Statement of Cash Flows or as a separate disclosure.

33
Q

What is the cash flow category for loans made to other entities?

A

Investing

34
Q

What are some examples of cash inflows classified as Financing Activities?

A
  1. Sale of own stock

2. Proceeds from borrowing

35
Q

What is the cash flow category for dividends paid?

A

Financing

36
Q

What is the cash flow category for purchases of trading securities?

A

Operating

37
Q

What are some examples of cash inflows classified as Investing Activities?

A
  1. Sale of long-term assets;
  2. Collection of loan principal;
  3. Disposal of held to maturity (HTM) and available for sale (AFS) debt and equity securities;
  4. Sale of productive assets (not inventory).
38
Q

What is the cash flow category for principal payments on short-term and long-term loans (from financial institutions or dealers) made to acquire plant assets?

A

Financing

39
Q

What is the cash flow category for principal payments on short-term and long-term loans from financial institutions made to acquire inventory for resale?

A

Financing

40
Q

What are some examples of cash outflows classified as Financing Activities?

A
  1. Repurchase of own stock;
  2. Paying back lenders (principal only);
  3. Payment of dividends.
41
Q

What is the cash flow category for purchases of securities available for sale?

A

Investing

42
Q

Using the indirect method for reporting cash flows from operations, should a decrease in inventory be added to or subtracted from accrual based net income?

A

Added to NI

43
Q

Using the indirect method for reporting cash flows from operations, should a decrease in unearned revenue be added to or subtracted from accrual based net income?

A

Subtracted from NI

44
Q

Using the indirect method for reporting cash flows from operations, should an increase in accounts payable be added to or subtracted from accrual based net income?

A

Added to NI

45
Q

Using the indirect method for reporting cash flows from operations, should an increase in accounts receivable be added to or subtracted from accrual based net income?

A

Subtracted from NI

46
Q

What is the difference between errors and irregularities?

A

Errors are unintentional, irregularities are intentional.

47
Q

List the formula for working capital.

A

Current Assets - Current Liabilities.

48
Q

List the working capital ratio formula.

A

Current Assets / Current Liabilities.

49
Q

List the cash availability or interval ratio formula.

A

(Cash + Net Receivables + Marketable Securities) / Average Daily Cash Expenditures.

50
Q

List the formula for inventory turnover.

A

Cost of Goods Sold (COGS) / Average Inventory.

51
Q

List the Accounts Receivable Turnover ratio formula.

A

Net Credit Sales / Average Net Accounts Receivable.

52
Q

List the formula for Number of Days’ Sales in Accounts Receivable (AR).

A

365/ AR Turnover.

53
Q

List the formula for times preferred dividend.

A

Net Income / Annual Preferred Dividend Obligation.

54
Q

List the formula for the Acid Test or Quick Ratio.

A

(Cash + Net Receivables + Marketable Securities) / Current Liabilities.

55
Q

List the formula for number of days’ supply in inventory.

A

365/ Inventory Turnover.

56
Q

List the formula for times interest earned.

A

(Net Income + Interest Expense + Income Tax Expense) / Interest Expense.

57
Q

List the return on common stockholders’ equity formula.

A

Total Liabilities / Total Assets.

58
Q

List the per share common stock dividend pay out rate formula.

A

Cash Dividends per Common Share / Earnings Per Share (EPS).

CPA Cram (2 decks)

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