Conceptual Framework and Financial Reporting

Question 1

Accounts Receivable Turnover

Answer 1

Net credit sales/average accounts receivable (Beg + end/2)

Question 2

IFRS Interim reporting

Answer 2

not required for companies who prepare statements in accordance with IFRS

Question 3

Level with lowest valuation purposes

Answer 3

Level 3

Question 4

Presented with statement of CF in separate schedule

Answer 4

1. Conversion of debt to equity (ex. bonds to common stock
2. Acquisition of assets by incurring a mortgage; entering into a capital lease; issuing stock
3. exchange of noncash assets or liabilities for other noncash assets or liabilities

Question 5

users of prospective financial information

Answer 5

1. general users with whom the responsible party is not negotiating directly
2. the responsible party
3. third parties with whom the responsible party is negotiating directly

Question 6

Principal Market

Answer 6

market with greatest volume and level of activity

Question 7

Reportable Operating Segment

Answer 7

Segment’s revenue, profit (or loss), or identifiable assets are 10% or more of the company’s total values

Question 8

SEC form discloses info about material events

Answer 8

Form 8-K

Question 9

SEC form annual filing

Answer 9

Form 8-K, Form 10-Q for quarterly filing

Question 10

Gains and losses classified as…

Answer 10

can be classified as operating or nonoperating depending on the entity’s major ongoing or central operations.

Question 11

Quick Ratio

Answer 11

(Cash +(net) receivables+marketable securities/ current liabilities

Question 12

SEC S-K

SEC S-X

Answer 12

S-X - governs the form and content of financial states and financial statement disclosures

S-K - governs the form and content of non financial statement dsiclosures.

Question 13

Cash paid to suppliers

Answer 13

CGS + (End. Inv - Beg Int)+ Beg AP - End AP)

Question 14

Income approach for developing fair value measurements

Answer 14

using present value techniques to discount cash flows

Question 15

monetary asset account vs. nonmonetary asset account

Answer 15

monetary asset account is fixed sometime in the future (loans to employees)
nonmonetary asset account - price change based on relative price levels in the future (merchandise inventory)

Question 16

2 criteria required for incorporating items in IFRS income statement

Answer 16

it meets definition of an element and can be measured reliably

Question 17

BEPS

Answer 17

(NI available to Common)/WA common shares outstanding

Question 18

DEPS

Answer 18

(NI Available to common adjusted for effects of PCS)/WA common shares + shares issuable from PCS (potential common stock

Question 19

how to calculate CAPITAL account

Answer 19

Beg cap,+ inv + inc - drawing = ending cap

Question 20

Inventory Turnover

Answer 20

COGS(Sales - Gross Margin on Sales)/Average Inventory (Beg+end/2)

Beg inv = COGS + ending - Purchases.

Question 21

current ratio

Answer 21

Current assets/current liabilities

Question 22

dividend payout ratio

Answer 22

NI - dividend per share/earnings per share

Question 23

COGS formula

Answer 23

Beg Inv + Puchases - End inv

Question 24

Management approach

Answer 24

method used to determine what information to report for business segments

Question 25

Working Capital

Answer 25

Current Assets + Current Liabilities

Question 26

Book Value per Common Share

Answer 26

Common Stockholder’s equity / outstanding shares

Question 27

AR Net method vs gross method

Answer 27

Net method after cash discount

if cash paid during discount period gross recognizes sales discount net doesn’t

If cash paid after 10 day discount period gross does not record te sales discount forfeited, but net does

Question 28

Cash discount

Answer 28

Cash (DR
Sales discount
Accounts receivable (CR)

Question 29

Returns and allowances

Answer 29

Sales returns and allowances (DR)

AR (CR)

Question 30

Uncollectible accounts

Answer 30

allowance method is required under GAAP if uncollectible accounts a probable and estimable

Dire method is used when firm is unable to estimate uncollectible accounts

Question 31

Allowance Method (uncollectible accounts)

Answer 31

period adjusting entry:
DR: Bad debt expense
Cr: allowance for doubtful accounts

write-off of uncollectible:
DR: allowance for doubtful accounts
CR: Accounts receivable

Recovery of accounts written off:
Dr: Accts Rec
CR: Allowance for doubtful accounts
DR. Cash
CR: Accts Rec

Question 32

Fixed Overhead ratio

Answer 32

budgeted fixed overhead / budgeted direct labor hours

Question 33

Periodic Inventory system

Answer 33

Physical inventory count is required.

Beging
Dr. Purchases (does not use inventory account)
Cr. Accounts payable

Paid delivery charges:
Dr. Transportation in
Cr. Cash

Returned damage defec:
DR. Accts pay
Cr. Purchases returns and allowances

Paid merch and received disc
Dr. AP
CR. Puchase discounts
Cr. Cash

Sold on account:
Dr. AR
Cr. Sales

After count, year end aadjus
DR. Merch inv (ending)
Dr. Purchases reutrns and Allow
Dr. purchase discount
Dr. COGS
CR. Merchandise Inv (beg)
Cr. Purchases
Cr. Transportation in

Net purchases = Gross purchases + Transportation in

                        - Purchases Returns and allowance
                        - Purchase Discounts

Beg Inv. + NET purchases = End Inv + COGS

Question 34

Cash Flow assumption (inv)

Answer 34

Business entities are free to choose

specific Identification - being able to specifically identify cost of each inventory item and then total the individual cost of all inventory items

WA Cost-flow - (periodic system) (WA cost per unit = COGs Avail for Sale / # of units available for sale)

                   - end inv is equal to the # of units in end    inven multiplied  by WA Cost per Unit
                   - COGS = # of units sold * WA Cost per unit

FIFO (First in - First out)- assumes end inv is composed of units of inventory most renently acquired. COGS is made up of the oldest merch. Reflecs the way most firms actually move inventory. (GAAP does not require this)

LIFO (last in - first out) - assumes end inv is composed of the oldest inventory layers. COGS is composed of the units of inventory most recently acquired (LESS RELIABLE THAN FIFO)

Question 35

COGS in Periodic System

Answer 35

Beg Inv
\+ Net Cost of purchases 
= goods avail for sale
- ending invent
= COGS