Day 15 Flashcards
Equity securities held for investment are carried at fair value unless:
- The investment is carried using the Equity Method
- The Equity Securities will be consolidated and therefore eliminated
- The fair value cannot be readily determined
Note: if #3 the Investment is carried at cost and adjusted for any impairment
On 11-30-23 ABC plans to close one of is offices, they offer a termination benefit to the 50 employees of $10k of they do not quit until 9-30-24. ABC estimates 40 employees will take the $10k benefits. What amount is recognized as a Liability on ABC BS on 12-31-23?
$40k
The employees offered the termination benefit must provide future services, therefore the liability should be recognized over time
40 employees × $10k × 1/10 months = $40k liability @ 12-31-23
MCQ-16154
ABC owns 75% of XYZ. XYZ had net income of $20k and paid $8k dividends.
ABC net income was $30k and paid $15k dividends separately from XYZ .
What amount of dividends paid would ABC show on its consolidated Stmt of RE?
$15k
During consolidation, XYZ’s dividends is eliminated
MCQ-05920
ABC bought 75% of Tesla stock. At the time of the acquisition Tesla has $800k of common stock and $240k of Retained Earnings.
ABC uses the Acquisition Method to record the transaction, what amount of CS and RE of Tesla will be reported on the consolidated FS?
$0 & $0
Under the Acquisition Method, the preacquisition of subsidiary is not carried forward. Consolidated Equity = The Parent Corps equity
MCQ-07467
Stock Dividends on CS should be recorded at FMV by the investor when the investment is accounted for under the Cost Method or Equity Method?
Neither
Rule: stock dividends and splits are not considered income to the investor
The investor would relocate the investment account balance over more shares. The per share price decreases
MCQ-01562
Indirect Method: Cash provided by Operating Activities equation
(Reconciliation)
Net Income
LESS: Increase in AR
PLUS: Increase in AP
= Cash provided from Operating Activities
MCQ-05698
How would a 5% stock dividend affect APIC and RE?
APIC - Increase
RE - Decrease
The FMV of the stock dividend at the declaration date is transferred from RE to Capital Stock and Paid In Capital
MCQ-01523
Dollar value LIFO
MCQ-00080
Concept Video: Assumptions: Part 2 - 09:30min
Equation: Days in Inventory
Ending Inventory / (COGS / 365)
MCQ-02633
Matching Revenues and Related Expenses: Unearned Revenues AJE
JE: to record unearned revenue
DR Cash $1,000
CR Unearned Revenue $1,000
AJE: to record unearned revenue that has been earned
DR Unearned Revenue $1,000
CR Revenue $1,000
MCQ-07527
What is the rule when two or more purchases of stock cause ownership to go from less than 20% to more than 20%?
Rule: When two or more purchases of stock cause ownership to go from less than 20% to more than 20%, The Equity Method should be used starting on the date of “Significant Influence”
No prior period adjustments are required
Equity Method = NI × Ownership %
MCQ-00344
What is the normal balance for: Allowance for Uncollectible Accounts?
Credit Balance
MCQ-07225
During the year, ABC wrote off a customer’s AR. ABC used the Allowance Method for Uncollectible Accounts. What impact would the write-off have on Net Income and Total Assets?
NI = No Effect
Total Assets = No Effect
JE: Write-off AR under Allowance Method
DR Allowance for Doubtful Accounts $1,000
CR AR $1,000
MCQ-07225
Changes in debit balance accounts have what effect on Cash Flows?
The Opposite
MCQ-05397
Changes in credit balance accounts have what effect on Cash Flows?
The Same
MCQ-05397
