Deck 2

Question 1

What is the formula to calculate impairment loss

Answer 1

Book Value minus Fair Market Value of assets or liabilities

Question 2

What type of revenue is excluded or separately reported from “revenues”

Answer 2

revenues from discontinued ops but it is included in comprehensive income

Question 3

what is comprehensive income?

Answer 3

summary of all changes in equity from non-owner sources. Dividends and investments from owners are not included

Question 4

how is a change in accounting principal reflected? example, fifo to weighted average

Answer 4

as an adjustment to beginning retained earnings

Question 5

What is included in AOCI? (in the balance sheet not income statement)?

Question 6

what is included in the cost of cosigned inventory?

Answer 6

cost of inventory+any costs ready to get it ready for sale.

If 70% of inventory was sold, only 30% remains at the end of the year based on original cost.

Question 7

how is interest revenue calculated on a note payable?

Answer 7

Total payments(monthy payment * number of years)
less principal paid at the present value
=interest revenue

Question 8

where should the depreciation method used be reflected in the financials?

Answer 8

in the summary of significant accounting policies

Question 9

how is a finance lease recorded and calculated on the sellers/lessee books when leasing back? (sales type lease)

Answer 9

sale price-fair value=financing liability

Cash
A/D
    asset at cost  x
    financing liability  x
g/l

Question 10

how is a 70% owned sub’s cash dividend affect RE and NCI in consolidated financials?

Answer 10

no effect to RE
NCI decreases by 30% of the dividend
parent balance sheet will have 70% of sub’s earnings the dividend would be eliminated but the NCI would be reflective

Question 11

what are the two items for the bank cash balance?

Answer 11

add deposits in transit

subtract outstanding checks

Question 12

how are cash receipts calculated on a bond issuance?

Answer 12

Sales price=20010001.03=206,000
add accrued interest=face amount of 200,000*.09 stated rate * bond date to issue date 2/12=3,000
less bond issuance costs
=199,000

Cash 199,000
Bond issue costs + premium 40,000
Bond payable(face value) 200,000
Interest payable 3,000

Question 13

what is the amortization rule for intangible assets?

Answer 13

amortize over the lessor of the economic useful life or the legal life

Question 14

do not include dividends in determining what?

Answer 14

net income. Only include dividedn in retained earnings or investment account

Question 15

how is interest expense(net of tax) used in EPS?

Answer 15

added back from dillutive if the effects are dillutive, ignored for basic

Question 16

how does a lessee record depreciation expense on a finance lease?

Answer 16

PV of min lease payments/lease term=SL dep. expense

**record JE for amortization expense of a lease

Question 17

name the 4 criteria to record employee compensation expenses for future absences to be accrued

Answer 17

1) vested/accumulated
2) payment is probable
3) reasonably estimated
4) services already rendered

Question 18

how do treasury stock transactions affect total equity and book value?

Answer 18

decreases equity acquired at a price less than book value
book value per share is increased
ex: 1000/100= 10 vs 920/90= 10.22

Question 19

what is the journal entry to record declaration of a dividend?

Answer 19

Retained earnings

Dividends payable

Question 20

what is the journal entry to record shares issued?

Answer 20

Cash (price/share * number of shares issued)
Common stock (number of shares issued * par value)
APIC (Plug or number of shares issed* (diff between par and issue price)

Question 21

JE for a treasury stock purchase

Answer 21

Treasury stock (par value* number of shares purchased)
APIC( APIC price or diff between par and issue price * number of shares purchased)
Retained Earnings (PLUG)
Cash (purchase price* number of shares purchased)

Question 22

JE to record reissued shares held in treasury stock

Answer 22

Cash (purch price* number of shares reissued)
Treasury stock (par price* number of shares reissued)
APIC (plug)

Question 23

how should capitalized equipment be amortized in a lease?

Answer 23

use estimated useful life of asset

BUT if there no title transfer or bargain purchase, use life of lease

Question 24

how do gains and losses from treasury stock purchases and resales affect retained earnings and APIC?

Answer 24

gains increase APIC

losses decrease existing APIC to zero, therefore reducing RE

Question 25

how are assets recorded in a toubled debt extinguishment transfer?

Answer 25

the asset is adjusted to fair value resulting in a gain or loss
carry value-fair value

Question 26

how is par value adjusted for a stock split to keep equity the same?

Answer 26

value of stock must stay same so par value may be adjusted for splits. no change in equity

Question 27

calulate carry amount of a bond

Answer 27

face value=issue price
subtract unamortized discount or add premium
subtract bond issuance costs

Question 28

how is a bond liability caluculated at issue date?

Answer 28

bond at issue price which includes discount/premium less issuance costs

Question 29

what type of accrual and or disclosure is required for a reaonably possible contingent liability that includes a range?

Answer 29

only disclosure indicating the range and best estimate. DO NOT accrue unless reasonably PROBABLE

Question 30

what is the difference between an exchange transaction and a non exchange transaction for governmental budgetary?

Answer 30

exchange- each party gets similar item in exchange & bargained value
non-exchange- no bargain value, uneven exhange