deck 2 Flashcards
three different methods for arriving at an price index:
- simplified
- double extension (extend back to base year)
- link-chain (cumulative index, compare with previous year)
a simplified index is:
the use of a generally available index of prices, typically a government index such as the Consumer Price Index for Urban Consumers (CPI)
the double extension method:
requires the client to count the inventory and then extend inventory prices twice (which is the reason the term “double” is used). Then the two results are compared to determine a price index:
current quantity x current unit cost = current cost
current quantity x base date unit cost = base cost
current cost / base cost = price index
the link-chain method is
similar to the double extension method, except that year-to-year price changes, rather than cumulative changes, are computed, then the annual changes are linked (multiplied together to determine a prince index. to determine the year to year changes, the calculation is:
current quantity x end of year unit cost = current cost
current quantity x start of year unit cost = prior year cost
current cost / prior year cost = annual cost index.
SEC Reporting Requirements
a. Unless exempt by regulation, companies with assets of more than $10 million and 500 or more shareholders and securities that trade on a national securities exchange or an over-the-counter market must have the securities registered.
b. There are multiple regulations that SEC registrants must follow. The more common regulations are as follows :
(1) Regulation S-X describes the form and content of financial statements filed with the SEC
(2) Regulation S-K describes the requirements for information and forms required by Regulation S-X.
(3) Regulation AB describes reporting requirements for asset-backed securities.
(4) Regulation Fair Disclosure (FD) mandates that publicly traded companies disclose material information to all investors simultaneously.
private nonprofit organization:
The standards apply to all nongovernmental nonprofit organizations, except those that operate for the direct economic benefit of members (such as mutual insurance companies). General FASB standards, unless specifically prohibited by those standards or do not apply because of their nature (capital stock, etc.) or unless modified by these standards, are presumed to apply.
when Bargain purchase option equals the fair value at the future date, do you add it to acquisition cost?
NO! Ignore that shit!
Neely Co. disclosed in the notes to its financial statements that a significant number of its unsecured trade account receivables are with companies that operate in the same industry. This disclosure is required to inform financial statement users of the existence of
the company has a concentration of credit risk in one industry. Credit risk is the risk of loss due to a particular borrower’s nonpayment of a loan.
When only a few assets (not a reporting unit) acquired in a business combination accounted for using the acquisition method are being tested for recoverability, all goodwill that arose from that transaction should
According to ASC Topic 360-35-26, if some but not all of the assets acquired in a business combination accounted for using the acquisition method are being tested for recoverability, the goodwill that arose from that transaction shall not be allocated to the assets unless the asset group includes a reporting unit.
Which of the following provides the holder the right to sell the underlying at an exercise or strike price, anytime during a specified period of time a gain accrues to the holder as the market price of the underlying falls below the strike price?
This meets the definition of an American put option*.
An American call option provides the holder the right to acquire an underlying at an exercise or strike price, anytime during the option term. The forward contract is an agreement between two parties to buy and sell a specific quantity of a commodity, foreign currency, or financial instrument at an agreed-upon price, with delivery and/or settlement at a designated future date. A swaption is an option on a swap that provides the holder with the right to enter into a swap at a specified future date at specified terms or to extend or terminate the life of an existing swap.
When stock is issued in combination with other securities (lump sum sales), :
When stock is issued in combination with other securities (lump sum sales), the proceeds can be allocated by the proportional method or by the incremental method. If the FV of each class of securities is determinable, the proceeds should be allocated to each class of securities based on their relative FV. In the instances where the FV of all classes of securities is not determinable, the incremental method should be used. The market value of the securities is used as a basis for those classes that are known, and the remainder of the lump sum is allocated to the class for which the market value is not known. In this problem, the FV of the stock is unknown. As such, the incremental method must be used as follows:
Lump sum receipt $110,000
FV of bonds 50,000
Balance allocated to common stock $ 60,000
As the par value of the common stock is $5,000 (1,000 shares × $5), $55,000 ($60,000 - $5,000) should be reported as additional paid-in capital on the issuance of the stock
An impairment loss for a long-lived asset, which is being used in the operations of a business, is measured by the excess of the asset’s carrying amount over its
This answer is correct. ASC Topic 360 explains that an impairment loss shall be measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. The fair value of an asset is determined by the guidelines set in ASC Topic 820. Fair value is determined by using the principal or most advantageous market and assumes the asset is used in its highest and best use.
IFRS requires inventory to be reported at:
the lower of cost or net realizable value (LCNRV).
stock dividends recognized in the income statement?
No dividend revenue is recognized when an investor receives a proportional stock dividend, because the investor continues to own the same proportion of the investee as before the stock dividend.
equity method dividends received?
does not reduce income recognized
