Exam 3 Flashcards
What Increases and Decreases the Equity Investment account
Net Income increases
Dividends decreases
What is the most important thing to remember for calculating equity investment and income?
You must multiply by the ownership percentage if you don’t own 100% of the subsidiary
Does Amortization bring Equity Investment down?
Yes
Are Dividends included in Equity Income?
No
Equity Investment Purchase JE
Eq Inv
Cash
Equity Investment Net Income JE
Eq Inv
Eq Inc
Equity Investment Dividend JE
Cash
Eq Inv
Equity Investment Amortization/Goodiwill Impair JE
Eq Inc
Eq Inv
Equity Investment Sale JE
Cash
Gain/Loss
Eq Inv
For Basic Intercompany Transactions what do we defer?
Amount of GP left in Ending Inventory (it will be sold next year)
Basic E JE
Com Stock
APIC
Ret Earn
Eq Inv
Basic A JE
Undervalued Assets
Overvalued Liabs
Goodwill
Overvalued Assets
Undervalued Liabs
Eq Inv
What is the Eq Inv account equal to directly after acquiring subs common stock?
The Purchase Price
For total Asset and Liability purchases how do you do the JE?
You list out all of the assets and liabilities at fair value
100% Stock purchase with Cash JE
Eq Inv
Cash
100% Stock purchase with CS and APIC JE
Eq Inc
CS
APIC
Where are Intangible Assets in the Balance Sheets before consolidation?
Embedded into the Eq Inv acccount, thats why we have to take them out of there
What are CS, APIC, and RE on the consolidated statements?
They are just the Parents Equity since subs equity gets deleted from consolidated statements
Basic C JE
Eq Inc
Eq Inv (Plug)
Div
Basic D JE
Op Exp
Overval Assts/Underval Liabs
Underval Assts/Overval Liabs
(Includes AAP Amort/Dep too)
Cost Method ADJ JE
Eq Inv
Ret Earn
Cost Method C JE
Div Inc/Eq Inc
Div
ADJ JE Calculation Steps (to get to EOY consolidated RE) COST METHOD ONLY
Change in Beg of time RE and Curr EOY RE of sub
Subtract Cum AAP
Add EOY RE of Parent
On consolidated statements what will Eq Inv and Eq Inc always be?
0
Basic consolidation PPE formula (both Equity and Cost Method)
Parent PPE
+ Sub PPE
+ Excess PPE
- Total Dep PPE
Do we do the ADJ JE EOY RE calculation for Equity Method?
No
ISale
Sales
COGS
ISale amount
The actual sale amount
ICogs Deferral
COGS
Inv
ICogs Deferral amount
GP * % remaining in Inv
ICogs Undefferal
Eq Inv
COGS
ICogs Undefferal amount
The same as previous years GP * % remaining
IPay
AP
AR
IPay amount
The amount of the receivable/payable earned or owed
IGain Land Purchase
Gain Sale
Land
IGain Land Purchase amount
Just the gain on the sale
IGain Land No Sale
Eq Inv
Land
IGain Land No Sale amount
Still the gain on the original sale
IGain Land Sale
Eq Inv’
Gain Sale
IGain Land Sale amount
Still the gain on the original sale
IGain Equip Purch
Gain Sale
Equip
AD
IGain Equip Purch amounts
Gain is gain on sale
Equip is difference between Gain and AD
AD is AD deleted from sale
IDep Equip Purch
AD
Dep Exp
IDep Equip Purch amount
Change between old yearly dep exp and new yearly dep exp
IGain Equip No Sale
Gain Sale
Equip
AD
IGain Equip No Sale amounts
Gain goes down by IDep amount
Equip stays same as last time
AD goes down by IDep amount
IDep Equip No Sale
AD
Dep Exp
IDep Equip No Sale amount
Same as previous years
IGain Equip Sale
Eq Inv
Gain Sale
IGain Equip Sale amount
Change between what old CV would have been and New CV at time of sale
General Equip Purch JE
Cash
AD
Gain
Equip
How do we figure out basic Net Equipment/PPE?
Its literally just the same amount as if the IC sale had never happened (what the original amount would be)
For Downstream transactions do we put profit/gain through NCI?
No
How does ICogs Undeferral change under NCI?
Eq Inv
NCI
COGS
How does IGain Land No Sale change under NCI
Eq Inv
NCI
Land
How does IGain Land Sale change under NCI
Eq Inv
NCI
Gain
How does IGain Equip Sale change under NCI
Eq Inv
NCI
Gain
What is a control premium
When the actual divide between controlling and noncontrolling interest is not exactly the % stated
NCI (bal sheet) equation
% of Sub BVNA EOY
+ % of AAP that hasnt been amortized yet EOY
- % Def GP (upstream transactions)
NCI C JE
Eq Inc
Cons NI to NCI
NCI
Div
Eq Inv
NCI E JE
CS
APIC
Ret Earn
Eq Inv
NCI
NCI A JE
Underval Asst/Overval Liab
Goodwill
Overval Asst/Underval Liab
Eq Inv
NCI
NCI D JE
Same as normal one
Does AAP Amort/Dep go into Consolidated Expenses
Yes
Cons Inc to NCI Equation
% of Sub NI
- % of Upstream IC Gain
+ IDep amount (if applicable)
Does Consolidated Revenues deal with NCI?
No
Do we always add IDep amount to both CI and NCI when applicable
Yes
Gain Loss on retirement equation
Parent CV
- Sub Purch Price
Consolidate NI equation for BOY Retirement of bonds
Parent NI
+ Sub NI
+ Int Exp
- Int Inc
+/- Gain/Loss on retirement
For BOY Retirement of bonds what will be reflected on income statement
Int Inc No
Int Exp No
Gain/Loss Yes
Consolidtae NI equation for PY Retirement of bonds
Parent NI
Sub NI
- Int Inc
+ Int Exp
For PY Retirment of bonds what will be reflected on income statement
Int Inc No
Int Exp No
Gain/Loss No
What do we do if bond retirement happens mid year
Int Inc and Int Exp get halved
Consolidated NI equation for EOY Retirement of bonds
Parent NI
+ Sub NI
+/- Gain/Loss
For EOY Retirement of bonds what will be reflected on income statement
Int Inc No
Int Exp Yes
Gain/Loss Yes
What changes for retirement of bonds for NCI
The only thing that changes is that we only take the % of Sub NI everything else stays the same
Foreign Currency AR JEs
AR
Sales
AR
FCTGain (switch sides if loss)
Cash
FCTG/L
AR
Foreign Currency AP JEs
Inv
AP
FCTL
AP (switch sides if gain)
AP
FCTG/L
Cash
Forward Contract JEs
Forw Cont
Sales/Inv
Forw Cont
Sales/Inv
Cash
Forw Cont (opposite if Forw Cont is negative)
What changes for Foreign Currency AR AP JEs when there are forward contracts
Last JE is
Cash
AR (opposite for AP)
What changes with a Firm Commitment?
It just offsets the Forward Contract until the end when you receive cash for the initial transaction and reclassify firm commit
Firm Commitment reclassify JE
Firm Comm
Sales/Inv (opposite depends on Forw Cont)
Firm Commitment OG Transaction JE
Cash
Sales (opposite for AP)
Cash Flow Hedge 2 main JEs
Forw Cont
OCI FCTG (opposite if loss)
Forw Cont
Sales/Inv
Cash Flow Hedge Reclassify OCI
AOCI
Sales/Inv (opposite if loss)
For the FV of contracts how do you find the correct rate to multiply by for AR and AP
AR is Beg-End
AP is End-Beg
Local Currency
Currency in which sub records transactions and prepares financial statements
Functional Currency
Primary currency that sub does business in
Reporting Currency
Currency in which subs financial statements will be reported
Remeasurement Monetary Assets and Liabilities measurement
Current/EOY
Remeasurement Nonmonetary Assets and Liabilities measurement
Historical/BOY
Remeasurment Rev and Exp Nonmonetary Net Assets measurement
Historical/BOY
Remeasurement Rev and Exp Monetary Net Assets measurement
Average
Reameasurement Equity measurement
Specific rates for CS and APIC
Translation Assets and Liabilities measurement
Current/EOY
Translation Inc Stmnt measurement
Average
Translation Equity measurment
Historical
Which way do we complete remeasurement?
Bottom to top
Which way do we complete Translation
Top to bottom
What do we plug into the Balance Sheet in Remeasurement?
Retained Earnings
What is the rate used for Purchases
Average Rate
What is always given in remeasurement and translation problems
BOY Retained Earnings
What do we plug into the Retained Earnings Statement in Remeasurement
Net Income
What do we plug into the Income Statement in Remeasurement
Remeasurement Gain/Loss
What is the only plug we have in Translation (located in Balance Sheet)
Cumulative Translation Adjustment
