Exam 3- Review Flashcards
Investing activities
Include buying and selling personal property and equipment , making extraordinary repairs to personal property or equipment and making and collecting non trade loans (such as loans to affiliates) and purchases and proceeds of securities with cash except equity
Excludes buying and selling inventory nor does it include the creation and collection of trade receivables (operating activities)
Financing activities include
Financing activities include issuing and redeeming company stock, purchasing and selling treasury stock, and the payment of cash dividends on company stock
Financing does not include the creation and payment of trade payable or accrued liabilities (operating activities)
Operating activities include
Starts with net income, +depreciation expense + amortization of patent - gain on sale of equipment - negative deferred tax expense
Cash payments to suppliers
\+Gapp basis cogs \+Ending Inventory -Beginning Inventory -Ending Accounts Payable \+Beginning accounts payable
How to report cash payments for interest expense (direct method)
\+Gaap basis interest expense \+ amortization premium - discount amortization \+ beginning balance of interest payable - Ending balance of interest payable
Present value of single amount=
(Amount) / (1+i)^n
Executory Costs ?
Normal costs associated with the leased property including insurance on leased property and property taxes on leased property
Excludes depreciation and amortization
Lessors initial direct costs?
Brokers commissions, legal fees resulting from execution of lease, and lease document preparation costs incurred after execution of the lease
What are 5 test to make it a finance test
1. Transfer of ownership 2 purchase option 3. Lease term >75% 4. Present value >90% 5. Alternative use test
Record First rental payment?
Lessor
Cash xx
Lease receivable xx
Tax deferred “-“ sign means add to tax expense
Subtract if positive
How to calculate total present value test (Lessee)(residual guaranteed =10,000, 3.000 deficiency payment) for ten years
Guaranteed residual value to lessor less deficiency payment (10,000-3000)
7,000/(1.08)^10
+
Deficiency payment likely to be paid
+ fixed lease payments
= PV of lease !!
GRV=
GRV-DP
