F-7 Simulations Flashcards
Property Dividend Journal Entry
Dr. Retained earnings
Cr. Inventory/Property
Recorded at FV so if above BV, the gain increases income is less then loss decreases income
Declaring dividends
Small
Dr. Retained earnings-market value
Cr. Common stock
Cr. Apic
Large
Dr. Retained earnings-PAR
Cr. Common stock
Property Dividend accounting
PP&E should be restated to FV and gain or loss should be in income statement
Dr. Retained earnings -FV
Dr. Loss
Cr. PP&E or inventory - CV
Cr. Gain
Property Dividend accounting
PP&E should be restated to FV and gain or loss should be in income statement
Dr. Retained earnings -FV
Dr. Loss
Cr. PP&E or inventory - CV
Cr. Gain
Grant Date Journal entry for stock compensation
No entry
Compensation expense journal entry
Dr. Compensation Expense
Cr. APIC-Stock Options
Take FV of stock options and divide by number of years
Journal entry to exercise stock options
Dr. Cash - Strike price
Dr. APIC-Stock options - what’s recorded in compensation expense
Cr. Common Stock - Par
Cr. APIC - Common Stock - Plug
Journal entries for stock compensation not exercised
Dr. APIC - stock options
Cr. APIC - expired stock options
Cash Flow direct method note about expenses
A negative balance for a decrease in an expense means the expense was paid so you have a decrease in cash
Direct method notes about how to calculate numbers
- Revenues uses A/R & Unearned Revenue
2. CCGS uses inventory and A/P
What to look for in liabilities section for financing activities cash flow
- Short term borrowings
2. Current portion of long term debt: net against long term debt
Retained earnings & financing cash flows
Beginning retained earnings + Net Income - Dividends = Ending retained earnings
Statement of cash flows supplemental disclosures
Cash paid for income taxes & interest paid go into supplemental disclosures and don’t need to be a negative number because they’re disclosures
EPS and discounted operations
Must be shown on the face or in the notes
Treasury stock method for Diluted EPS
- Multiply the number of options by the exercise price and divide by the market price then add to the denominator
If converted method for Diluted EPS - convertible bonds
Numerator - multiply face amount by “1 - tax rate” then multiply by interest rate
Denominator - Divide face amount by value of each bond to get the number of bonds them multiply by conversion rate
If converted method for Diluted EPS - convertible preferred stock
Numerator - add back deferred dividends
Denominator - Add conversion ratio
What does the Statement of Accumulated Plan Benefits show?
- effect of changes in actuarial assumptions
- effect of plan amendments
- amount of benefits paid to beneficiaries
Statements required for pension plans
- Statement of Net Assets Available for Benefits
2. Statement of Changes in Net Assets Available for Benefits
Statement of Net Assets Available for Benefits example
Assets
- Investments at FV
- Receivables
1. Employer contributions
2. Employee contributions
3. Interest, dividends, other
Liabilities
- Admin expenses & other payables
Statement of Changes in Net Assets Available for Benefits ADDITIONS example
Additions
- Investment Income
1. Realized & unrealized appreciation in FV of investments
2. Interest & Dividends - Contribution
1. employer
2. participants
3. rollover - Interest income on notes receivable from participants
Statement of Changes in Net Assets Available for Benefits DEDUCTIONS example
Deductions
- Benefits paid directly to participants
- Admin expenses
Defined Benefit Plan
- Employer defines amount of monthly benefit the employee will receive
- Employer bears risk of making sure there are enough assets for retired benefit obligations
Defined Contribution Plan
- Employer contributes set amount each month
- The amount is invested and when the employee retires he may draw money from the balance
- Employee bears risk because employer sets the contribution amount and not the max benefit amount
Statement of Accumulated Plan benefits
Future benefit payments attributable to the employee’s service rendered to the benefit information date
- retired or terminated employees and their beneficiaries
- beneficiaries of deceases employees
- present employees or their beneficiaries
Statement of Changes in Accumulated Plan Benefits
Shows increases & decreases in
- plan amendments - add if favorable if not subtract
- change in actuarial assumption - add if favorable if not subtract
- benefits accumulated
- [benefits paid]
How to calculate book value per share for common stock
- Add up everything in stockholder’s equity
- Subtract everything that doesn’t have to do with common stock including dividends in arrears and other shit with preferred stock, except for retained earnings
Cash flow direct method - Cash received from customers
Revenues (Increases in receivables) Decrease in receivables Increase in unearned revenue (Decrease in unearned revenue)
Things that directly increase cash
Interest received
Dividends received
Receipts from lawsuits
Sale of trade securities
Cash paid from other expenses
(Decrease in prepaid expenses)
Increase in prepaid expenses
Decrease in accrued liabilities
(increase in accrued liabilities)
