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FAR Exam > F1 - Financial Reporting > Flashcards

F1 - Financial Reporting Flashcards

1
Q

F1 - M1

What’s the difference between a single-step income statement vs. a multi-step income statement?

A

Single Step: Rev + Gains (Operating and Non-Operating) / Expenses + Losses (Operating and Non-Operating)
Multi-Step: Operating Income + Operating Expense / Non Operating Income and Expenses (Including Gains and Losses)

Discontinued Ops are ALWAYS reported separately on both statements

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2
Q

F1 - M1

What are the 2 conditions for Discontinued Operations?

A
  1. Segment is Disposed
  2. Segment is held for Sale

Disposal = Strategic Shift for Business OR Major Effect on Ops

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3
Q

F1 - M1

What 3 items are included in Discontinued Operations?

A
  1. Result of Operations (typically a loss)
  2. Impairment Loss
  3. Gain/Loss from Disposal

EVERYTHING is Net of Tax!

Year 1: Result of Ops + Impairment Loss
Year 2: Result of Ops + Loss/Gain on Disposal

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4
Q

F1 - M1

What is the Equation for Impairment Loss?

A

Net Realizable Value [(Fair Value - Cost to Sale)] - Carrying Value

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5
Q

F1-M1

What is the Equation for Loss/Gain on Disposal?

A

Selling Price - Carrying Value

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6
Q

F1-M1

True or False: All discontinued operation calculations must be net of tax before subtracting from Income from continued operations

A

TRUE

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7
Q

F1-M1

Once management decides to dispose of an asset, depreciation is no longer accounted for

A

TRUE

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8
Q

F1-M1

Foreign Exchange: What is the Direct Method

A

The domestic price of one unit of another currency
Ex. One Euro (foreign) = $1.67 (domestic)

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9
Q

F1-M1

Foreign Exchange: What is the Indirect Method?

A

The foreign price of one unit of domestic currency
Ex. $1.00 (domestic) = 0.68 euro (foreign)

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10
Q

F1-M1

True or False: When a foreign exchange (FX) transaction is not settled by the balance sheet date, the transaction is recorded as an unrealized gain/loss

A

TRUE

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11
Q

F1-M1

True or False: Unrealized Gains and Losses are recorded in the Income Statement in the “other” section

A

TRUE

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12
Q

F1-M1

What are the 4 accounts usually included in ForEx Transactions?

A
  1. Purchases (or another asset account like inventory)
  2. Accounts Payable
  3. Foreign Exchange Transaction Gain/Loss
  4. Cash
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13
Q

F1-M1

What are the typical JEs used for ForEx Transactions?

A

At contract date - DR: Purchases, CR: A/P
At B/S date - DR: A/P, CR: ForEx gain/loss
At fulfillment - DR: A/P + ForEx gain/loss, CR: Cash

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14
Q

F1-M1

What is Net Realizable Value? (NRV=…)

A

NRV = Fair Value - Cost to Sell

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15
Q

F1-M1

What are the 4 components of Other Comprehensive Income?

A
  1. Pension Adjustments
  2. Unrealized Gains/Losses (Avail. for Sale Securities & Hedges)
  3. Foreign Currency Items
  4. Instrument Specific Credit Risk
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16
Q

F1-M1

What is Comprehensive Income?

A

“The change in equity…from non-owner sources”

Comprehensive income = Net income (NI) + Other Comprehensive Income (OCI)

17
Q

F1-M1

What is Accumulated Other Comprehensive Income (AOCI)?

A

The “accumulation” of all Other Comprehensive Income from previous periods (including current period)

18
Q

F1-M1

True or False: Other Comprehensive Income is not included in Comprehensive Income

A

False

Comprehensive income comprises of
1. Net Income
2. OCI

19
Q

F1-M3

What is Stockholder’s Equity?

A

“The owner’s claims to the net assets of a corporation”

20
Q

F1-M3

What is “Legal Capital”?

A

“The amount of capital that must be retained by the coproation for the protection of their creditors”

21
Q

F1-M3

What’s the difference b/w participating and non participating dividends?

A

Participating -> Share in excess dividends
Non Participating -> Do NOT share in excess dividends

22
Q

F1-M3

What is the formula for Common Stockholder’s Equity?

A

Total Shareholder’s Equity - Preferred Stock outstanding (greater of call price or par) - cumulative preferred dividends in arrears

23
Q

F1-M3

What is the formula for Retained Earnings?

A

Net Income/Loss - (Dividends declared) +/-(prior period adjustments) +/- (Accounting changes reported retrospectively)

24
Q

F1-M3

True or False: The “Par Method” for Treasury Stock is used 95% of the time

A

False

The “Cost” Method is used 95% of the time

25
Q

F1-M3

True or False: When Treasury Stock is repurchased using the “Par Method”, the stock is recorded at Par Value with Additional PIC as a plug in

A

True

26
Q

F1-M3

When using the “Cost Method” for buying back Treasury Stock, the value of T/S is recorded at par value

A

False - Treasury Stock is recorded at market price

27
Q

F1-M3

What is the purpose of “Appropriated Retained Earnings”

A

To disclose to the shareholders that some of the retained earnings are not available due to “restricted use”

28
Q

F1-M3

True or False: Appropriated retained earnings, can turn be restored to unappropriated retained earnings

A

True

29
Q

F1-M3

True or False: Dividends in arrears are only considered liabilities when declared

A

True

30
Q

F1-M4

What are the 3 accounts typically used for the Sale of Stock Subscriptions?

A

Subscriptions Receivable, Common Stock Subscribed and Additional PIC

31
Q

F1-M4

When is a liability (dividends payable) created in the books?

A

On the Date of Declaration

32
Q

F1-M4

True or False: Property (In-Kind) Dividends are restated at Fair Value on the date of declaration

A

TRUE

33
Q

F1-M4

What is a “Scrip Dividend”? What account is used to record the distribution on the date of declaration?

A

A special form of notes payable; Notes payable (NOT Dividends Payable) is credited

34
Q

F1-M4

What is considered a “small” stock dividend?

A

A dividend that makes up less than 20-25% of shares previously outstanding

35
Q

F1-M4

What is the journal entry for stock dividends greater than 20-25% at the date of declaration?

A

DR: Retained Earnings
CR: Common Stock Distributable

36
Q

F1-M4

True or False: Stock splits and reverse stock splits affect retained earnings or total shareholder’s equity

A

False - they do not affect retained earnings or total shareholder’s equity

FAR Exam (2 decks)

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