F1 - Financial Reportinng Flashcards
1
Q
F1M1
A
Balance Sheet, Income Stmt, and Comprehensive Income
2
Q
What is the Gross Concept?
A
The total amount of something before any deductions are made
3
Q
What is the Net Concept?
A
The amount of something after all costs and expenses are subtracted
4
Q
Gains are reported at what amt?
A
their net amount
5
Q
Purchase Costs are included where?
A
Not on the income stmt but reduce COGS
6
Q
The recovery of accounts written off is reported on…
A
balance sheet only
7
Q
What is the Direct Method?
A
the domestric price of one unit of another currency
8
Q
What is the Indirect Method?
A
the foreign price of one unit of the domestic currency
9
Q
For something to Appreciate means…
A
means 1 unit is more valuable
10
Q
For something to Deppreciate means…
A
means 1 unit is less valuable
11
Q
Foreign Currency Transactions go on the
A
Income Stmt
12
Q
Foreign Currency Translations go on the
A
OCI
13
Q
The individual components of other comprehensive income may be reported how with tax?
A
either on a before tax basis with an aggregate tax amount reported after these items or individually on a net of tax basis.
14
Q
Available for-sale securities are recorded on what statemetn
A
OCI
15
Q
Trading securities are recorded on what statement
A
Income Stmt
16
Q
Held to Maturity Securities have an impact on OCI. T or F?
A
no because they are recorded at amortized cost , since there is not g/l doesn’t effect oci
17
Q
Comprehensive income includes all changes in equity except
A
for those resulting from owner investments and distribution
18
Q
What is considered a Full Set of financial stmts?
A
- Stmt of Financial Position
- Stmt of Earnings
- Stmt of Comprehrensive Income.
- Stmt of Cashflows
- Stmt of Owner’s Equity
19
Q
Balance Sheet Assets side include:
A
Current Assets, Investments, PPE, Intangible Assets, Other, Total Assets
20
Q
Current Assets include
A
cash and cash equiv, trading securities at fv, A/R net of allowance, N/R, Inv, Prepaid Expenses
21
Q
Type of Invesments in the Balance Sheet Include
A
AFS securities at fv, HTM securities, Investments in affiliates
22
Q
PPE assets under the balance sheet include:
A
Land, Property and Equipment Less: Acc Depreciation
23
Q
Intangible assets under the balance sheet include
A
Goodwill, Patents net of amortization
24
Q
Other assets under the balance sheet include
A
Pension and other Postretirement benefit assets and Deferred income tax asset
25
Liabilities and SE side of Balance include
Current Liabilities, Long-Term Liabilities, Total Liabilities, SE, Total SE , Total L and SE
26
Current Liabilities items include
Current portion of LT debt, A/P, N/P, Interest Pay, Sal Pay, Unearned Rev
27
Long-term Liabilities items include
Bonds Payable, Deferred Income Tax Liabiltiy, Pension and other post retirement liabilities,
28
Stockholder Equity items include
Capital Stock, Common Stock, PIC in excess of par, RE, Acc OCI, Treasury stock
29
How do you set up a Single Step Income Statement?
TITLE
Revenues and Other Items
TOTAL REV AND OTHER
Expenses and Other Items
TOTAL EXP AND OTHER
Income from Continuing
Discontinued Operations (net of tax)
NET INCOME
30
How do you set up a MultiStep Income Statement?
Net Sales, less discounts/returns
-COGS
= Gross Profit
Operating Income/Loss
NonOperating Income
Income before income tax
Income tax expense
= Income from Continuing Operations
Discontinued Operations (net of tax)
=NI
31
What is considered non-operating and operating items?
Operating:
Depreciation expense
Selling, Gen, Admin expense
Wages expense
Rent Expense
=Operating Income/Loss
NonOperating: Unusual and Infrequent
Other Revenues/Gains (auxiliary act)
- Interest Revenue
-Gain on Sale of Available for Sale Securities
Other Expenses/Losses
-Interest Exp
- Loss on Sale of Fixed Assets
- Restructuring Expense
32
What is considered Selling Expense item vs Gen Admin expense?
Selling Expenses include:
Wages, commissions, and advertising, freight out
General Admin expenses include:
Officer salaries, legal fees, accounting fees
33
Freight out is considered what on the income stmt?
It is expensed as a selling expense
34
Freight in is considered what on the income stmt?
Freight - in is capitalized to inventory and included in COGS
35
Is interest operating or nooperating?
Interest will always be included in noncontinuing operations
36
When is something considered a discontinued activity?
if it has been disposed of or classified as held for sale
37
Discontinued Operations can consist of..
Impairment loss, income from actual operations, or g/l on disposal
38
A disposal of component is reported in discontinued operations if the disposal…
represents a strategic shift that will have a major effect on an entity's operations and financial results
39
Strategic Shift disposals include
major geographical area, major equity method investment, major line of business
40
Something is considered "Held for sale" if:
"1. Management commits to a plan to sell the component
2. The component is avaible for immediate sale in its present condition
3. An active program to located a buyer has been initiatied
4. The sale of the component is probable and the sale is expected to be completed within one year
5. the sale of the componenet is being acitvitly marketed
6. It is unlikely that signigicant change to the plan to sell will be made or that the plan will be withdrawn"
41
What has a debit normal side, and what does that mean?
"DEAL
Expenses, Assets, and Loss all increase with debits and decreases with credits."
42
What has a credit normal side, and what does that mean?
"GIRLS
Gains, Income , Revenues, Liabilities, SE all increase with credits and decreases with debits."
43
What is the JE for Foreign Currency Transaction when you purchase something in for X amt of foreign currency
A/P (# pesos * X exchange rate - EOY exchange rate) XX
Foreign exchange transaction gain XX
44
What is the JE for Foreign Currency Transaction when you purchase something in for X amt of foreign currency and the domestic rate of foreign currency went down at EOY?
A/P (# pesos * X exchange rate - EOY exchange rate) XX
Foreign exchange transaction gain XX
45
What is the JE for Foreign Currency Transaction when you purchase something in for X amt of foreign currency and the domestic rate of foreign currency went up at time of payment?
A/P (# pesos * X exchange rate - EOY exchange rate) XX
Foreign exchange transaction loss XX
Cash (# pesos * X exchange rate) XX
46
Components of OCI may be reported either with what tax effects
Net Income (REGL)
+ OCI (PUDFI)
= Comprehensive Income
47
What are OCI Items?
Pension Adjustments
Unrealized G/L (available for sale debt securities and hedges)
Derivative Hedges (certain types)
Foreign Currency Items
Instrument-Specific Credit Risk
48
Statement of Comprehensive Income can be reported 2 ways:
single stmt approach (below net income on the inc. stmt ) or 2 stmt approach- separately from inc stmt)
49
At the end of the accounting period, the balances of OCI accounts are transferred to what account
AOCI reported under SE in the Balance Sheet and Stmt of Owner's Equity
50
Where is NI closed to ?
Retained Earnings
51
F1M2
EPS and Public Company Reporting Topics
52
Form 10-K is what and what are the deadlines
"is an annual report that must be filed by US registered companies, info about business and risk factors
60 days after YE for large ACC. filers
75 days after YE for ACC. filers
90 days for all other"
53
Components of OCI may be reported either with what tax effects
net of tax or before related tax effects with one amt shown for the aggregate income tax expense
54
Form 10-Q is what and what are the deadlines
First 3 Quarterly results of operations and finanical condiition of a registrant
40 days for large acc and acc filers
45 for all others
55
Large Accelerated Filers
700 M in market value
56
Accelerated Filers
<700 M in market value
57
All other Registrants
100M or Less
58
Form 8-K is reported by and reports what
is a form required to be filed by all companies registeres with SEC. It reports major corporate events, such as :
-corporate asset acquisitions and disposals
- accountant changes
- financial statement changes
- management changes and
- changes in securities
59
Management's Discussion and Analysis of Financial Condition and Results of Operations of 10-K
MDA provides perspectiv on business results
60
Basic EPS Formula
Income available to common shareholders(NI-Pref Div)/weighted average # of common shares outstanding
61
WACSO
1. shares outstanding in the beginning of the period
2. Add: shares sold during the period (on a time-weighted basis)
3. Less: shares required during the period (TS)
Adjust these additions/subtractions for the portion of period they cover. For example, if the company issued shares halfway through the year, only half of those shares are considered for that year’s calculation. If they were issued with 4 months left to the year then the # would be multiplied by 1/3 and so on.
4. Add: stock dividends and splits retroactively adjusted
5. Less: reverse stock splits
= weighted average number of common shares
62
Weighted shares for each period equation
1 = Shares outstanding * (Months occured until next period)
2= (1+ new set of shares) * (Months occured until next period)
1+2= weighted average
63
Stock Splits and Stock Dividends must be treated as though
they occured in the beginnning of the period
64
A stock dividend does what?
increases the # of shares outstanding by a certain percentage
65
How to calc Total WACSO when there is a stock dividend?
1. Adjust all shares for the 10% stock dividend:
January 1 shares: 100,000 X 1.10 = 110,000
July 1 shares: 120,000 X 1.10=132,000
2. Apply the weighted average formula:
January 1 to June 30 (6 months): 110,000 X 6/12 =55,000
July 1 to December 31 (6 months): 132,000 X 6/12 =66,000
3. Total Weighted Average Shares: 55,000+66,000=121,000 shares
66
A stock split does what?
increases the number of shares in a fixed ratio (ex. 2-1 split doubles the shares)
67
How to calc Total WACSO when there is a stock split?
1. Adjust all shares for the 2-for-1 split:
January 1 shares: 100,000 X 2 = 200K
July 1 shares: 120,000 X 2=240K
2. Apply the weighted average formula:
January 1 to June 30 (6 months): 200,000 X 6/12 =100,000
July 1 to December 31 (6 months): 240,000 X 6/12 =120,000
3. Total Weighted Average Shares: 100,000+120,000=220,000 shares
68
A reverse stock split does what?
reduces the number of shares in a fixed ratio (e.g., a 1-for-2 split halves the shares)
69
How to calc Total WACSO when there is a reverse stock split?
1. Adjust all shares for the 1-for-2 split:
January 1 shares: 100,000 X .5 = 50K
July 1 shares: 120,000 X .5 =60K
2. Apply the weighted average formula:
January 1 to June 30 (6 months): 50,000 X 6/12 =25,000
July 1 to December 31 (6 months): 60,000 X 6/12 =30,000
3. Total Weighted Average Shares: 25,000+30,000=55,000 shares
70
What is cumulative # of pref shares equation? and what is cum PS
cum # of PS * par value per share * rate
any part of pref div not paid in any year accumulates and must be paid in the future before dividends can be paid to common shareholders. the acc amt is referred to as dividends in arrears. must be disclosed on the bal sheet or in foot notes
71
What is noncumulative # of PS?
the declared, they do not accumulate and PS shareholders lose the right to receive the dividends
72
What is Diluted EPS?
is a calculation that shows a company's earnings per share if all convertible securities were converted to common stock.
73
Dilutive Securities are what and include…
These are financial instruments like stock options, warrants, convertible preferred shares, and convertible bonds, which can potentially be converted into common stock.
It increases the # of shares in the denominator which produce an EPS number below basic EPS
includes convertible securities
warrants and other options
contracts that may be settled in cash or stock and contingent shares
options/warranted the average market value > exercise price"
74
What are antidilutive securities?
Would increase EPS if included, meaning they don't actually dilute the EPS. If a security is antidilutive, it's excluded from diluted EPS calculation
75
Adjustment for convertible PS in Dil EPS
Add # of CS shares that would be obtained by converting the PS and exclude preferred dividends.
Uses the If-converted Method
76
Adjustment for convertible bonds in Dil EPS
Calculate how many shares the bonds would convert into
Add shares and adjust for after-tax interest expense.
Uses the If-converted Method
77
Adjustment for stock options and warrants in Dil EPS
Use the TS method
Include only if exercise price < average market price
Where you assume that the company uses proceeds from exercise of options/warrants to buy back common shares at the average market price. The net increase in shares ( shares - shares bought back) is added to the WACSO
78
Diluted EPS calculation
"(Income available to the common stock shareholder + Interest on dilutive securities)
/ weighted average # of common shares + dilutive shares form convertible securities
Subtract PD if any from NI since they are not available to common shareholders
Add the dilutive shares from convertible securities to the weighted average # of shares outstanding"
79
Treasury Stock Method is used...
For stock options and warrants and only aapplies if the exercise price is less than the avg market price.
Assumes that the proceeds from the exercise of stock options or warrants are used to repurchase common shares at the average market price
80
Additional shares outstanding equation
= # of shares (of options/warrants) -
((# of shares * exercise price)/average market price))
81
If - Converted Method is used...
for convertible bonds and PS
Assumes that convertible securities are converted into common stock at the beginning of the period
82
If - Converted Method For convertible bonds equation
1. Take the # of convertible bonds and divide by the face/par value= to get # of bonds
2. Multiply by # of shares per bond = # of shares
Add # of shares issued upon conversion to denominator
3. Calc interest expense = Take the # of convertible bonds and * by % in bonds = $
Take out tax.
Add back the after-tax interest expense
83
If - Converted Method For convertible PS equation
1. Take # of convertible PS * conversion of CS rate = additional shares
Add # of shares issued upon conversion to denominator
Take # of convertible PS * par value * % div rate = $ that is added to NI in num of DEPS
2. Exclude preferred dividends from the numerator (because dividends would not have been paid if the preferred stock were converted).
84
Anti Dilution Test
if the exercise price is higher than the average market price, then it is antidilutive
or if additional EPS from conversion is greater than the basic EPS
85
Order of Inclusion for Multiple Securities:
When there are multiple dilutive securities, include them in order of their dilutive effect (starting with the most dilutive first).
86
Each individual bond has face value of ?
What if it had a par value?
1000
if there is a par value, you would divide it by that instaead
87
F1M3
Stockholder's Equity
88
What is stockholder's equity?
the owner's claim to net assets
89
What items are on the stmt of owner's equity?
Capital Stock
CS
PS
APIC
Retained Earnings
Acc Depr.
- Cost of shares in Treasury
Total Capitla Corp Shareholder's equity
Noncontrolling interest
Total Equity
90
Capital Stock is
legal capital. Its the amt of capital that must be retained by the corporation for the protection of creditors.
cannot be used to pay for dividends
91
Common Stock is
the basic ownership interest in a corporation. Common shareholders bear the ultimate risk and receive ultimate benefits but not guranteed dividends or assets upon dissolution. They can control management and have right to vote.
92
Preferred Stock is
an equity security with preference and features not associated with common stock
does not have voting rights but may have preference to dividends.
93
Book Value per common share equation
common shareholder's equity/
common shares outstanding
94
Common Stockholders' Equity Formula
Total Shareholder's Equity
- Preferred Stock Outstanding ( at greater of call price or par value)
- Cumulative preferred dividends in arrears
= Common shareholders' equity
95
To Determine the dividend to be paid on the preferred and common stock:
Take Dividends declared and paid
- (PF in arrearrs multiply by par and % ) Y1
- (PF in arrearrs) Y2
= leftover
- (CS multiply by par and %)
Remaining proration btw PS and CS
CS*par/CS+PS * proration
PS*par/CS+PS * proration
PS is CS*par/CS+PS * proration + Y1+Y2
CS is PS*par/CS+PS * proration + Y1 CS
= total cash div distrib
96
What is APIC? and the equation
generally contributed caputal in excess of par or state value.
ex includes sale of treasury stock at a gain
liquidating dividends
conversion of bonds
small stock dividends
of shares issed * (contributed cap - par value)
97
What is RE and what is the equation?
is the acc earnings during the life of a corporation that have not been paid out as div.
Retained Earnings =
Net Income/Loss
- Dividends declared
+/- Prior Period Adjustments
+/- Accounting changes reported retrospectively
= RE
98
What is the purpose of appropriated retained earnings?
The purpose is to disclose to shareholders that some of RE is not readily available to pay dividends because they have been restricted for plant construction
99
When the purpose of appropriated RE has been achieved, it should be ...
what is the JE for this?
restored to unappropriated RE
RE unappropriated. XXX
RE appropriated
100
Two methods of accounting for Treasury Stock
1. Cost Method
2. Legal (or/stated) method
101
What is the Cost Method with Treasury stock?
When TS is recorded and carried at their reaquisition cost.
102
What is the Legal/ Par Method with Treasury stock?
When TS is recorded by reducing the amounts of par value and APIC received at the time of the original sale
103
What is the journal entry to record the original stock of issuance of common stock?
Debit: Cash
Credit: Common Stock
Credit: APIC - CS
104
What is the journal entry to record repurchase of stock above issue price? Cost Method and Par Value Method
Cost Method:
Debit: Treasury Stock
Credit: Cash
Par Value Method: immediately calc the loss
Debit: Treasury Stock (shares * par)
Debit: APIC - CS (leftover/reverse the surplus)
Debit: RE * only if there is not balance in APIC TS (org price - buy back price*shares = the loss)
Credit: Cash (shares * buy back price)
105
What is the journal entry to record repurchase of stock below issue price? Cost Method and Par Value Method
Cost Method:
Debit: Treasury Stock
Credit: Cash
Par Value Method: immediately calc the gain
Debit: Treasury Stock (shares * par)
Debit: APIC - CS (leftover/reverse the surplus (org price-par))
Credit: Cash (shares * buy back price)
Credit: APIC TS (org - buy back price * shares)
106
Losses only decrease RE with tresury stock if
if there is no APIC - TS balance that can absorb the loss
107
What is the journal entry to record Reissue of stock above cost? Cost Method and Par Value Method
Cost Method:
DR: Cash (reissue price* shares)
CR: Treasury Stock (repurchase price* shares)
CR: APIC - TS (leftover)
Par Value Method:
DR: Cash (reissue price* shares)
CR: Treasury Stock (par* shares)
CR: APIC - CS (leftover)
108
What is the journal entry to record Reissue of stock below cost? Cost Method and Par Value Method
Cost Method:
DR: Cash (reissue price* shares)
DR: APIC - TS (amount in credit)
DR: RE (leftover)
CR: Treasury Stock (repurchase price* shares)
Par Value Method:
DR: Cash (reissue price* shares)
CR: Treasury Stock (par* shares)
CR: APIC - CS (leftover)
109
What happens to G/L on Treasury stock?
They are never recorded on the income statement. Any G/L is recorded to APIC - TS
110
What is different under cost method vs par method?
The timing of G/L recognized on transactions will be different under each method
111
True or False? Net income/ RE will never be increased through TS transactions.
t
112
What is a retirement of treasury stock?
the shares are permanently removed from circulation, reducing the company's issued stock.
113
Cost Method (retirement of TS)
Step 1: Reduce treasury stock by the reacquisition cost.
Step 2: Reduce common stock by the par value of the shares retired.
Step 3: Reduce APIC – CS by the excess of the original issue price over par.
Step 4: If there’s a difference between the reacquisition cost and the total reduction of common stock + APIC – CS, adjust APIC – Treasury Stock or Retained Earnings.
CS. (# of shares * par value)
APIC. (excess of org $ * shares)
RE. leftover
TS (reacq $ * # of shares retired
114
Par (Method (retirement of TS)
Step 1: Reduce common stock by the par value of the shares retired.
Step 2: Reduce APIC – CS by the excess of the original issue price over par.
Step 3: If the reacquisition cost is greater than the original issue price, charge the difference to APIC – Treasury Stock or Retained Earnings
CS (# share retired * par value
TS (# of shares retired
115
JE for receipt of donated stock
Donated Stock
APIC - Donated Stock
116
JE for sale of donated stock
Cash (shares * sold for
APIC - Donated Stock difference(debit if loss, credit if gain)
Donated Stock ((shares * orig)
117
F1M4
Stockholders' Equity Part 2
118
If par value exists, stock may be issued...
above par
at par
or below par
119
If stock is issue above par what happens to assets, equity and APIC
cash will be debited for the proceeds , assets go up
common or preferred capital stock will be credited for par or stated value, equity goes up
additional PIC will be credited for the excess over par
120
If stock is issue at par what happens to assets, equity and APIC
cash will be debited for the proceeds , assets go up
common or preferred capital stock will be credited for par or stated value, equity goes up
no change to APIC
121
If stock is issue below par what happens to assets, equity and APIC
additional PIC will be debited for the to reflect discount so equity goes down.
122
Stock subscriptions often are sold before the stock is
What is it?
actually issued
A stock subscription is an agreement in which an investor commits to purchasing a specified number of shares at a future date, usually by paying in installments.
The subscribed shares are not considered issued until the subscription is fully paid.
123
JE When a stock subscription is received:
DR: Subscription Receivable (total subscription price)
CR: Common Stock Subscribed (shares subscribed at par)
CR: APIC – CS (excess over par, if any)
124
JE when a stock subscription payment is received:
DR: Cash
CR: Subscription Receivable
125
JE Cancel the Subscription and Refund Payments
Reverse all related entries, and refund any payments made.
DR: Common Stock Subscribed (par value)
DR: APIC -CS (excess over par)
CR: Subscription Receivable (remaining balance)
CR: Cash (refund amount)
126
JE Cancel the Subscription and Forfeit Payments
If the company decides to keep the payments received (typically recorded as APIC – Forfeited Subscriptions):
DR: Common Stock Subscribed (par value)
DR: APIC – CS (excess over par)
CR: Subscription Receivable (remaining balance)
CR: APIC – Forfeited Subscriptions (amount forfeited
127
What is a Quasi-Reorganization?
What are the steps for quasi -reorg?
A quasi-reorganization allows a company to eliminate a deficit in retained earnings by revaluing assets and liabilities. This provides a fresh start without undergoing formal bankruptcy.
1. Write down overvalued assets to fair value.
2. Eliminate the retained earnings deficit by reducing APIC or common stock.
3. Memorandum entry is made to reflect the reorganization.
128
What is Liquidating Dividend?
A liquidating dividend occurs when a company distributes more than its retained earnings, using paid-in capital to fund the distribution.
The portion of the dividend that exceeds retained earnings reduces APIC.
129
What is a declaration of dividends, and what happens on the date?
The Date of Declaration is the date the board of directors formally approves the dividend. A liability is created, and RE is reduced
130
Liquidating Dividend Equation
Total Cash Dividend Declared
Less RE
131
What happens to the FMV of stock dividend at the declaration date?
Transfers from RE to Capital Stock and PIC. There is no effect of total SE because all transfer take place within SE.
132
A 10 percent stock dividend qualifies as a small stock dividend because
the issuance is not expected to affect the market price of the stock.
133
Freight in is apart of
Cost of Goods Sold
134
Freight out is apart of
Selling Exp
135
Sales Represenative salaries is apart of
Sellinng Exp
