F2 Flashcards
Tell me the effect of subsequent event about replacement cost of unbuild property
Subsequent event relating to building is that replacement cost will be ignored because it is unfinished and hard to estimate
Measurement of PPE or held as an investment property, Goodwill, financial instrument like cash and cash equivalent
Historical cost/fair value
Where to report fair value hedge?
Income statement
Where to report cash flow hedge?
Other comprehensive income
How do you compute the fair value of a principal market and most advantageous market?
Principal = most unit sa sarili nya di sa iba
Advantageous = price
Tell me what to do if there’s a change in method of depreciation
A change in depreciation is handle prospectively no cumulative effect
What is the formula of return on equity
Net income - preferred dividends divided by average total equity
What is the formula for working capital turnover
Sales / average working capital (which is computed as current asset - current liabilities
Formula for return on asset
Net income / average asset
Do you remove the tax when computing other comprehensive income
Yes you should report other comprehensive income net of tax
How to compute book value per share
1 compute all preferred stock value amount + common stock value amount + Additional paid in capital value amount + Retained earnings - dividends in arrears - liquidating dividends or value
2 answer to # 1 divide that to common shares outstanding
What is the effect if the declared property dividend’s value is less than the amount declared.
The value of the property dividend will be deducted to the Retained earnings. Any gain should be added back to the retained earnings
Distribution of dividends declare
- Kailangan tignan mo kung cummulative or noncummulative and preferred stock. Kapag cumulative meron sya share kahit walang declaration ng dividend. Kapag naman noncumulative may share sya kahit di bayad basta nadeclare.
Identified concentration only need a o disclosed if the following occurs
- The concentration/uncertainty exist at the statement date
- The concentration/uncertainty makes the entity vulnerable to the rick of a near - term severe impact
- It is at least reasonably possible that the event that could cause the severe impact occur in the near future
What to do with permanent losses when corp issue quarterly FS
Do not report temporary losses. Only report permanent losses in the valuation of inventory
During period of inflation what happened to ending inventory under Fifo and lifo using perpetual and period inventory valuation
Fifo same as lifo
Lifo will not have the same ending inventory
Formula for index under inventory
Index = ending inventory at current yr cost / ending inventory at base yr cost
Estimated of price level changes for specific inventories under which inventory method
Dollar value LIFO
How do you value a stock dividends if its small and large
Large - par value
Small - market value
How do you depreciate leasehold improvements
Amortized over the lesser of the life of the improvement or the remaining term of the lease whichever is lesser
Formula for sum of the yrs digit depreciation
N x (N + 1) / 2
When computing for the yearly depreciation dont deduct depreciation exp. Yearly. Every yr of depreciation you will use the cost of the equipment
Formula of declining balance depreciation
2 x 1/n dito minus mo yearly ung dep. expense. Remember to ignore or dont deduct the salvage value of the asset
Depletion formula
- Compute depletion base = Cost - Residual value + any estimated restoration and development cost to prepare the land for extraction
- Depletion base / Estimated recoverable unit x actual ton sold
Tell me about the testing of impairment loss
- Undiscounted expected cash flow should be less than the carrying value if positive no impairment loss
- Impairment loss then computed by fair value - discounted future cash flow
How do you value donated fixed assets
Are recorded at fair value along with incudental cost incurred.
Tell me about repairs of equipment
- Increase in quantity and usefulness = capitalize the cost
- Increase in life = reduce the accumulated depreciation
What kind of depreciation method reflect that an assets services potential declines with use.
Units of product depreciation
When computing lower of cost method of pricing the inventory
- Look at the question if it is lower of cost or net realizable value.
- Or lower of cost or market
Remember to read closely with the question
Tell me how you proceed with the sale of an asset
- Check the original price of the asset
- Check the yr. Depreciation
- Then you need to remove the asset to the balance sheet, accumulated depreciation
- Compute for the gain or loss from selling the asset
Intangible asset if you are planning to sell it in the future you should?
Deduct the future money you will receive on selling the intangible asset to the original price you paid for that intangible then amortize it over the useful life or the legal life whichever is lesser
What is the treatment for organization cost
Expense for GAAP but deducted in the later yrs for tax purposes.
When computing composite life of the asset
Make sure to deduct the salvage value of the asset to their original price then divide that to the total depreciation
Interest cost on construction period of machinery
- Scenario. Machinery to be used by firm as fixed asset, capitalized asp part of the historic cost. But after construction it will be expense.
- Scenario. Interest incurred for the machinery held for sale all interest will be expense
How to account agriculture product and precious stone
Revenue is recognized at the time of production and not at the time of sale
Tell me how you will account for the commitment to purchase
Any commitment will be final. Any loss will be computed by the guarantee or how many you order and the multiplied it by the purchase price but make sure you deduct the recovery amount
When can you capitalize interest on borrowings?
- Special order goods held for sale to customers (generally you cant capitalize the interest if your goods that you build is for resale, only capitalize interest when for use. But with special order you can capitalize
- While you still building the property or equiptment
What concept governing the GAAP pertaining to recording gain contingencies?
Conservatism
Condition that must be present for an entity to begin capitalizing the interest
- Expenditures for a qualifying asset have been made
- All necessary permits (licenses) have been filed to prepare the asset for its intended use
- Interest cost is being incurred
Intangible asset - incurred cost
Equipment - incurred cost
How do you account the incurred cost
Intangible incurred cost addition to the original cost if the life of the intangible extend and amortization is whichever is lesser legal or remaining life.
Equipment - kapag capacity exceed or improve, incurred cost is capitalized and depreciated if additional life deduction to the accumulated depreciation
Commitment to an exit or disposal plan will recognized liability when?
ALL of this following criteria met
1. An obligation event has occurred
2. The event results in a present obligation to transfer asset or to provide services in the future
3. The entity has a little or to no discretion to avoid the future transfer of the assets or providing of services
High probability of a favorable outcome of infringement should?
Not accrued but disclosure only
Non interest bearing note should be recorded at what value?
It’s present value calculated by using the prevailing market interest rate.
Explain to me the present value of ordinary annuity and present value of annuity what date are they paying the interest?
- Present value of ordinary annuity is a the end of each period
- Parent value of annuity is at the beginning of each period
What is the treatment of bond issuance cost?
Bond issuance cost is deducted to the carrying value of the bonds
Serial bonds payable
Debentures
Variable rate bonds
Term bonds
Explain each
Serial bonds are pre numbered bonds that the issuer may call and redeem a portion by serial number.
Debentures are unsecured bonds
Variable rate bonds have interest rates changes
Term bonds are bonds that have a single fixed maturity
Difference between future value of 1 and present value of 1
- Future value of 1 concern with how much a present value will grow in the future
- Present value of 1 determines how much money you need to invest today to reach a future amount
How to compute impairment loss
- Dapat mas mababa ang undiscounted cash flow/present value of expected future cash flow ng long live asset kaysa sa carrying value
- Para makuha mo ung impairment loss carrying amount minus market value or discounted amount
If the leasee did not take ownership and no written purchase option you will amortize the long live asset
Amortize it over the lease term
Finance lease and operating lease amortization rule
- If the long live asset is accounted for as finance lease and at the end of the lease term will transfer ownership, amortized using the life of the asset. And if no transfer of ownership amortized it using the lease term
- Operating lease amortized it whichever is shorter, lease term or lief of the asset
Antidiluted earning per share, how to compute the diluted earnings per share
Kapag ang exercise price of stock option eh mas mataas kaysa sa market price, ignore ang stock option unless otherwise
Equity security where is the changes impacted
Any change in the cost vs fair value will be accounted in income statement
When selling the marketable security any incurred expenses must be added or deducted from the price of the marketable security?
It should be deducted to the selling price of the marketable security any
When selling the available for sale investment any losses should be?
Any losses should be write off
Reporting equity method of investment
- Kapag may preferred stock kasama yan sa computation kapag compute mo ung total investment nla.
Where you deduct the liquidating dividends? (Equity method)
This is not considered income but rather deduction to the investment
Goodwill created in an investment accounted for under equity method
Is being ignored. The entire investment using equity method is subject to impairment tes
When there is under valued asset when computing the income from investment using equity method
Make sure you include that in the computation as deduction from your net income share. Make sure only your share is deducted on your share of the net income.
