F2 - Financial Reporting and Disclosures Flashcards
1.
What’s the formula for changing from accrual basis income to cash basis income?
Δ Cash Income = ΔL + ΔE - ΔOA
Answer adj. Q’s with End. Bal. with the same signs above.
What’s the formula for changing cash basis revenue to accrual basis revenue?
ΔE = ΔA - ΔL
Answer adj. Q’s with End. Bal. with the same signs above.
What’s the formula for converting operating expense on a cash basis to an accrual basis?
Accrual Oper. Exp. = ΔL + ΔE - ΔOA
What’s the formula for converting operating expense on an accrual basis to a cash basis?
Cash Oper. Exp. = ΔA - ΔL
How do you calculate COGS?
Beg. Inv.
+ Purchases
=Goods available for sale
- End. Inv.
= COGS
How do you calculate inventory turnover?
COGS / Avg. Inventory
Calcute net profit margin:
NI (after tax) / Net Sales
Calculate return on assets:
NI (after tax) / Avg. Assets
How do you calculate return on equity?
NI - Preferred Dividends / Avg. Equity
Calculate the quick ratio:
CA - Inventory / CL
CA would include cash & cash equivalents, marketable securities, and AR.
Current Ratio:
CA / CL
Accounts Receivable Turnover:
Net Sales / Avg. AR
Beg. & End. AR should each be net of ABD
Calculate days in inventory:
End. Inv. / (COGS/365)
Calculate times interest earned:
Earnings before interes and taxes (EBIT) / Interest Exp.
What is the formula for Uncollectible Account Expense?
Beg. ABD + Uncollectible Acct. Exp. - Writeoffs + Recoveries = End. ABD (AR - NRV of AR)
How do you calculate LIFO perpetual vs LIFO periodic?
LIFO perpetual considers dates.
LIFO periodic disregards dates: (Beg. Inv. + all purchases - all sold) x oldest unit cost for the difference of newest unit layers.
How do you report inventory on the balance sheet under lower of cost or market?
Compare the cost vs Market value - choose the lower of the two.
Determine the three market values then select the middle value:
1) NRV (Sales - cost of completion)
2) Replacement
3) NRV - Profit
How long must a filer (with the SEC) and nonfiler evaluate subsequent events for purposes of potentially making adjustments/footnote disclosures to financial statements?
A “filer” has a subsequent event evaluation period through the date its F/S are issed, whic is when F/S have been widely distributed to its users in a form and format compliant to GAAP.
All other nonfiler entities have a subsequent event evaluation period thorugh the date F/S are available to be issued, which is when F/S are in GAAP forma dn format compliance with all approval for issuance obtained.
What are the steps to compute gross profit earned for the current year of a long-term construction contract?
1) Compute gross profit of completed contract: Contract Price - Estimated Total Cost = Gross Profit
2) Compute percentage of completion: Total Cost to Date / Total Estimated Cost of Contract
3) Compute gross profit earned (profit to date): step 1 x step 2
4) Compute gross profit earned for current year: PTD at current FYE - PTD at beginning of period = Current YTD GP
How do you recognize a current liability at year end (construction contracts), if revenue is recognized over time?
Firstly, identify the current asset amount: CA = (Accumulated Costs + Estimated Earnings) / Related Billings
Secondly, remember a liability only exists when Progress Billings exceeds Costs and Estimated Earnings.
When does a seller book the sales transaction of a good as a financing arrangement, if the seller is obligated to repurchase the good?
When the repurchase price is equal to or greater than the original sale price and the expected market value.
What are common modifications for the cash basis F/S?
OCBOA
- Recording LT Liabilities
- Accrual of Income Taxes
- Capitalizing Inventory
Recognizing revenues when earned instead of received is accrual basis.
Calculate days sales in AR:
(End. AR/ Net Sales) / 365
