F2 - Financial Reporting and Disclosures

Question 1

1.

What’s the formula for changing from accrual basis income to cash basis income?

Answer 1

Δ Cash Income = ΔL + ΔE - ΔOA

Question 2

What’s the formula for changing cash basis revenue to accrual basis revenue?

Answer 2

ΔE = ΔA - ΔL

Question 3

What’s the formula for converting operating expense on a cash basis to an accrual basis?

Answer 3

Accrual Oper. Exp. = ΔL + ΔE - ΔOA

Question 4

What’s the formula for converting operating expense on an accrual basis to a cash basis?

Answer 4

Cash Oper. Exp. = ΔA - ΔL

Question 5

How do you calculate COGS?

Answer 5

Beg. Inv.
+ Purchases
=Goods available for sale
- End. Inv.
= COGS

Question 6

How do you calculate inventory turnover?

Answer 6

COGS / Avg. Inventory

Question 7

Calcute net profit margin:

Answer 7

NI (after tax) / Net Sales

Question 8

Calculate return on assets:

Answer 8

NI (after tax) / Avg. Assets

Question 9

How do you calculate return on equity?

Answer 9

NI - Preferred Dividends / Avg. Equity

Question 10

Calculate the quick ratio:

Answer 10

CA - Inventory / CL

CA would include cash & cash equivalents, marketable securities, and AR.

Question 11

Current Ratio:

Answer 11

CA / CL

Question 12

Accounts Receivable Turnover:

Answer 12

Net Sales / Avg. AR

Beg. & End. AR should each be net of ABD

Question 13

Calculate days in inventory:

Answer 13

End. Inv. / (COGS/365)

Question 14

Calculate times interest earned:

Answer 14

Earnings before interes and taxes (EBIT) / Interest Exp.

Question 15

What is the formula for Uncollectible Account Expense?

Answer 15

Beg. ABD + Uncollectible Acct. Exp. - Writeoffs + Recoveries = End. ABD (AR - NRV of AR)

Question 16

How do you calculate LIFO perpetual vs LIFO periodic?

Answer 16

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.

Question 17

How do you report inventory on the balance sheet under lower of cost or market?

Answer 17

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

Question 18

How long must a filer (with the SEC) and nonfiler evaluate subsequent events for purposes of potentially making adjustments/footnote disclosures to financial statements?

Answer 18

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.