F5 Flashcards
Fin Instruments, Equity Method, Consolidated FS, Partnerships, Cash Flows, Income Taxes
under the indirect method of cash flows, how is cash paid for interest and income taxes accounted for?
a supplemental disclosure ONLY is required
Operating activities
cash receipts/disbursements reported on IS, current assets, and most current liabilities (excluding current notes payable and current long term debt)
Investing activities
receipts/disbursements from noncurrent assets including purchase of LT assets and investments
financing activities
receipts/disbursements from interest bearing debt (including noncurrent liabilities) and equity
partnerships bonus method
purchase price </> BV of capital account balance; total balance in capital account controls computation!-
1. determine total capital & interest of new partner
2. If interest < contribution, bonus to old partners
3. if interest > contribution, bonus to new partner
partnerships exact method
purchase price is equal to the book value of the investment- no goodwill or bonus; only partnership % will change ($ value of investments remain same); use ‘finger math’ to find new partner contribution
partnerships goodwill method
total value of partnership implied by new partner’s contribution; investment going in (contribution) controls the computation
1. compute existing capital balances after admitting new
2. compute net worth & compare to existing cap balances
3. difference is ‘goodwill’ allocated to old partners according to profit ratio
cash equivalents
short-term, liquid investments that are quickly convertible and mature within 90 days; only changes form of cash- not reported on statement of CFs
cash flows from operations- indirect method
NI + noncash expenses losses [+ depreciation + most amortization + bad debt expense] - noncash income/gain [- amortization] + change in operating liabilities - change in operating assets
trading (debt) securities
bought to be sold in the near future- operating cfs, held at FV, unrealized g/l on IS
AFS (debt) securities
investing cfs, held at FV, unrealized g/l to PUFI
HTM (debt) securities
positive intent and ability to hold until maturity- investing cfs, held at amortized cost,
current portion of income tax expense
income tax payable on taxable income (taxable income x rate)
deferred tax asset (DTA)
future tax benefit, tax income first or deduct later
deferred tax liability (DTL)
future tax liability, tax income later or deduct first
