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FAR OVERALL > F7 > Flashcards

F7 Flashcards

1
Q

J/E for issuance of PS

J/E for Conversion to CS

A

DR: Cash
CR: PS
CR: APIC- PS

DR: PS
DR: APIC - PS
CR: CS
CR: APIC - CS

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2
Q

Does contingent shares or stock options be used in basic earnings per share calculation?

A

Stock options- no

Contingent share- only if all conditions for issuance are met

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3
Q

Are shares issuable upon exercise of a stock option considered a contingent share?

A

No- Shares issuable upon the exercise of a stock option are not considered contingient shares as the option holder is required to pay the strike price to exercise the option.

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4
Q

What are the required disclosures of a statement of CF under the direct method

A
  • The major classes of gross cash receipts and gross cash payments
  • Amt of income taxes paid
  • Reconciliation of NI to net CF from operations
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5
Q

J/E for gain on equipment sale

A

DR: Cash
DR: Accum Dep
CR: Gain
CR: Equipment

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6
Q

Book Value per Common Share Formula

A

= Common Shareholders’ equity / common shares outstanding

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7
Q

Common Stockholders’ Equity Formula

A

Total Shareholders’ equity
- Preferred stock outstanding (at greater of call price or par value)
- Cumulative preferred dividends in arrears
= Common shareholders’ equity

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8
Q

Retained Earnings Formula

A

Net Income/Loss
- Dividends (cash, property (FMV), and stock) declared
+/- Prior period adjustments
+/- Accounting Changes reported retrospectively
+ Adj from quasi-reorganization
= RE

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9
Q

J/E for Eliminating the deficit in RE - quasi-reorganization

A

DR: Common Stock
CR: RE
CR: APIC (plug)

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10
Q

Treasury Stock = Cost Method J/E

  1. Original Issue
  2. Buy Back Above issue Cost - contra equity
  3. Reissue Above Cost
  4. Reissue below Cost
A 
Original Issue	
	DR: Cash
	CR:	C/S (# x Par)
	CR:	APIC - C/S 
Buy Back Above Issue Price - contra-equity
	DR: TS (# X cost)
	CR:	Cash
Reissue Above Cost 
	DR: Cash 
	CR: 	TS (# x buy back cost)
	CR:	APIC TS - (gain goes to APIC)
Reissue Below Cost
	DR: Cash
	DR: APIC TS
	DR: RE 
	CR:	TS (# x buy back cost)
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11
Q

Treasury STock = Par Method

  1. Original Issue
  2. Buy Back above Issue Price
  3. Buy Back below issue Price
  4. Reissue Shares
A 
Original Issue
	DR: Cash 
	CR: 	CS (# x par)
	CR:	APIC (# x (sold price - par))
Buy Back Above Issue Price
	DR: TS (# x par)
	DR: APIC - CS (# X (org price - par)) 
	DR: RE 
	CR: 	Cash (# x repurchase price)
Buy Back Below Issue Price
	DR: TS (# x par)
	DR: APIC CS (# X (org price - par)) 
	CR:	Cash (# x buy back price)
	CR: 	APIC -TS “plug”
Reissue Shares
	DR: Cash (# x reissue price)
	CR: 	TS (# x par)
	CR: 	APIC - CS “plug”
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12
Q

Dividends:
Date of Declaration:
Date of Record:
Date of Payment:

A

Date of Declaration- board approves dividend (a liability created and RE is reduced (debited))

Date of Record- No J/E

Date of Payment - dividend is actually disbursed

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13
Q

Accounting for stock issued to employees

~Noncompensatory
~Compensatory

A

~Noncompensatory Stock Options/Purchase Plans - No J/E till stock purchase

~Compensatory Stock Options - valued at FV of the options issued

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14
Q

Stock Options:

J/E to allocate compensation cost

J/E to record exercise of options

A

J/E to allocate compensation cost
DR: Compensation expense
CR: APIC - stock options

J/E to record exercise of options
	DR: Cash (# x strick price)
	DR: APIC - Stock options (reverse from above)
	CR:	CS (# x par)
	CR:	APIC in excess of par ( plug )
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15
Q

Basic EPS Formula

A

Basic EPS = Income available to common shareholders (NI - Preferred div) / Weighted avg # of common shares outstanding

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16
Q

Weighted Avg # of CS oustanding

A

Shares outstanding (beg of period)
+Shares sold during the period (on time-weighted basis)
- Shares reacquired during the period (on time-weighted basis)
+Stock Div and Stock Splits (retroactively adj) - pretend it happened at first of period
- Reverse Stock splits (retroactively adj)
= WACSO

17
Q

Diluted EPS Formula

A

Diluted EPS = (NI - preferred div) - Interest on dilutive securities / WACSO-assuming all dilutive sec are converted to CS

18
Q

Dilution from Options, Warrants, and their equivalents - no change to numerator

Treasury Stock Method Formula

A

Number of Shares - [( # of shares X exercise price ) / avg market price ]=additional shares outstanding

19
Q

Dilution from Convertible securities (bonds or preferred stock)

A

Convertible Bonds
- Add to numerator => Interest Expense X (1-tax rate)

-Add to denominator => # of CS associated with conversion

20
Q

What is the purpose of statement of CF?

A

Purpose : to learn why cash changed

21
Q

What are the 2 methods of operating CF?

A

direct or indirect

22
Q

What are included in Operating CF?

A
  • Selling Products/ collecting receivables
  • Purchasing inventory/Paying vendors
  • Purchasing supplies and services/paying vendors
  • Paying Taxes
  • Purchasing/Selling Trading Sec (GR)
  • Collecting interest on an investment
  • Collecting dividends on an investment
23
Q

What are included in Investing CF?

A
  • Purchasing LT assets or LT investments for Cash

- Selling LT assets or investments (noncash equivalents and non-trading sec) - cash proceeds

24
Q

What are included in Financing CF?

A
  • Borrowing Funds (ie. Bank loans, issuing debt)
  • Paying principal on debt
  • Issue common or preferred stock
  • Paying dividends on common or preferred stock
  • Repurchasing stock (treasury stock)
25
Q

What is not included in CF

A
  • Recording dep, amort or depletion

- Recording income of equity method affiliates

26
Q

Operating Activities (Direct Method)

A
  1. Cash received from customers
  2. Cash paid to suppliers and employees
  3. Interest received and paid
  4. Dividends received
  5. Purchases and sales of trading sec, if appropriate, based on the nature and purpose for which the sec were acquired
  6. Income taxes paid
  7. All other cash transactions not accounted for elsewhere
27
Q

Operating Activities (Indirect Method)

A
  1. Record NI
  2. Adj NI for noncash items such as dep and the impairment of goodwill
  3. Reverse the income statement g/l shown on the sale of asset
  4. Adj for changes in current assets and current liabilities except for cash and accounts treated elsewhere in the statement

Current Assets Increase : Subtract
Current assets decrease: Add
Current Liabilities increase: Add
Current Liabilities Decrease: Subtract

28
Q

What are the Asset and Liabilities added and subtracted for operating indirect method?

A

Current Assets Increase : Subtract
Current assets decrease: Add
Current Liabilities increase: Add
Current Liabilities Decrease: Subtract

29
Q

Financing Activities

A
  1. All sums borrowed and/or repaid (principal amt only)
  2. Issuance and/or repurchase of own company stock
  3. Dividends Paid (not received)
30
Q

Investing Activities

A
  1. All sums lent and/or repaid (principal only)

2. Purchase and/or sale of noncurrent assets (including FA, intangible assets and mark sec)

31
Q

Working Capital Formula

A

Working Capital = Current Assets - Current Liabilties

32
Q

Current Ratio (working cap ratio)

A

Current Ratio (working capital ratio) = Current Assets / Current Liabilities

33
Q

Acid-Test / Quick Ratio

A

Acid-Test Ratio = (Cash Equivalents + Marketable Sec + Net receivables) / Current Liabilities

34
Q

Cash Ratio

A

Cash Ratio = (Cash Equivalents + Marketable Securities ) / Current Liabilities

35
Q

AR Turnover

A

AR Turnover = Net credit Sales / Avg Net Receivables

36
Q

AR Turnover in Days

A

AR Turnover in Days = Avg net receivables / (Net Credit Sales / 365)

37
Q

Inventory Turnover

A

Inventory Turnover = COGS / Avg Inventory

FAR OVERALL (18 decks)

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