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FAR > F7 Flashcards > Flashcards

F7 Flashcards

1
Q

What happens when the appropriation of retained earnings has been achieved?

A

Restored back to unappropriated retained earnings

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2
Q

What is the JE for of declaration of dividends?

A

Debit: retained earnings; credit: dividends payable

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3
Q

If no consideration is given, what is the journal entry to record issuance of rights?

A

No entry

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4
Q

For the purchase/sale of treasury stock, what do we do with the difference between stock price and cost?

A

Record as APIC. If this does not fully absorb the gain or loss, put remainder in retained earnings

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5
Q

What is the primary purpose of a quasi-reorganization?

A

Eliminate retained earnings deficit so future earnings will be available for dividends rather than limited to offsetting the retained earnings deficit

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6
Q

What is a liquidating dividend?

A

Dividend amount in excess of retained earnings balance

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7
Q

What amount and when is APIC credited?

A

Excess of proceeds over par value; at time rights are exercised

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8
Q

How and when are property dividends recorded?

A

Fair market value at the date of declaration

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9
Q

When is APIC decreased?

A

When retirement price is less then initial selling price

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10
Q

When stock is donated, what is the effect on stockholders equity?

A

No effect

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11
Q

When our stock options outstanding reduced?

A

At the exercise date

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12
Q

What is the journal entry for a stock dividend?

A

Debit: retained earnings; credit: common stock

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13
Q

With treasury stock transactions, do we change net income or retain earnings?

A

No

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14
Q

Do you treasury stock transactions result in gains or losses?

A

No - debit or credit to APIC

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15
Q

How do we calculate book value per share?

A

Common stockholders equity / common shares outstanding

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16
Q

When are equity instruments issued for employee services valued?

A

At the date of grant

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17
Q

When is compensation expense calculated? Allocated? Recognized?

A

Calculated at the grant date; allocated over the vesting period; recognized during the service period

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18
Q

Do you stock options have to be recognized to reflect compensation expense?

A

No

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19
Q

What is the impact of treasury stock on common stock?

A

No effect, treated separately as a reduction to equity

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20
Q

When treasury stock is resold, how is it regarded?

A

Outstanding

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21
Q

How is total compensation cost per year calculated?

A

(Market price of share on date of grant * number restricted shares awarded) / years of service period

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22
Q

How is the intrinsic value of options-based compensation calculated?

A

Number of shares of options * (market price of stock on grant date - exercise price of share option)

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23
Q

Calculate A/R turnover in days?

A

Average net receivables / (net credit sales / 365)

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24
Q

How do we calculate inventory turnover?

A

COGS / average inventory

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25
Q

How do we calculate total asset turnover?

A

Net sales / average total assets

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26
Q

How do we calculate average total assets?

A

Net sales / total asset turnover

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27
Q

How do we calculate A/R turnover?

A

Sales / receivables

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28
Q

With assumed conversions, which ones do we record?

A

Dilutive (decreases earnings per-share), not anti-dilutive

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29
Q

When can contingent shares enter into basic EPS calculation?

A

When dilutive

30
Q

In computing WACSO (weighted average common shares outstanding), how do we treat stock dividends or stock splits?

A

Retroactively recognized for all prior periods presented entry as if it had occurred at the beginning of the year

31
Q

What companies must include EPS disclosures?

A

Companies with publicly traded common stock or potential common stock or those who have filed with the SEC in preparation for sale of public securities

32
Q

When our shares contingent?

A

When issuable for no cash consideration after occurrence of specified condition

33
Q

What happens with cumulative preferred stock dividends?

A

Required to pay first before income is available to common shares

34
Q

When computing basic EPS, how do we treat convertible securities?

A

Ignore them

35
Q

What we do with interest expense on debt considered an EPS?

A

Add back to numerator

36
Q

When computing diluted EPS, how do we treat convertible securities?

A

Only recognize if conversion is dilutive

37
Q

How is EPS calculated?

A

(Net income - preferred dividends) / WACSO

38
Q

When is a stock option out of the money? And are they dilutive/anti-dilutive?

A

Out of the money when exercise price > market price; anti-dilutive

39
Q

How do we calculate additional shares outstanding?

A

Number of shares - [(number of shares * exercise price) / average market price]

40
Q

To get income available to common stockholders, when do we deduct non-cumulative preferred stock and cumulative preferred stock dividends?

A

When declared in period; When accumulated in period

41
Q

Under the indirect method of cash flow presentation, what goes in the supplemental disclosure?

A

Disclose cash paid for interest and income taxes

42
Q

What are the three required disclosures of the statement of cash flow under U.S. GAAP direct method?

A

Major classes of gross cash receipts and gross cash payments, amount of income tax paid, and reconciliation of net income to net cash flows from operations

43
Q

How to be record dividends paid in the statement of cash flows?

A

Outflow of cash from financing activities

44
Q

Do we disclose cash flow per-share and statement of cash flow?

A

Nope

45
Q

What is the primary purpose of the statement of cash flow?

A

To provide relevant information about cash receipts and cash disbursements of an enterprise during a period

46
Q

How do we treat conversion of preferred stock into common stock?

A

Non-cash financing disclosure

47
Q

In the statement of cash flow, how is the amount of equipment shown if it’s sold as a gain?

A

Cash inflow from investing activities equal to the caring amount of equipment plus the gain

48
Q

How do we treat cash payments to reduce debt principal and cash interest payments?

A

Principal payment is financing activity; interest payment is operating activity

49
Q

Under the indirect method, how should a gain on the sale of equipment be reported in the statement of cash flow?

A

Operating activity as a deduction from income

50
Q

In the statement of cash flow, what are uses of cash and increases in cash?

A

Increase in assets and decrease and liabilities; decrease in assets and increase and liabilities

51
Q

Under IFRS, how is interest received during a period reported in the statement of cash flow?

A

Operating or investing

52
Q

Under IFRS how is interest paid during a period reported in the statement of cash flow?

A

Operating or financing

53
Q

Under IFRS how is dividends paid during a period reported in the statement of cash flow?

A

Operating or financing

54
Q

How is payment of interest on bonds classified in the statement of cash flow under GAAP? Under IFRS?

A

Operating; operating or investing

55
Q

If we pay for a non-current asset with the cash down payment and take out a loan on the remaining portion, how is this record in the statement of cash flow?

A

Cash down payment is investing; remaining portion loan is financing

56
Q

If paying amount, how do increases or decreases in assets and liabilities affect the statement of cash flow?

A

Increases in assets and decreases and liabilities increase cash flow; decreases in assets and increases and liabilities decrease cash flow

57
Q

What is the journal entry to record a liquidating dividend?

A

Debit: retained earnings, APIC
Credit: cash (dividends payable)

58
Q

When a property dividend is declared, what are we reduce retained earnings by?

A

Fair market value of asset

59
Q

What do you stock dividends do?

A

Transfer fair market value of stock dividend at declaration date from retained earnings to capital stock and APIC

60
Q

For a small stock dividend (less than 20% of shares outstanding), what amount is debited to retained earnings? What about a large stock dividend (greater than 25% of shares outstanding)?

A

Fair market value of shares; par value of stock

61
Q

What effect do all treasury stock transactions have on total equity?

A

Decrease

62
Q

What happens to book value per share when acquisition of treasury stock has a price less than fair value?

A

Increases book value per share

63
Q

What is appropriated retained earnings?

A

Setting aside retained earnings amount for future purposes

64
Q

How are dividends other than Cash recorded?

A

Fair market value at date of distribution

65
Q

What do we do with proceeds from the basket purchase or sale of convertible preferred stock?

A

Allocate proceeds based on fair market value

66
Q

What do we do if we acquisition price is less than or greater than original issue price?

A

Gain credited to APIC; lost debited to retained earnings

67
Q

How do we calculate gain or loss on disposal of asset?

A

Fair market value - book value; positive = gain, negative = loss

68
Q

When collectibility is reasonably assured, when is the excess of subscription price over stated value recorded as APIC?

A

When subscription is recorded

69
Q

How do we treat stock dividends and splits?

A

Do not record as income, just reallocate investment account balance

70
Q

How is compensation expense charge and when is it measured?

A

Over service period; Measured at grant date

71
Q

If dividend is not declared, how do we report it?

A

Disclosure

72
Q

What do each section of the statement of cash flows represent?

A

Operating: cash effects of light items that make up netting come
Financing: cash effects of borrowing or paying that debt and buying/selling the equity of the company
Investing: cash effects of non-current assets transactions (purchase and sale of fixed assets and investments and lending activities)

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