FAR 1 Flashcards
Equity Instrument - Asset or Liability?
Asset
Unconditional Promise, amt known - disclose in notes or balance sheet?
Balance Sheet - Liability
30 year mortgage current portion - current liability or long term liability?
Current Liability
Current Assets - what is included?
Cash, AR, Inv, Prep Exp, Land (if for sale and sold, if checks mailed in month after FS issued include it)
Costs in excess of billings on LT contract is?
Cost in excess of billings, in percentage of completion method, is when the billings on uncompleted contracts are less than the income earned to date. These under-billings result in increased assets.
To calculate income
Earnings from LT contracts less costs and expenses (both # given)
If prepaid taxes and there is no temp or perm difference - is it as asset?
not included in an asset
Net Assets vs Current Assets
Net Assets include Idle machinery, invest in equity securities, cash surrender value of life ins on corp exec.
Treasury stock is a reduction of stockholders equity (not an asset)
Assets = Liabilities + Equity
Assets = Liabilities + Equity
Increase in Assets
Increase in Liabilities (minus)
Increase in stockholders equity
Add back dividends
Equal inc in SE before dividends
Less increase : new stock
(Capital stock + APIC)
equal Net Income
Initial Prepayment that will be reimbursed in future years is
Noncurrent Asset
Assets = Liabilities + Equity
if cash increased by 40000
and all other assets decreased by 65000
net decrease is 25000
It must equal net decrease of 25000 in liabilities and equity for the formula to balance, so if liability increased by 32000
equity must have decreased by (32000 + 25000) =57000
Who are the primary users of FS?
Investors, lenders, and creditors (not regulators)
Are differed taxes and liabilities current or noncurrent?
Noncurrent
If bonds have sinking funds (which is restricted cash aka long term asset
Bonds will be long term liability (even if matures in less than a year)
To calculate current assets:
subtract bond sinking fund, allowance for doubtful accounts; add prepaid expense, cash, AR, and inventory
A right of setoff (to offset amount owed to co w/ amt owed by same co):
- amounts owed are determinable
- reporting party has the right to set off amt
- reporting entity intends to set off
- the right of set off is enforceable by law
Balance Sheet is used to:
Analyze company liquidity and financial flexibility
Articulation of FS
Is fundamentally interrelated
Short term obligations that are paid with cash before the balance sheet is released to the public
CANNOT be refinanced and reclassified as long term.
