FAR 1/5 Flashcards
Q001. _________________ are intended to establish the objectives and concepts that the FASB will use in developing standards of FAR
A001. Statements of Financial Accounting Concepts
Q002.__________ establish GAAP in financial reporting by business enterprises.
A002. Statements on Financial Accounting Standards (SFAS)
Q003. The meaning of “present fairly in accordance with GAAP “ and “the hierarchy of sources of GAAP” are presented in ___________
A003. Statements on Auditing Standards (SAS)
Q004. Investments by owners are specifically excluded from _________
A004. Comprehensive income
Q005. _______ _______ adjustments are not considered accounting changes.
A005. Prior period
Q006. An entity will be reported Discontinued operations IF 1. OR 2.
A006. 1. it has been disposed of OR 2. Is classified as held for sale
Q007. A component classified as held for sale is measured at the lower of ________ OR ________ less cost to sell.
A007. it’s carrying amount OR fair value
Q008. Under what principal Defer estimated Gains until realized Record probable estimated losses immediately
A008. Conservatism Principle
Q009. Sale of a fixed asset used for operations for greater than its carrying amount should be reported in the IS using the ________
A009. Net concept, showing the total Gain as a part of continuing operations, NOT net of Income Taxes.
Q010. Interest expense is classified as a __________ on the IS. Advertising is classified as a ____________
A010. 1. separate line item 2. selling expense.
Q011. The best, most current estimate of the annual _________ rate should be used to determine the income tax provision for the second quarter.
A011. Effective tax rate
Q012. Comprehensive income includes all changes in Equity during a period except those resulting form ______________
A012. Owners investments and distribution to owners
Q013. Because the note is due within the next fiscal year, it should normally be reported as a current liability. However, if either of two events occurs prior to the issuance of the financial statements, then the liability is reported as a long- term liability because it will not require the use of current assets or the creation of another current liability. The first of these events is that the note is actually __________________. The second is that the debtor signs __________ agreement with a party to refinance the note on a long-term basis when it comes due or at some time before it comes due. The other party must be capable of meeting this obligation.
A013. 1. refinanced on a long-term basis 2. a non-cancelable
Q014. Who pays bond issuance costs?
A014. The company; it reduces the amount received
Q015. This group of bonds was sold at a yield rate (8 percent) that was higher than the market rate at the time (7 percent). Buyers would not buy this bond without an especially high right of return. That indicates that the market was not comfortable in some way with the company or the structure of the bond. If the bond had been viewed as relatively safe, the company should have been able to negotiate a yield rate that was a bit lower than the __________. Interest expense to be recognized for the first year is the $86,000 initial book value times the 8 percent yield rate (or $6,880). Because the interest being paid at the end of the first year was only $6,000 (face value of $1 million times the stated rate of 6 percent). The additional interest of $880 recognized as an expense ($6,880 less $6,000) must be compounded or added to the book value of the bond. That brings the book value (the principal) from $86,000 to $86,880. Interest expense for Year Two is this $86,880 figure times 8 percent or $6,950.40.
A015. market rate
Q016. On January 1, Year One, Big Company offers to sell a $100,000 bond coming due in exactly 10 years. This bond pays cash interest of 2 percent at the end of each year. A buyer is found who wants to earn 5 percent interest each year. After some negotiations, Big agrees to the 5 percent effective rate. The present value of a single amount of $1 in ten years at 2 percent annual interest is .80 whereas the present value of a single amount of $1 in ten years at 5 percent annual interest is .63. The present value of an annuity of $1 in ten years at 2 percent annual interest is 8.75 whereas the present value of an annuity of $1 in ten years at 5 percent annual interest is 7.70. What is the sales price for this bond?
A016. The set cash flows established by this bond are $2,000 per year ($100,000 times 2 percent) for ten years plus $100,000 at the end of ten years. The price of the bond will be the present value of these cash flows at the desired 5 percent annual rate. $2,000 times 7.70 is $15,400 and $100,000 times .63 is $63,000. Total present value is $78,400 ($15,400 plus $63,000). That is the amount that should be paid for these future cash flows in order to earn the equivalent of 5 percent annual interest, the negotiated rate.
Q017. Two things (bonds and stock warrants) are issued here for a single amount. If both values are known, the $990,000 (the cash received by the company) is prorated between the two based on the ___________. If only one value is known, that value is used for reporting purposes and the remainder is assigned to the other item. In this problem, only the value of the stock warrant is specified.
A017. relative values - Market value
Q018. The loan comes due within the current year and must be shown as current unless the company can show that it has both the __________ to refinance. That intent and ability is proven by either refinancing the debt prior to the issuance of the financial statements on February 27, Year Two or obtaining a non-cancellable agreement to refinance by that same date. Basically, the company must show that there is no chance that the bond will have to be paid out of the company’s own current assets. If that is demonstrated, the bond is reported as long-term.
A018. intent and ability
Q019. SFAS 109 requires an enterprise to net SEPARATELY all of the deferred tax assets and liabilities classified as _________ and __________.
A019. Current and Noncurrent
Q020. If the decline in fair value is judged to be _________, the cost bases of the individual security shall be written down to fair value as a new cost basis and the amount of the write-down shall be included in earnings ( as a realized loss) - DECREASE IN NET INCOME
A020. OTHER THAN TEMPORARY
Q021. Idle machine, cash surrender value of life insurance on corporate executives, and marketable equity investments valued at FMV should be reported as _____________ on the B/S
A021. current assets
Q022. Current assets consist of cash and other assets reasonably expected to be realized in cash or sold or consumed in operations within _______ or an operating cycle, whicherver is longer.
A022. One year
Q023. A material event or transaction that is unusual in nature or occurs infrequently but not BOTH, and therefore does not meet both criteria for classification as an extraordinary item, should be reported as a separate component of __________
A023. Income from continuing operations
Q024. ___________ differences do not affect either interperiod or intraperiod Income Tax allocation.
A024. Permanent
Q025. The net unrealized loss on marketable trading securities is included in ___________
A025. Income S., not in Other comprehensive income
Q026. CORRECTION OF AN ERROR in FS of a prior period should be accounted for and reported as a prior period adjustment and should not affect income of the __________ period.
A026. Current
Q027. Total assets = Total Liability + Stockholder’s Equity Borrowed fund to start a corporations are part of ______________
A027. Total Liability
Q028. The amortization of a bond discount is the deference between cash interest and interest expense. Cash paid for interest is reported in operating activities. Amortization of a discount on bonds payable results in interest expense greater than cash interest. Because more expense has been deducted in computing income than the amount of cash paid for interest, the difference (captured in the change in the bond discount account) must be added to _____ to reconcile to the cash provided or used for operating activities.
A028. Income
Q029. ___________ is a periodic interim invoicing for progress payments on L/T contracts. It is contra Assets account, netted against the construction in process assets account and recorded as either an asset (contraction costs in excess of billings) or as a liability (billings in excess of construction costs.)
A029. Billing
Q030. The segregated account (restricted as to withdrawal or use) should be classified as __________
A030. Noncurrent asset
Q031. The overdrawn account should be reported as ________
A031. CURRENT LIABILITY
Q032. Inventory is accounted for at lower of ___________ or _________. ___________ is measured as Replacement cost, Net realizable value, or Net realizable value less a normal profit margin.
A032. 1 (Historical) cost or Market cost 2 Market
Q033. A credit balance in the deferred income taxes account does not represent a payable in the usual sense in which the term “payable” is used in financial statements. The credit balance in the deferred income taxes account represents the tax ____________ recognized to-date for financial reporting purposes that is expected to be included in taxable income in future years. However, it does not represent an amount “owed” to the federal gov. at the B/S date.
A033. expense
Q034. Consolidated statements reflect the ___________ concept.
A034. ECONOMIC ENTITY
Q035. The amount to be assigned to inventories (acquired in an acquisition) of finished goods and merchandise is the estimated selling price less the sum of 1. costs of disposal and 2. a reasonable profit allowance for the selling effort of the acquiring corporation. The amount to be assigned to the inventory of WIP is - the estimated selling prices of finished goods less the sum of 1. costs to complete, 2. costs of disposal, and 3. a reasonable profit allowance for the completing and
A035. The general guidelines for assigning amounts to the inventories acquired
Q036. Depreciation expense of the asset sold to subsidiary company at a GAIN (treated as unrealized gain) on a Consolidated IS should be the depreciation that would have been expansed on ________ if the equipment had not been sold
A036. Parents books
Q037. __________ statements may be used to present the results of operations of 1. companies under common management AND 2 commonly controlled companies
A037. COMBINED STATEMENTS
Q038. Other Comprehensive income includes revenues, expenses, gains, and losses that are included in Comprehensive income but __________. The total of Other Comprehensive income for a period must be transferred to a separate component of Equity in the B/S at the end for the accounting period.
A038. EXCLUDED from NET INCOME
Q039. Dividends paid to ___________ would NOT be included in computation of COMPREHENSIVE INCOME
A039. STOCKHOLDERS
Q040. _________ securities include debt securities and readily marketable equity securities that are bought and held principally for the purpose of selling them in the near term. _______ securities are recognized in the B/S at fair value. Unrealized holding G/L are included in earnings.
A040. TRADING
Q041. __________ securities are recognized in the B/S at fair value. However, any related unrealized holding G/L are excluded from _________ and reported as __________.
A041. A-FOR-SALE : INVESTMENTS IN DEBT AND EQUITY SEC NET INCOME OTHER COMPREHENSIVE INCOME
Q042. _____________ CONCEPT - The effect of price change on assets held and liabilities owed are recognized as “holding G/L” and included in return ON capital. The concept is applied to What income?
A042. FINANCIAL CAPITAL CONCEPT NET INCOME AND COMPEHENSIVE INCOME
Q043. FINANCING ACTIVITEIS are associated with a company’s __________ and ______________
A043. LIABILITIES AND SOCKHOLDER’S EQUITY - cash effects of transactions obtaining resources from Owners and providing them with a return on Their investment
Q044. If LAND was held for resale and was indeed sold BEFORE issuance of the F/S, the land should be classified as ____________
A044. CURRENT ASSET
Q045. In concept, REVENUES - increase assets rather than decrease liabilities, but a convinient shortcut is often to directly record _____________
A045. reduction of liabilities
Q046. Calculate EQUITY if given capital stocks revenue expenses cash dividends declared
A046. revenue - expenses ______________ NI - cash dividends declared + capital stocks _________________________ EQUITY
Q047. Articulation means that the elements of F/S are _____________
A047. FUNDAMENTALLY INTERRELATED
Q048. Conversion of Debt to Equity should be disclosed as ___________ in the SCF.
A048. SUPPLEMENTAL INFO
Q049. F/S should not report an amount of cash flow _____________
A049. PER SHARE
Q050. Calculate Cash proceeds of insurance settlement, given Extraordinary loss, Cost of the asset and Accumulated depreciation. This amount is reported on SCF as ___________
A050. Cost of the asset - Accumulated depreciation - Loss ________________ Cash from “sale” INCREASE IN CF
Q051. The recognition of the realized Loss due to other than temporary change in value of ___________ security would result in a ________________ and no effect on NET NONCURRENT ASSETS
A051. AVALABLE-FOR-SALE DECREASE IN NET INCOME
Q052. Constant Dollar Index = Constant Dollars are dollars of equal Purchasing power
A052. Historic cost to be restated x C/Y index / Base year index
Q053. Culculate the R/E for the year =
A053. Revenues - expenses - income tax ———————— NI - Dividends (cash) ________________ R/E for the C/Y
Q054. The cost of company acquired in a Business Combination includes the _________ costs of the Business Combination. These costs will be included in the total _______ cost which will be allocated to identifiable assets.
A054. DIRECT ACQUISITION
Q055. What type of the account is Costs in excess of billings on long-term contracts?
A055. Current asset
Q056. What type of the account is Billings in excess of costs on long-term contracts?
A056. Liability acct.
Q057. Available-for-Sale Sec. 2000 FMV of the stock is $1000 2001 FMV of the stock is $800 - decline in value is temporary 2002 FMV of the stock is $800 - decline in value is OTHER than temporary What should be the effect on NONCURRENT ASSETS and NET INCOME in 2002?
A057. NONCURRENT ASSETS -NO EFFECT. – carrying value would have to be lowered for 2001 using Valuation Allowance NET INCOME - will DECREASE in 2002
Q058. The total of Other Comprehensive income for a period must be transferred to a separate component of Equity Account _______________ in the B/S at the end for the accounting period.
A058. ACCUMULATED OTHER COMPREHENSIVE INCOME
Q059. A single-step income statement formula =
A059. Net Income = (Revenues + Gains) – (Expenses + Losses)
Q060. List B/S ASSET items
A060. CURRENT ASSETS - Cash and cash equivalents, Trading SEC at fair value, A/R net of allowance for ncollectable accts, Notes receivable, Merchandise inventory at lower cost or market, Prepaid expense INVESTMENTS - Available-for-sale SEC. at fair value, Held to maturity SEC, Land held for future plant site PROPERTY, PLANT AND EQUIPMENT - Land, Building, Equipment Less: Accumulated depreciation INTANGIBLE ASSETS - Good will, Patents, net of amortization OTHER ASSETS - Bond issue costs TOTAL ASSETS
Q061. List B/S LIABILITIES items
A061. CURRENT LIABILITIES Long-term debt due within one year A/P Notes payable Interest playable Salaries payable Income tax payable Advances from customers ( unearned) Unearned rent revenue LONT-TERM LIABILITIES Bonds payable Plus: Unamortized premium on bonds OR Less: Unamortized discount on bonds Differed income tax liability Pension and postretirement liabilities
Q062. List B/S STOCKHOLDERS EQUITY items
A062. Capital stock Paid-in capital in excess of par ————————————————————- Total paid-in capital (net contributed by owners) Retained earnings (internally generated) Accumulated other comprehensive income (internally generated) Treasury stock ( contra equity) TOTAL STOCKHOLDERS EQUITY
Q063. INTERIM FINANCIAL REPORTING is generally concerned with the __________ reports that PUBLIC companies _______________ TIMLINESS is emphasized over___________ Should be marked _____________ Income tax expense is estimated each quarter - use __________ tax rate
A063. Quarterly must file with SEC RELIABILITY UNAUDITED ESTIMATED AVERAGE TAX RATE
Q064. SEGMENT REPORTING applies to __________ REQUIRED DISCLOSURES ARE (4) INTERCOMPANY TRASACTIONS _______ ELIMINATED FOR REPORTING
A064. PUBLIC COMPANIES ONLY 1. Operating segment 2. Products and Services 3. Geographic areas 4. Major customers NOT
Q065. ҉ QUANTITATIVE THRESHOLD FOR REPORTABLE SEGMENT %??? “size” test “reporting sufficiency” test “single industry dominance” test
A065. 1. Segment meets the “size” test if its REVENE or G/L or ASSETS are 10% of total. 2. need to identify segments until at least 75% of COMBINED REVENUE is included 3. the is only ONE segment if its REVENE + G/L + ASSETS are 90% of total
Q066. SFAS 157 provides the definition of FAIR VALUE, Establishes a frame work for measuring FV, and expands FV disclosures. FV is the price to sell asset or transfer a liability in an orderly transaction - __________ between market participants - __________ at the measurement date.
A066. Not a Fire sale buyers and sellers are INDEPENDENT
Q067. FAIR VALUE TERMINOLOGY (8) - need to be familiar
A067. 1. FV is measured for a specific asset or liability 2. FV is a MARKET-specific measure, not entity-specific 3. FV is measured in the principal, or most advantageous market for the asset or liability 4. FV is and exit price, not and entrance price 5. FV measure should reflect all of the assumptions that market participants would use in pricing the asset 6. FV does not include transaction costs, but may include transportation costs if location is an attribute of the asset. 7. FV of an asset assumes the highest and best use of the asset 8. FV of liability should include the liability’s nonperformance risk, which is the risk that the obligation will not be fulfilled
Q068. FAIR VALUE VALUATION TECHNIQUES 1. The MARKET APPROACH 2. The INCOME APPROACH 3. The COST APPROACH -
A068. 1. The MARKET APPROACH - uses prices and other info from Market transactions – Real Estate 2. The INCOME APPROACH – converts future amounts to a single discounted amount - – Real Estate 3. The COST APPROACH - uses the current replacement cost
Q069. F. Statements of all prior periods presented should be RESTATED when there is a ______________
A069. “CHANGE IN ENTITY”
Q070. It is permissible, but extremely rare, to deviate from one of the 6 PRONOUNCEMENTS if compliance would cause the financial statements to be misleading. List hierarchy of sources of GAAP.
A070. 1. B – Accounting Research Bulletins 2. O – Accounting Principles Board Opinions 3. S – FASB Statements of Financial Accounting Standards 4. S – FASB Staff Positions 5. I – FASB Interpretations 6. I – FASB Statements 133 Implementation Issue.
Q071. SFAC # 2 – “Qualitative characteristics of accounting information” Financial info must be (7):
A071. 1. UNDERSTANDABLE to decision makers 2. RELEVANT ( timely information with predictive or feedback value) 3. RELIABLE ( verifiable, faithfully representable, and neutral) 4. COMPARABLE 5. CONSISTENT 6. MATERIAL 7. LESS COSTLY THAN THE BENEFIT PROVIDED.
Q072. PRIMARY QUALITIES OF DECISION USEFULNESS – (2)
A072. 1. Relevance – ( Passing Feels Terrific) a) P – Predictive Value b) F – Feedback Value c) T – Timeliness 2. Reliability ( Nobody Relies on Financials unless Verified ) a) N – Neutrality – free from bias b) RF – Representational Faithfulness - info is valid c) V – Verifiability
Q073. Representation order of the major components of an Income and RE statement (“IDEA”)
A073. 1. Reported on IS – (I) INCOME (OR LOSS) FROM CONTINUING OPERATIONS – BEFORE TAX include Operating and Non-operating activities (D) Income from DISCOUNTINUED OPERATIONS – NET OF TAX (E) EXTRAORDINARY ITEMS – NET OF TAX unusual in nature and infrequent in occurrence. 2. Reported on RE Statement (A) cumulative effect of change in ACCOUNITNG PRINCIPLE – NET OF TAX RULE #1: line items ABOVE “income form continuing operations” are shown “gross” (before tax) RULE #2: line items BELOW “income form continuing operations” are shown “NET” (after tax)
Q074. Recognition and realization are NOT ________
A074. SYNONYMOUS
Q075. IDE(A) Accounting changes are broadly classified as (3) 1. Changes in accounting ESTIMATE -_________ 2. Changes in accounting PRINCIPLE - GR - ______________ 3. Changes in accounting ENTITY -________________
A075. 1. Changes in accounting ESTIMATE - Prospective as Income from Continuous operation 2. Changes in accounting PRINCIPLE - GR - Retrospective 3. Changes in accounting ENTITY = RESTATE - >Retrospective
Q076. ҉ Other Comprehensive Income - includes those items that are excluded from Net Income. (4) Comprehensive income: Net income +Other compr. income _________________________ Comprehensive income
A076. Pension minimum liability adjustments Unrealized gains and losses Foreign currency items Effective portion cash flow hedges PUFE is not reported on IS - it is direct to Equity Adjustment
Q077. Other comprehensive income includes all changes in Equity from nonOwner sources. The components of OTHER COMPREHENSIVE INCOME are: (4)
A077. Pension minimum liability adjustments Unrealized G/L - available-for-sale securities only Foreign currency items Effective portion cash flow hedge
Q078. Examples of items commonly considered to be cash equivalents are: Treasury bills, commercial paper, money market funds, and federal funds sold. Cash purchases and sales of those investments generally are part of the enterprise’s cash management activities rather than part of its operating, investing, and financing activities, and details of those transactions need not be reported in _________
A078. A Statement of Cash flows.
Q079. You will be able to easily remember approximately 85% of the adjustments made to the operating activities section under the INDIRECT METHOD by remembering the mnemonic CLAD
A079. Current assets and liabilities Losses and Gains Amortization and Depreciation Deferred Items
Q080. What is basic accounting equation?
A080. Beginning Balance + Additions - Deletions = Ending Balance
Q081. THE A/R TURNOVER RATIO=
A081. NET CREDIT SALE / AVERAGE. RECEIVABLES AVERAGE RECEIVABLES= (A/R - allowance for doubtful accounts YEAR1 + A/R - allowance for doubtful accounts YEAR2) / 2
Q082. ROI - Return on Investment =
A082. Net income / Total Investment = Net income + Interest expense after the effect of Income tax / Liabilities + Equity
Q083. Debt-to-Equity ratio =
A083. DEBT/EQUITY DEBT = ASSETS - CAPITAL STOCK - EQUITY
Q084. TOTAL ASSET T/OVER=
A084. NET SALES / AVERAGE TOTAL ASSETS
Q085. THE QUICK RATIO =
NAME?
Q086. AVRG COLLECTION PERIOD for A/R =
A086. 360 / A/R T/OVER AR T/OVER = NET SALE/ AVERAGE A/R
Q087. ҉ GENERATE MULTIPLE STEP INCOME STATEMENT
A087.
Q088. A statement of Cash F shall explain the change during the period in ____________ and its primary purpose is to provide relevant info about _________ and ____________
A088. CASH AND CASH EQUIVALENTS CASH RECEIPTS AND DISBURSEMENTS
Q089. One of the key purposes of the statement of CF is to disclose how a business ____________ its operations.
A089. FINANCED
Q090. Categories to Report separately under the Direct method (10)
A090. INFLOW 1 cash received from customers 2 interest received 3. dividends received 4 Other operating cash receipts such as receipt of insurance proceeds and lawsuit settlement 5 cash received from the sale of securities classified as Trading securities OUTFLOW 6 cash paid to suppliers and employees 7 interest paid 8 income taxes paid 9 cash paid to acquire securities classified as Trading sec. 10 other operating cash payments
Q091. BOND DISCOUNT represents _____________ at the bond maturity and is amortized over the life of the bond; amortized amounts ___________ interest EXPENSE each period
A091. ADDITIONAL INTEREST TO BE PAID TO INVESTORS INCREASE
Q092. BOND PREMIUM represents _____________ who then receive a return of this premium in the form of larger periodic payments; amortized amounts ___________ interest EXPENSE each period
A092. INTEREST PAID IN ADVANCE TO THE ISSUER BY BONDHOLDERS DECREASE
Q093. CARRYING VALUE OF THE BOND =
A093. FACE + UNAMORTIZED PRIMIUM - UNAMORTIZED DISCOUNT OR CV + DISCOUNT AMORTIZATION FOR THE PERIOD - PRIMIUM AMORTIZATION FOR THE PERIOD
Q094. EFFECTIVE INTEREST METHOD for the amortization of DISCOUNTS/PREMIUMS is required by GAAP INTEREST EXPENSE = INTEREST PAID = DIFFERENCE ?
A094. (I/S impact) INTEREST EXPENSE = NET CARRYING VALUE X Effective Interest Rate (B/S impact) INTEREST PAID = BOND FACE X STATED RATE DIFFERENCE = INTEREST EXPENSE less INTEREST PAID
Q095. The purpose of the IS is to provide info about the uses of funds in the income process - _________ , the uses of funds that will never be used to earn income - __________ , the sources of funds created by those expenses - __________, and the sources of funds not associated with the earnings process - __________
A095. EXPENSES LOSSES REVENUES GAINS
Q096. The IS is useful in determining __________, _________ for investment purposes and credit__________.
A096. PROFITABILITY VALUE WORTHINESS
Q097. Cost is the amount actually paid for something. If COST is expensed immediately - it is ________ cost; if NOT expensed immediately - it is ________
A097. PERIOD CAPITALIZED = ASSET
Q098. Unexpired cost is _________ because it can generate revenue in the future.
A098. ASSET
Q099. _________ and _________ are normal reacuring operations , both separately reported at their ________ amounts
A099. REVENUES AND EXPENSES GROSS
Q100. __________ and _________ are nonoperating income and reported at their _________ amounts.
A100. GAINS AND LOSSES NET
Q101. COGS =
A101. BI . + GOGM/purchases - EI . _________________ COGS .
Q102. In the SINGLE STEP IS presentation of income from continuing operations, total _______ are subtracted form total ________ .
A102. EXPENSES REVENUES
Q103. iDea - Discontinued operations - are reported separately from continuing operations in the IS in the period in which they occur - anticipated losses NOT allowed. The loss form Discontinued operations can consist of an (3)
A103. 1 impairment loss 2 G/L form actual operations 3 G/L on disposal
Q104. A component of a business is classified as “Held for sale” in the period in which ALL criteria are met:(6)
A104. 1. Plan to sell 2 available for immediate sale 3 active to locate a buyer 4 expected to sell within ONE year 5 is being actively marketed 6 significant changes are unlikely
Q105. Both of the following conditions must be met in order to report income from DISCONTINUED operations :
A105. 1 ELIMINATED FROM ONGOING OPERATIONS 2 NO SIGNIFICANT CONTINUING INVOLVEMENT
Q106. Report the results of DISCONTINUED operations in period component is DISPOSED OF or IS CLSSIFIED AS HELD FOR SALE. Types of items included : (3)
A106. 1 revenues/expenses of the component - for that period 2 G/L on Disposal - in the period of sale 3 Impairment Loss and Subsequent increase in FV SP/NRV < BV, report immediately in the period HELD FOR SALE
Q107. The results of DISCONTINUED operations, net of ________, are reported as a separate component of IS before the _________. G/L disclosed in ______ or in ________
A107. TAX EXTRAORDINARY FACE OR NOTES
Q108. idEa - EXTRAORDINARY ITEMS - must be _____ AND _________
A108. UNUSUAL AND INFREQUENT
Q109. MATERIAL Unusual OR Infrequent items should be reported as a separate line item as part or income from ___________________ at ____ amount.
A109. CONTINUING OPERATIONS GROSS
Q110. INCOME STATEMENT Normal reoccurring operations list the items for multiple step
A110. Net sales Cost of sales ———————————– Gross margin Selling expense G&A expenses Depreciation Expense —————————————– Income (loss) from operations
Q111. INCOME STATEMENT Non-operating list the items for multiple step
A111. OTHER revenues and gains: Interest Income Gain on transactions in foreign currencies OTHER expenses and losses: Interest Expense Loss on sale of fixed assets INCOME before unusual items and income tax UNUSUAL or infrequent items Gain on litigation settlement Gain on sale of available-for-sale investments INCOME before income tax
Q112. Net sales=
A112. Net sales= Gross Sales - returns - discounts
Q113. Inventory cost = Selling expense= G&A expenses= Non-operating =
A113.
Q114. Examples of extraordinary items:
A114. 1. the abandonment of a plant due to an INFREQUENT earthquake. 2. An expropriation of a plant by the government. 3. A prohibition of a product line by a newly enacted law or regulation. 4. Certain gains or losses from extinguishment of long- term debt - must say unusual and infrequent.
Q115. ҉ Examples of NONEXTRAORDINARY items: 1.2.3.4.5.
A115. 1. Gains or loss form sale or abandonment of property, plant or equipment used in the business 2. Large writedowns or writeoffs of: A/R, Inventory, Intangibles, Long-term securities 3. G/L from Foreign currency transactions of translation. 4. Losses from major strike by employees 5. Long-term debt extinguishments (not unusual and infrequent)
Q116. DISCOUNTINUED OPERATIONS – are reported separately from continuing operations in the _________. The loss from discontinued operations can consist of an Impairment loss, a Gain/loss from actual operations, and the Gain/loss on disposal. (in the period in which they occur) (iDea)
A116. Income Statement
Q117. CHANGE IN ACCOUNTING ESTIMATE - PROSPECTEVELY In the 3rd year of asset it estimated useful life was changed from 10 to 5. how to calc. the depreciation for current and future years?
A117. (BV- accum depreciation ) / remaining useful life using new estimate (5-2)
Q118. IDE(A) Accounting changes are broadly classified as (3) 1. Changes in accounting ESTIMATE - Prospective as Income from Continuous operation 2. Changes in accounting PRINCIPLE - GR - Retrospective Change from GAAP to _________ Principal may be changed only IF new principal is _________ and _________ presents the information. 3. Changes in accounting ENTITY - Retrospective
A118. Change from GAAP to GAAP preferable and more fairly
Q119. Prior period adjustments are not considered ______________
A119. ACCOUNTING CHANGES
Q120. Prior period adjustments: 1. Correction of __________ 2. new GAAP pronouncement 3. Changes from __________ method of accounting to ____________
A120. 1. ERROR 3. non-GAAP TO GAAP (from cash basis to accrual)
Q121. F/S prep under which of the methods include adjustments for both specific price ∆ and general price-level ∆
A121. CURRENT COST, CONSTANT DOLLAR
Q122. Statement of cash flow Cash receipts and cash payments are classified into three categories: 1. ___________ all transactions and other events that are not investing or financing; generally include transactions that enter into the determination of net income. These include production and delivery of goods and services, interest and dividends received, and payment of interest. 2 __________ all transactions related to the making or collecting of loans and the acquiring and disposing of debt, equity instruments , or property, plant, and equipment. 3. ___________ all transactions related to obtaining resources from owners and providing them with a return on, and a return of, their investment , and to obtaining and repaying debt.
A122. 1. OPERATING ACTIVITIES 2. INVESTMENT ACTIVITIES 3. FINANCING ACTIVITIES
Q123. Cash inflows are not to be netted against __________
A123. CASH OUTFLOWS
Q124. Examples of items commonly considered to be cash Equivalents are ________ (4). Cash purchases and sales of those investments generally are part of the enterprise’s cash management activities rather than part of its operating, investing, and financial activities, and detail of those transactions need not be reported in _____________
A124. 1. Treasury bills 2. commercial paper 3. money market funds, 4 federal funds sold a Statement of cash flows.
Q125. Cash ________ from _________ activities generally include the following: 1. Cash receipts from sale of goods or services 2. Cash receipts from interest and dividends on investments in another enterprise 3. All other cash receipts that are not classified as either investing or financing activities.
A125. INFLOWS FROM OPERATING ACTIVITIES
Q126. Cash ________ classified as ____________ include the following: 1. Cash payments to acquire materials for manufacture or goods for resale 2. Cash payments to other suppliers and employees for goods and services 3. Cash payments to Gov. for taxes, duties other fees, or penalties 4. Cash payments to lenders and other creditors for interest 5 All other cash payments that are not classified as either investing or financing activities.
A126. OUTFLOWS OPERATING ACTIVITES
Q127. The following are types of cash ________ from _______: 1. Cash receipts form collections or sales of loans made by the enterprise and of other debt instruments that are purchased by the enterprise 2. Cash receipts form sale of equity securities of other enterprises 3. Cash receipts form the sale of PP&E and other productive assets
A127. INFLOWS INVESTING ACTIVITIES
Q128. 1. Cash payments for loans made by the enterprise and payments to acquire debt instruments of other entities 2. Cash payments to acquire equity instruments of other enterprises 3. Cash payments to purchase PP&E and other productive assets
A128. OUTFLOWS INVESTING ACTIVITIES
Q129. Cash _________ from __________ include the following: 1. Cash proceeds from issuing equity instruments 2. Cash proceeds from issuing bonds, mortgages, notes, and other short-and- long-term debt instruments
A129. INFLOW FINANCING ACTIVITIES
Q130. Cash _________ classified as ____________ are as following: 1. Cash payments of dividends of other distributions to owners, including outlays to reacquire the enterprise’s instruments 2. Cash repayments of amounts borrowed 3. other principal cash payments to creditors who have extended long-term credit
A130. OUTFLOW FINANCING ACTIVITIES
Q131. Cash received from sale of equipment with accumulated depreciation for Gain =
NAME?
Q132. A reconciliation of ending retained earnings to net cash flow from operations is _________ to be disclosed on the Statement of CF.
A132. NOT REQUIRED
Q133. The Gain on sale of the land does ___________ Investment activities. Gain =
A133. NOT affect Gain = Proceeds from Sale of FA - NBV NBV= Cost - Accumulated depreciation
Q134. The amortization of the bond discount is classified as Interest Expense and has been deducted in arriving at NI. Using INDIRECT method, this amortization must be __________ to NI to compute net cash provided by _________.
A134. Added Operating Activities.
Q135. Using direct method compute Cash paid to suppliers.
A135. COGS for the year + increase in inventory + Decrease in A/P ___________________ Cash paid to suppliers
Q136. Only those changes that are NOT investing ( purchase of equipment) or financing ( change in notes payable) are _________________
A136. OPERATING ACTIVITIES
Q137. In calculating CF from Operating act. using Indirect method, NONCASH expenses (Depreciation and Amortization) are ___________. The sale of equipment is included in CF form investing activities; the Gain on the sale of that equipment is __________ in the Operating activities section so that it will not counted in both NI and Sale of Equipment.
A137. ADDED BACK DEDUCTED NI + Depreciation Expense. (Non Cash) - G/+L ( Investment Activity) ————————————– CF from Operating Activity INDIRECT METHOD
Q138. Indirect method - is a _________ IF used - must report the same amount of net CF form Operating activities indirectly, by adjusting NI to _________ it to net CF from Operating activities.
A138. RECONCILIATION METHOD RECONCILE
Q139. Under the ___________, NI is adjusted to arrive at net CF form Operating activities. In addition, supplemental disclosure of cash paid for interest and income tax is required.
A139. indirect method
Q140. Under the ___________, major classes of cash receipts and disbursements are presented in their gross amounts and totaled to arrive at at net CF form Operating activities.
A140. DIRECT METHOD
Q141. The amortization of a bond discount is the difference between ______ and __________. Because more expense has been deducted in computing income than the amount of cash paid for interest, the difference must be 2_____________ to reconcile to the cash provided to used for operating activities.
A141. CASH INTEREST AND INTEREST EXPENSE; INTEREST expense IS GREATER THAN CASH INTEREST. 2 ADDED TO INCOME
Q142. A discount (in sale of the bond) results when the ___________ is LESS than the _________
A142. STATED INTEREST RATE EFFECTIVE (MARKET) RATE
Q143. A premium results when the ______________ RATE is GREATER than the ___________RATE.
A143. STATED INTEREST RATE EFFECTIVE (MARKET) RATE
Q144. Only the _________ portion of the monthly lease payments would be reported as cash outflow for Financing activities in the CFS. ___________portion of the monthly lease payments would be reported as cash outflow for Operating activity in the CFS.
A144. 1. PRINCIPAL 2. INTEREST
Q145. The amortization of the bond discount is classified as __________ and has been deducted in arriving at ___________. Using the indirect method, this amortization must be added to _________ to compute net cash provided by _____ activities.
A145. INTEREST EXPENSE NET INCOME NET INCOME OPERATING
Q146. Statement of cash flow 1. OPERATING ACTIVITIES 2. INVESTMENT ACTIVITIES => you _____a LOAN and get $$$ receipts is a change in _________ inflow when - _________ outflow when _________ “_________” relationship 3. FINANCING ACTIVITIES => you get a ____ and repay it * _________on notes, bonds, mortgages * your own _________ * Pay _________ “_________” relationship
A146. Statement of cash flow 1. OPERATING ACTIVITIES 2. INVESTMENT ACTIVITIES => you MAKE a LOAN and get $$$ receipts is a change in NON- CA inflow when - SELL outflow when BUY “INVERSE” relationship 3. FINANCING ACTIVITIES => you get a LOAN and repay it * Principal on notes, bonds, mortgages * your own stock * Pay dividends “DIRECT” relationship
Q147. Purchasing power G/L only result from holding_________ assets/liabilities. During inflation , prices ___ resulting in a purchasing power __________
A147. MONETARY INCREASE LOSS
Q148. The info about the effect of changing prices would be _____________ info to the FS
A148. SUPPLEMENTARY
Q149. SFAS 89 defines the inflation component of the increase in current cost amount as the difference between the ________ dollar and _________ dollar measures. inflation component =
A149. NOMINAL AND CONSTANT increase in NOMINAL $ LESS increase in CONSTANT $ ——————————————— = inflation component
Q150. A summary __________ should be the first disclosure in the notes to the FS. Examples basis of consolidation depreciation methods amortization of intangible inventory pricing accounting for research and development costs translation of foreign currencies recognition of profits on long-term construction-type contracts.
A150. of significant accounting policies
Q151. In the period of rising general price levels, wages payable would result in a purchasing power ___________ refundable deposits with suppliers would result in purchasing power _________.
A151. GAIN LOSS
Q152. ________ security - reported in the net income of the current period and accumulated in a valuation allowance ________ security - reported as a separate (negative) component of S/Equity and accumulated in a valuation allowance, which may be debit or credit balance
A152. TRADING AVAILABLE FOR SALE
Q153. SFAS 89 describes current cost/constant dollar accounting as method of accounting based on measures of current cost or lower recoverable amounts in units of currency, each of which has the same general purchasing power. These statements include adjustments for both specific _________ change and general _________ change.
A153. PRICE PRICE-LEVEL
Q154. COGS on a __________ BASIS may be computed by: multiplying the number of ___________ by the average _________of units during the year
A154. CURRENT number of units sold x average current cost of units during the year —————————————— COGS on a CURRENT BASIS
Q155. When _________ indexes are used to adjust major expense items (depreciation COGS) the result is restated amounts that approximate ____________ COSTS for those items.
A155. SPECIFIC CURRENT
Q156. Info which becomes known after the B/S date, but before the F/S are issued, should be _________
A156. DISCLOSED
Q157. __________ CONTINGENCIES should NOT be reflected in the accounts (accrued) but the adequate __________ should be made in Notes to the F/S _________ CONTINGENCY would be accrued.
A157. GAIN DISCLOSURE LOSS
Q158. __________ is the process of formally recording or incorporating an item into the FS of an entity as an asset, liability, revenue, expense, or the like
A158. RECOGNITION
Q159. __________CONCEPT the effects of price change on assets held and liabilities owed are recognized as “holding G/L” and included in return on capital
A159. FINANCIAL CAPITAL
Q160. the Board issues a Statement or Interpretation by simple _________ vote.
A160. MAJORITY
Q161. Both income tax-basis and GAAP -basis FS recognize all the financial activities of a company’s business. However, it is the _________ of this recognition that differs between the two methods.
A161. TIMING
Q162. The estimated current value of an investment that constitute a LARGE part of person’s total assets should be shown as _________ amount as _______
A162. ONE AN INVESTMENT
Q163. The estimated current value of an investment life insurance is the CASH VALUE of the policy less the amount of _______
A163. LOANS AGAINST IT.
Q164. NET WORTH =
A164. Estimated value of assets - Estimated value of liabilities - Tax on difference between estimated values and tax basis _________________________ Net worth Tax on difference between estimated values and tax basis = Difference in assets less difference in liabilities x Tax Rate
Q165. The estimated income taxes should be presented between _________ and _________ in the statement of financial condition.
A165. LIABILITIES AND NET WORTH
Q166. Personal FS should present assets at their ________ values and Liabilities at their _________ amounts.
A166. Estimated Current Estimated Current
Q167. The modified cash basis of accounting is a combination of the _________ basis and the ________ basis.
A167. CASH AND ACCRUAL
Q168. Cash basis income is (vs accrued basis) 1. Higher when 2 Lower when
A168. 1. AP (increase) ; AR (decrease) 2. AP (decrease) ; AR(increase) direct relationship with AP
Q169. A set of Personal FS usually includes a statement of __________ and a statement of __________
A169. FINANCIAL CONDITION AND NET WORTH
Q170. The _________ is the most important factor shown by comparative FS analysis. It is usually expressed in terms of a base year, thus allowing the manager to observe the __________ of the accounts.
A170. TREND direction
Q171. _________ analysis, _________ analysis , and _________ analysis are tools for FS analysis.
A171. RATIO analysis TREND analysis COMPARATIVE STATEMENT analysis
Q172. In FS analysis, the expressing of all FS figures as a % of base-year figures is called :
A172. HORIZONTAL COMMON SIZE ANALYSIS
Q173. _________ analysis is the method of FS analysis that computes component % changes.
A173. VERTICAL
Q174. _______ stock is common stock which has been repurchases by the company and held in its treasury to be resold when the company needs money. Firm ASSETS and EQUITY is ________ by the amount of the purchase.
A174. TREASURY REDUCED
Q175. Cash basis net revenue =
A175. NET REV FROM CASH SALE + CASH COLLECTED FROM CREDIT SALES ____________________________ Cash basis net revenue CASH COLLECTED FROM CREDIT SALES = net credit sales + decrease in A/R
Q176. ҉ Those segments that meet at least one of the tests represent REPORTABLE SEGMENTS. The test are:
A176. 10% of REVENUE ( 10% or more of the combined rev, internal and external, of all operating segments) 10% of PROFIT or LOSS 10% of ASSETS
Q177. How do you record an asset purchased on a deferred payment plan?
A177. At it’s cash equivalent price, if that’s unavailable, imputed interest rate should be used and PV of payments.
Q178. How do you record an asset purchased by issuance of securities?
A178. FV or FV of the securities issued, whichever is more clear.
Q179. What are 3 assets qualifying for interest capitalization?
A179. 1. Assets constructed or produced for self-use on a repetitive basis. 2. Assets acquired for self use through arrangements requiring down payments or progress payments. 3. Assets constructed or produced as discrete projects for sale or lease.
Q180. What’s the formula for weighted average rate?
A180. Total Interest / Total Principal
Q181. Is interest cost capitalized part of the cost of acquiring the asset & written off over the estimated useful life of the asset?
A181. Yes
Q182. How do you record an asset by self construction?
A182. By all directly related costs: DM, DL & additional overhead incurred
Q183. What is a revenue expenditure?
A183. Expenditures that benefit only the current period are charged to expense as incurred.
Q184. How are assets to be recorded?
A184. At acquisition cost, which includes all costs reasonably necessary to bring it to the location and to make it ready for its intended use.
Q185. How would the entity paying boot record new asset? Is there any gain recognized?
A185. No Gain recognized. Record the asset received at the amount of boot paid plus the recorded amount of the asset surrendered.
Q186. Formula for portion of BV sold when receiving boot?
A186. BV of old asset x (boot/(boot + BV of new asset)
Q187. When an exchange with boot indicates a loss, do you recognize the whole loss or just a portion?
A187. Whole loss!
Q188. When you’re the recipient of boot, how is your gain calculated?
A188. Realize a gain to the extent the monetary (boot) receipt exceeds a proportionate share of the recorded amount of the asset surrendered.
Q189. T or F G & L’s in general for nonmonetary transactions should be based on FV’s? Either asset surrendered or asset received, whichever is more clearly determinable?
A189. True
Q190. When are the 3 times nonmonetary exchanges should be based on recorded amounts?
A190. 1. Can’t tell either FV 2. Trans is an exchange of a product or property held for sale in the normal course of business for a prod or prop to be sold in the same line of business to facilitate sales to customers. 3. Trans lacks comm substance
Q191. How is a nonreciprocal transfer recorded?
A191. At FV, G or L should be recognized on the disposition of the asset.
Q192. How are donated assets recorded?
A192. At FV along with any incidental costs incurred. When received from government entity , no inc is recognized, off setting CR is to an OE acct. Additional-PIC-Donated Assets
Q193. What’s the diff btw Group & Composite depreciation?
A193. 1 Group-Assets have similar service lives, no G or L’s recognized, CR asset DR ad for same amount less any proceeds received in disposition. 2. Composite-have a wider range of service lives. Determined by calculating the annual depreciation expense for each asset, adding them up, and putting as a % of total cost of assets.
Q194. What are the 3 methods of fractional year depreciation?
A194. 1 Depreciation for one year in the year of acquisition & none in year of disp. 2 Half year depreciation in year of acquisition & disp. 3 Proportional Depreciation
Q195. Formula for Sum of the years digits depreciation?
A195. HC-SV x Fraction for year
Q196. When reclassifying an asset, do you use BV or FV as new amount?
A196. Going from Held For Sale to Held & Used reclass will be lower of: FV at date that asset is reclassified or BV before being classified as held for sale, adjust for any depreciation (amortization) that would have been recognized had the asset been originally held & used.
Q197. What’s the formula for DDB depreciation?
A197. 2 / EUL x (HC-AD) or (BV)
Q198. What’s the formula for variable charge depreciation?
A198. Depreciation expense = HC - SV / Total Expected Output or usage x current output or usage
Q199. What are the 3 categories of impaired assets?
A199. 1 Held for sale 2 Assets Held for use 3 Disposals other than by sale
Q200. Journal entries : 1. to collect royalties - B/S only 2. to recognized earned royalties - I/S impact
A200. DR Cash CR Unearned Royalties 2 DR Unearned Royalties CR Earned Royalties
