FAR-2/10/24 Flashcards
When may a company classify a current liability as a non current liability?
IF THE COMPANY DEMONSTRATES A PLAN TO REFINANCE THE CURRENT LIABILITY WITH NON CURRENT DEBT.
What is a current liability?
A DEBT OWED BY A COMPANY THAT MUST BE SETTLED WITHIN 1 YEAR OF THE BALANCE SHEET DATE OR THE OPERATING CYCLE (WHICHEVER IS LONGER)
What is the accounting equation?
TOTAL ASSETS= TOTAL LIABILITIES + TOTAL EQUITY OR TOTAL EQUITY = TOTAL ASSETS - TOTAL LIABILITIES.
Name two ways an entity can demonstrate its intent to refinance a short term obligation to a long term basis?
- ISSUING LONG TERM DEBT/EQUITY AFTER THE BALANCE SHEET DATE BUT BEFORE THE FINANCIAL STATEMENTS ARE ISSUED.
- A PLAN IS IN PLACE.
What is a current asset?
A RESOURCE THAT IS CONVERTED INTO CASH WITHIN 1 YEAR OF THE BALANCE SHEET DATE OR THE OPERATING CYCLE (WHICHEVER IS LONGER).
True or False:
Material events that are unusual or infrequent are reported net of tax as a component of discontinued operations.
FALSE.
THEY ARE NOT REPORTED NET OF TAX AND ARE A COMPONENT OF INCOME FROM CONTINUING OPERATIONS.
Are the results from discontinued operations reported net of tax?
YES.
When are operating gains/losses reported for discontinued operations?
IN THE PERIOD THAT THEY OCCUR.
What is the inventory formula?
BEGINNING INVENTORY PLUS PURCHASES (COST OF GOODS MANUFACTURED) = GOODS AVAILABLE FOR SALE LESS COST OF GOODS SOLD = ENDING INVENTORY
Comprenhensive Income = ________ ________ +/- OCI Items
NET INCOME.
True or False:
Does the comprehensive income statement include owner transactions?
FALSE.
COMPREHENSIVE INCOME EXCLUDES OWNER TRANSACTIONS (INVESTMENTS, DISTRIBUTIONS)
Name 3 items that are usually included in other comprehensive income?
- UNREALIZED GAIN/LOSS ON AVAILABLE FOR SALE SECURITIES
- GAINS/LOSSES ON CASH FLOW HEDGE DERIVATIVES
- FOREIGN CURRENCY TRANSLATIONS
Name the 2 ways Comprehensive Income can be presented.
- ONE CONTINUOUS STATEMENT
- TWO STATEMENT APPROACH
True of False:
Treasury Stock is an asset recorded under the company’s investments.
FALSE.
TREASURY STOCK IS A CONTRA EQUITY ACCOUNT, A SUBTRACTION FROM EQUITY (R/E).
Under foreign currency transactions, when are spot rates normally remeasured?
AT THE BALANCE SHEET DATE OR SETTLEMENT DATE.
What rate is used to convert a subsidiary foreign currency ASSETS AND LIABILITIES to the parent co. functional currency?
THE CURRENT RATE AS OF BALANCE SHEET DATE IS USED WHEN TRANSLATING THE FOREIGN CURRENCY UNITS TO FUNCTIONAL CURRENCY.
What rate is used to convert a subsidiary foreign currency REV, EXP, GAINS, LOSSES to the parent co. functional currency?
THE AVERAGE EXCHANGE RATE IS USED TO GET THE DOLLAR AMOUNT NEEDED TO REPORT ON THE CONSOLIDATED INCOME STATEMENT.
When does the accrual basis of accounting recognize revenues and expenses?
REVENUES ARE RECOGNIZED WHEN EARNED
EXPENSES ARE RECOGNIZED WHEN INCURRED
(matching principle)
When does the cash basis of accounting recognize revenues and expenses?
REVENUES ARE RECOGNIZED WHEN CASH IS RECEIVED/COLLECTED
EXPENSES ARE RECOGNIZED WHEN CASH IS SPENT/PAID
When converting from the cash basis pretax income to the accrual basis pretax income how is a decrease in accounts payable recognized on the GAAP financial statements?
A DECREASE IN ACCOUNTS PAYABLE FROM BEGINNING TO END YEAR IS ADDED BACK WHEN CONVERTING TO ACCRUAL BASIS PRETAX INCOME TO AVOID COUNTING THE EXPENSE TWICE; THE EXPENSE HAS BEEN DEDUCTED IN THE PRIOR YEAR.
When determining the cash basis interest expense how is the change in prepaid expenses recognized on the income statement?
UNDER THE CASH BASIS METHOD A DECREASE IN PREPAID EXPENSE FROM BEG TO END OF YR IS ADDED BACK.(An expense was recognized but no cash was paid out)
UNDER THE CASH BASIS METHOD A INCREASE IN PREPAID EXPENSE FROM BEG TO END OF YR IS SUBTRACTED. (Cash was used to purchase the prepaid)
When determining the cash basis interest expense how is the change in accrued interest payable recognized on the income statement?
UNDER THE CASH BASIS METHOD A DECREASE IN ACCRUED INTEREST PAYABLE FROM BEG TO END OF YR IS SUBTRACTED (CASH WAS PAID TO REDUCE THE PAYABLE)
UNDER THE CASH BASIS METHOD AN INCREASE IN ACCRUED INTEREST PAYABLE FROM BEG TO END OF YR IS ADDED (NO CASH WAS PAID, PAYABLE STILL OWED)
