Far 2 Flashcards
What is the profit margin ration
Net income / net sales
What is gross margin ratio?
Gross profit / net sales
Earnings per share ratio
Net income / weighted average of common stock outstanding
What is the purpose of the comprehensive income statement?
To show the full picture of all operating income, gains, and losses
What five items are in comprehensive income
Net income
Unrealized gains/loss afs securities
Unrecognized gains loss on pension costs
Foreign currency translation adjustments
Gains and losses from certain derivatives
What is AOCI?
Accumulated other comprehensive income
Where is AOCI in the balance sheet?
Shareholders equity
What is in the statement of changes in equity?
Common and preferred stock
Additional paid in capital
Retained earnings
Treasury stock
AOCI
What section of the statement of cash flows does making a loan go to?
Investing
Getting a loan is in the financing section
What section in the statement of cash flows does sting dividends go?
Financing section
Also paying bonds is here
Dividends received are part of net income which is what kind of activity?
Operating
What kind of activity is interest expense and interest income?
Operating activity
What is included in the Financing Activities of Cashflow statement?
It includes all cash flows involving Liabilies and Equity other than operating items; such as bank borrowing, dividend payments, issuance of stock, bank loan payments
What kind of expense excludes early stage production, legal fees for patents, and advertising?
Research and development.
When there is an intercompany sale of goods how do you eliminate the inventory?
There is no profit or loss between the two. An entry must be calculated for the cost of the sale between the companies.
In a business consolidation are transaction costs capitalized or expenses?
The are expenses. This includes legal fees, audit fees, finders fee
After one year of a business consolidation how do you calculate net income?
You consolidate the parents net income and the subs net income after the consolidation
If a contingent loss cannot be estimated then what do you do in the financial statement?
Put a description and a range of possible loss
What circumstances will goodwill be recognized in a business combination carried out as a legal merger?
When the price paid is higher than the FV of the net assets (assets minus liabilities)
What is the intrinsic value of a Call option dirrivitive?
The difference between the strike price and the market price
Wht is the journal entry for the allowance of returns
A debit to Sales Returns and a credit to allowance for sales returns
When a company sells an asset like a warehouse to replace it with a like kind asset, The excess of the proceeds to purchase the new warehouse would be reported as?
Part of continued operations. It is common to upgrade assets
In weighted average number of shares do you use the number of months for dividends and stock issuance?
You do not use months for the dividedns, it is considered declared at the beginning of the year. Stock issuance is from the month they were declared
What are the three ways that an operating segment would be deemed reportable?
They have 10% of Revenue
10% or more of total profit
Segment assets are 10% or more
Software development: The costs before technological feasability are expensed or capitalized?
Expensed. Once it is determined that the product will be sold then the expenses are capitalized.
What are the two most common items on other comprehensive income?
Unrealized gains or losses on available for sale securities and currency differences
For financing activitires, who is the interaction with? What is the exception?
Owners and creditors. The exception is dividends received is an operating activity.
Why is the gain on sale of equipment in the operating activities but the cash is in the investing activities?
That is because the Gain is included in the Net Income and it is necessary to remove it from net income to get to the cashflow balance. You have to negate the impact of a loss or gain in operating activities section of the statement of cashflows.
What are the two most common noncash expenses?
Depreciation and Amortization
How do you calculate the loss on the sale of an investment when you don’t use the FV method?
The loss is the difference between the purchased price of the investment and the selling price of the investment plus the fees and taxes. Do not forget the fees and taxes in the loss!
