Far 4 Flashcards
What is the difference between perpetual and period inventory methods?
Perpetual count at cost from the end of the account period. This results in highest COGS think LIFO and lowest ending inventoy. Periodic uses the date of sale
Leasing: What are the percentages you have to look out for financing and operating leases?
Is the lease 75% or more of ecnonmic life? and is the present value of lease payments equal to 90% of the FC of the lease property
For private company alternative for goodwill, how many years to amortize the intangible asset?
10 years
How do you calculate goodwill?
Purchase price - FV of net identifiable assets
IN a consiolidation what is the most you can depreciate your asset by?
The fixed asset cannoy be depreciated by a greater amount through a incercompany sale
How do you determine the performance of a bond?
Adding the interest revenue and unrealized holding gains
what is avoidable interest?
Avoidable interest is the interest cost that could have been avoided if the construction project did not happen.
How do you calculate the book value of a bond
The equation is total owners equity divided by the number of shares outstanding.
When allocating the proceeds of common and preferred stock dont forget to
total proceeds are allocated to the two securities based on relative market values.
Market value of common: 1,000($36) = $36,000
Market value of preferred: 2,000($27) = 54,000
Total market value $90,000
Allocation of proceeds to preferred = ($54,000/$90,000)$80,000 = $48,000
Are deferred income tax liabilities multiplied by the current rate or at the future rate?
Future tax rate
When calculating goodwill make sure you caculate Net Identifiable Assets. How do you calculate
Fair value of assets minus any liabilities.
During a consolidation, the investment in the company is always eliminated. What else could be eliminated?
Interest, Bond, receivable, and payables are all accounts that can be eliminated in a consolidation.
Consolidation: Sale of Asset: The depreciation expense cannot be higher than the parent company’s depreciation. What happens to the access
It is eliminated.
Purchasing bonds: The formula to calculate discount amortization is the interest revenue minus the cash interest.
When the interest method of amortization is used, interest revenue is computed directly, and the amount of discount amortization is computed indirectly as follows:
Interest revenue – Stated or cash interest = Discount amortizations
How do you calculate deferred gross profit?
It is the difference between the fair value of an asset and the carrying amount
If a contract is calcnellable and the work has not because what must you do with the revenue?
Do not book anything until the work has started since it can be cancelled up to that point.
How to calculation depletion rate?
Total cost for mine minus salvage value divided by the total extraction amount.
In equity method accounting of an investment how are dividednds reported?
They reduce the equity investment.
How to calculate common stock when there are preferred stock in arrears
First calculate the preferred stock dividednds in arrears and the current year. Then calculate current year common stock. Based on the percentage distribute any remaining funds.
Where is Bonds Payable in the balance sheet?
long term liability
In the stock holders equity section, name the components
Preferred stock, common, treasury, and APIC
What is a subsequent event
Happens after fiscal year but before the statement. Examples include lawsuit or weather event use a footnote disclosure.
Tips for balance sheet
Trial balance or partial balance sheet
We’re we given balances or changes in balances
Do retained earnings analysis
What part of the statement of cash flows do interest paid and dividend revenue belong?
Operating
What part of the statement of cash flows is changes in long term assets
Investing section
Where does interactions with owners and creditors belong of the statesmen of cash flows
Financing. This includes principal payments on long term liability and dividends paid to shareholders
What is the direct method of cashflows
They are asking for the amount paid for something.
The indirect is to start with the net income and adjust to cashflow. Only the operating account differs between direct and indirect method
