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Question 1

What is the difference between perpetual and period inventory methods?

Answer 1

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

Question 2

Leasing: What are the percentages you have to look out for financing and operating leases?

Answer 2

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

Question 3

For private company alternative for goodwill, how many years to amortize the intangible asset?

Answer 3

10 years

Question 4

How do you calculate goodwill?

Answer 4

Purchase price - FV of net identifiable assets

Question 5

IN a consiolidation what is the most you can depreciate your asset by?

Answer 5

The fixed asset cannoy be depreciated by a greater amount through a incercompany sale

Question 6

How do you determine the performance of a bond?

Answer 6

Adding the interest revenue and unrealized holding gains

Question 7

what is avoidable interest?

Answer 7

Avoidable interest is the interest cost that could have been avoided if the construction project did not happen.

Question 8

How do you calculate the book value of a bond

Answer 8

The equation is total owners equity divided by the number of shares outstanding.

Question 9

When allocating the proceeds of common and preferred stock dont forget to

Answer 9

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

Question 10

Are deferred income tax liabilities multiplied by the current rate or at the future rate?

Answer 10

Future tax rate

Question 11

When calculating goodwill make sure you caculate Net Identifiable Assets. How do you calculate

Answer 11

Fair value of assets minus any liabilities.

Question 12

During a consolidation, the investment in the company is always eliminated. What else could be eliminated?

Answer 12

Interest, Bond, receivable, and payables are all accounts that can be eliminated in a consolidation.

Question 13

Consolidation: Sale of Asset: The depreciation expense cannot be higher than the parent company’s depreciation. What happens to the access

Answer 13

It is eliminated.

Question 14

Purchasing bonds: The formula to calculate discount amortization is the interest revenue minus the cash interest.

Answer 14

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

Question 15

How do you calculate deferred gross profit?

Answer 15

It is the difference between the fair value of an asset and the carrying amount

Question 16

If a contract is calcnellable and the work has not because what must you do with the revenue?

Answer 16

Do not book anything until the work has started since it can be cancelled up to that point.

Question 17

How to calculation depletion rate?

Answer 17

Total cost for mine minus salvage value divided by the total extraction amount.

Question 18

In equity method accounting of an investment how are dividednds reported?

Answer 18

They reduce the equity investment.

Question 19

How to calculate common stock when there are preferred stock in arrears

Answer 19

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.

Question 20

Where is Bonds Payable in the balance sheet?

Answer 20

long term liability

Question 21

In the stock holders equity section, name the components

Answer 21

Preferred stock, common, treasury, and APIC

Question 22

What is a subsequent event

Answer 22

Happens after fiscal year but before the statement. Examples include lawsuit or weather event use a footnote disclosure.

Question 23

Tips for balance sheet

Answer 23

Trial balance or partial balance sheet
We’re we given balances or changes in balances
Do retained earnings analysis

Question 24

What part of the statement of cash flows do interest paid and dividend revenue belong?

Answer 24

Operating

Question 25

What part of the statement of cash flows is changes in long term assets

Answer 25

Investing section

Question 26

Where does interactions with owners and creditors belong of the statesmen of cash flows

Answer 26

Financing. This includes principal payments on long term liability and dividends paid to shareholders

Question 27

What is the direct method of cashflows

Answer 27

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