FAR

Question 1

If there is commercial substance to an exchange, the exchange is measured at:

Answer 1

Fair Value. The gain is equal to the old asset’s fair value and it’s book value. If the fair value was 30 and its book value is 25, the gain is 5.

Question 2

How does retail inventory method establish lower of cost or market valuation for ending inventory?

Answer 2

By excluding net markdowns from the cost to retail ratio.

Question 3

Can consolidated financial statements be prepared from a business combination that was accounted for using the acquisition method OR the pooling of interests method?

Answer 3

Yes to both. The pooling of interest method CANNOT be used anymore for business combinations, combinations that happened before that still need to be consolidated.

Question 4

Does a foreign sub using the local currency as its functional currency has their financials translated or remeasured?

Answer 4

Translated.

Question 5

Does a foreign sub using US dollars as its functional currency has their financials translated or remeasured?

Answer 5

Remeasured.

Question 6

Under translation, common stock is translated at the what exchange rate?

Answer 6

The historic exchange rate.

Question 7

500 shares of 6%, $100 par callable preferred stock are called at $101. The shares were issued at $103 per share. What is the journal entry to record the retirement?

Answer 7

DR preferred stock for 50,000DR PIC-preferred for 1,500CR PIC retirement of preferred for 1,000CR Cash for 50,500

Question 8

Working capital:

Answer 8

current assets - current liabilities

Question 9

Acid test:

Answer 9

(cash + net receivables)/current liabilities

Question 10

Acc Rec turnover:

Answer 10

Sales/ avg net receivables