FAR Chapter 1 Financial reporting

Question 1

How to calculate additional shares using the treasury stock method

Answer 1

Number of shares -(number of shares x exercise price/average market price)

Question 2

What is an unconditional redemption feature common stock and how is it reported on issues books

Answer 2

It is reported as a liability on date of issuance bc there is an obligation of a cash outflow in the future

Question 3

Difference between authorized issued and outstanding

Answer 3

Authorized- amount the company is able to issue

Issued-When stocks are issued to shareholders

Outstanding- when it’s in the hands of the shareholders

Question 4

What’s in retained earnings?

Answer 4

+ Net income/loss
- Dividends declared
+ Prior period adjustments
+ Accounting change retrospectively

Question 5

Formula for cs book value

Answer 5

Common shareStockholders equity/ common share outstanding

Question 6

Which account principle estimates are inseparable?

Answer 6

Change in dep for double decline to straight line or change in inventory to LIFO

Question 7

What items are net of tax on income statement?

Answer 7

extraordinary items, discontinued operations, or other comprehensive income.

Question 8

When does Common stock and APIC in excess of PAR increase?

Answer 8

When the stock is issued AND the rights are EXERCISED

Question 9

What is the relationship between ending inventory, cogs and net income?

Answer 9

Ending inventory ⬆️ COGS ⬇️ Net income ⬆️

Ending inventory ⬇️COGS ⬆️Net income ⬇️