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FAR: Financial > FAR: F3 & F4 > Flashcards

FAR: F3 & F4 Flashcards

1
Q

What are trading securities. How is it classified and reported on the B/S?

A

equity and debt securities bought to be sold in less than a year. Reported as a current asset. It is reported at FV.

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2
Q

What are available for sale securities? How is it classified and reported on the B/S?

A

Equity and debt securities bought to be either sold within a year or sold at a later date beyond a year. Can be reported as either current or non current depending on managements intent. It is reported at FV.

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3
Q

What are Held to Maturity securities? How is it classified and reported on the B/S?

A

Debt security investments that management has the positive intent and ability to hold the security until it matures. It is a Non current asset until maturity. It is reported at cost, net of amortization

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4
Q

Unrealized G/L from trading securities are reported on which F/S?

A

Income statement

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5
Q

Unrealized G/L from available for sale securities are reported on which F/S?

A

Balance sheet = Included in Comprehensive income

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6
Q

Unrealized G/L from held to maturity are reported on which F/S?

A

None

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7
Q

Realized G/L from trading securities are reported on which F/S?

A

Income statement

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8
Q

Realized G/L from available for sale securities are reported on which F/S?

A

Income Statement

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9
Q

Realized G/L from held to maturity are reported on which F/S?

A

in accordance with amortized cost

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10
Q

Any transfer reclassification of a security (trading, AFS or held to maturity) is accounted for at

A

Fair Value

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11
Q

What do you do when reclassification Unrealized G/L from trading to AFS or H-to-M?

A

Nothing! It has already been recognized income.

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12
Q

What do you do when reclassification Unrealized G/L from AFS or H-to-M to trading?

A

Recognize in current earnings

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13
Q

What do you do when reclassification Unrealized G/L from H-to-M to AFS?

A

Record in OCI

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14
Q

What do you do when reclassification Unrealized G/L from AFS to H-to-M ?

A

Amortize G/L from OCI with any bond premium/discount amortization

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15
Q

Dividend Income =

A

Number of shares x Dividend per share

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16
Q

T/F: A stock dividend is income? How should it be recognized under a consolidated I/S?

A

False. Should be a memo entry only

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17
Q

T/F: Under consolidated I/S Dividend revenue should be recognized to the extent of cumulative earnings since acquisition and return of capital beyond that point.

A

True

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18
Q

T/F: Under the cost method, dividends (not earnings) are not reflected as income by the investor.

A

Flase

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19
Q

The cost basis account is reduced only if (3 conditions)

A

Shares of stock are sold, cumulative dividends > cumulate earnings (Return of capital), or subsidiary incurs losses that significantly reduced net worth.

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20
Q

Consolidated NI =

A 
Parents NI 
\+Subs. NI (from date of acquisition)
\+/- effects of inter company transactions
- Depreciation 
- Impairment losses on goodwill (if any)
= Consolidated NI
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21
Q

Consolidated R/E =

A

Parent’s Beg R/E
+ Consolidated NI
- Parents Dividends (CY)
= Ending R/E

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22
Q

Under what method does a receipt of a dividend as income and is recorded as income and does not affect the investment account

A

Under the cost method

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23
Q

Under what method does a receipt of a dividend recorded decrease the investment account

A

Under the equity method

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24
Q

T/F: Under both the cost and equity methods, liquidating dividend reduce the carrying amount of the investment account

A

True

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25
Q

T/F: ny good will created in an investment accounting for under the equity method is ignored. It is neither amortized nor tested for impairment. The entire investment (using the equity method) is subject to the impairment test.

A

True

26
Q

Significant influence cannot be exercised by holding non-voting stock. The cost method must be used.

A

True

27
Q

Under the cost method, receipt of a dividend is recorded as income and does not affect the investment account

A

True

28
Q

T/F: Under the Equity method, the consolidated stockholders equity will be the parent companies stockholders equity plus the non controlling interest at year end

A

False. That is under the Acquisition Method

29
Q

Consolidated Stockholders’ Equity =

A

C/S + A.P.I.C. + Non controlling Interest + R/E

30
Q

Non Controlling Interest =

A

Beginning NCI* + NCI share of NI - NCI share of Dividends = Ending NCI

31
Q

Ending R/E =

A

Beginning R/E + NI - Dividends

32
Q

T/F: Under the acquisition method, Consolidated NI is the same as the parent company R/E under the equity method

A

False, this is under the equity method

33
Q

CAR IN BIG is a nemonic for

A

CAR: Common Stock, A.P.I.C. and R/E

IN: Investments in Subs. and Non-Controlling Interest

BIG: Balance sheet adjustment to FV, Identifiable Intangible Assets and Goodwill (or Gain)

34
Q

Journal Entry for Work paper eliminating - CAR IN BIG

A

DR: CARBIG
CR: IN

35
Q

Full Goodwill Method

A

Goodwill = FV of subs. - FV of subs net assets

36
Q

Partial Goodwill Method

A

Goodwill = Acquisition cost - (FV of subs net assets acquired x Share %)

37
Q

Full Goodwill Method calc. for NCI

A

NCI = FV of subs x NCI%

38
Q

Partial Goodwill Method calc. for NCI

A

NCI = FV of subs net identifiable assets x NCI)

39
Q

Step Acquisition: From No control to control what should you do?

A

remeasure previously held equity interest.

40
Q

Control -> more or less control

A

no G/L recognize on the I/S

41
Q

Control to No control

A

Recognize the G/L of the sale of the stock, remeasure the remaining non consolidating interest to FV and recognize the adjustment to FV on the I/S

42
Q

Inter-company transactions should be

A

eliminated

43
Q

What is the formula to determine Intercompany sales

A

Parent Revenue + Subs. revenue - Rev. Consolidated = inter company sales (or revenue)

44
Q

What is the formula to determine Inter-company Receivable

A

Parent A/P
+ Subs A/P
- Consolidated A/P
= Intercompany Receivable

45
Q

What is the formula to determine Inter-company Payable

A

Parent A/R
+ Subs A/R
- Consolidated A/R
= Intercompany Receivable

46
Q

What is the formula to determine Inter-company Unrealized Profit

A

Parent Inventory
+ Subs. Inventory
- Consolidated Inventory
= unrealized Inter-company profit eliminated

47
Q

What are the 4 steps to determine carrying amount of inventory that sub. purchased from parent. Where is this reported?

A
  1. Find COGS and GP%
  2. Find Inter-company Revnue
  3. Multiple Intercompany Revnue by COGS %
  4. Multply # by inventory still on hand

This is reported on the consolidated B/S

48
Q

The purchase by the member of a consolidated group of stock of another member of the same consolidated group is treated as a

A

treasury stock transaction

49
Q

What is the formula to determine adjusted Cost of Sales

A

Parent COGS + Sub COGS - Adjusment for inter company sales = adjusted COGS

50
Q

Working Capital =

A

Current Assets - Current Liabilities

51
Q

Current Ratio =

A

Current Assets/Current Liabilities

52
Q

Quick Ratio =

A

(Cash + N/R + Marketable Sec.)/Current Liabilities

53
Q

Uncollectible’s, sales discounts, and sales returns and allowances are examples of

A

Allowances

54
Q

2/10, n30 Means?

A

2% discount if customer pays within 10 days, otherwise full payment is due in 30 days.

55
Q

Under Discounts how do you account for discounts under Gross and Net methods?

A

Gross Method - Assume no discount will be taken and
DR: A/R and CR: S/R

Net Method - Assume discount will be taken and
DR: A/R (at discounted price) and Sales Rev at discounted price.

  • Sales discount taken
56
Q

Goods returned reduces

A

A/R and Sales

57
Q

T/F: Expected exchanges do not affect net sales or inventory or cost of sales

A

True

58
Q

What is the formula for a bank reconciliation: *DOSBENI

A
  1. Deposits in transit (Add to Bank)
  2. Outstanding Checks (Subtract from bank)
  3. Service Charges (Subtract from books)
  4. Bank Collections (add to books)
  5. Erros (fix the error)
  6. NSF (Subtract from books)
  7. Interest Income (add to book)
59
Q

What is Pledging (Assignment)

A

Pledging is when a company uses there A/R as collateral for a loan. Requires a footnote disclosure only

60
Q

What is Factoring?

A

A company converting its receivables into cash by assigning them to a “factor” either with or without recourse.

61
Q

Under Factoring what is without recourse

A

means the sale is final and that the assignee (the factor) assumes the risk of any losses on collections. If the buyer cannot collect the A/R thats to bad.

62
Q

Under Factoring what is with recourse

A

factor has an option to re-sell any uncollectible receivables back to the seller (Sale or Loan)

FAR: Financial (2 decks)

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