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FAR important Flashcards

1
Q

Double declining balance method

A

Double strait line depreciation. Ignore salvage value

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2
Q

JE Stock dividends

A

DR Retained earnings (FV)
CR Common stock (FV)
CR Additional paid in Capital

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3
Q

Intrinsic value-increase gain.

A

=Mkt Price-Strike Price

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4
Q

Time value. Decrease-loss

A

=Mkt-Intrinsic

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5
Q

Bank Rec .Calculate cash disbursement per books

A

Bank statement Disbursement
-Outstanding checks from prior month Rank Rec
+Outstanding checks current month (recorded in books but not cleared a bank)

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6
Q 
SEC reporting
10K  60-75-90 audited FS
10 Q-40-40-45 non audited
8K-events
Forms 3,4,5 insiders >10%
Regulation SX BS3-Other3 audited
A

The Bigger you are the more money you have to file fast

More than 700 MM Large Accelerated
Between 700MM and 75MM Accelerated
Less than 75MM

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7
Q

Diluted EPS. Use Treasure Sock method for options and warrants.

A

Net Income-Preferred Dividends+-Saved Preferred Dividends+ Saved Interest Expense NET OF TAX/(WACSO+Shares issued on convertible stock+shares issued on convertible bonds)

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8
Q

Divutive - Unti Dilutive (Increase/Decrease Numerator). Calculate separately for each component. DO NOT INCLUDE ANTY DILUTED COMPONENT TO Diluted EPS calculation

A

Diluted EPS less than EPS basic Bonds (What has bigger effect, savings or # of new shares)

  1. Options/warrants diluted in Strike Price>Avg. Price. Use Treasury stock buy back
  2. Preferred stock and bonds diluted if Basic EPS getting less with added new shares
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9
Q

Diluted EPS (no good news)

A

Additional shares issued

Options and warrants in the money

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10
Q

Anti-diluted. Compare each component with Basic EPS. If less, than it is diluted

A
  • Bonds (Savings on interest net of tax/convereted from bonds shares)
  • Preferred stock convertible (Dividends/Additional shares)
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11
Q

What is Unrealized gain/loss AFS securities on statement of Comprehensive income

A

(Cost- Mkt year 1)-Mkt year 2

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12
Q

What is Unrealized gain/loss AFS securities reported as accumulated other comprehensive income

A

Cost -Mkt year 2

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13
Q

Equity method (>20% owned significant influence). Calculate INVESTMENT in subsidiary. Watch the dates, 1/2 if bought in the middle of the year

A

Purchased price
+% of ownership*Net Income
-%DIVIDENDS

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14
Q

Credit loss for AFS securities because of expected credit loss

A

Credit loss=(Cost-PV). It is recognized in IS not in OCI in the amount not exceed (Cost-FV). No additional loss will be recognized in OCI because AFS securities can be sold at FV

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15
Q

INCOME FROM INVESTMENT UNDER EQUITY METHOD. Watch the dates, 1/2 if bought in the middle of the year

A

% OF NET INCOME (1/2 if bought in July)

Dividends-not a factor for Income under equity method

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16
Q

Not included in Revenues

A

Loss from operations of component

Gain on disposal of component

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17
Q

Loss of disposal a segment

A

Operating loss+(FV-Selling Price)*70% Tax

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18
Q

Recalculate Net Income from Cash to accrual basis net income:

A 
Net Income (Cash basis)
\+Increase in AR
-Decrease in Prepaid Expenses
\+Unearned Revenue
\+Decrease in AP (more cash was paid for prior period expenses)
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19
Q

Days in inventory ratio

A

Ending Inventory/ (COGS/365)

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20
Q

Subsequent event for SEC filer

A

Till the distribution/issuance date

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21
Q

Consolidated segment report customers

A

if 10% of TOTAL revenue

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22
Q

10-Q file date

A

Accelerated-40 days

Non accelerated -45 days

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23
Q

Major customer

A

Sales more than 10% of all sales

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24
Q

Working Capital Turnover

A

Sales/Average Working Capital (Cur Assets-Current Liabilities)

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25
Q

Reportable segment rule segment revenue is 10% of Combined Revenue of all segments
10% of ALL (Combined) Profit
or 10% of ALL Loss or 10% of Assets

A

Separate profit into one column and loss in another one

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26
Q

FV of equipment is NOT measured

A

by Net Realizable Value approach

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27
Q

IF company files with SEC

A

No disclosure of date of subsequent event in the notes is necessary

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28
Q

If company not files with SEC

A

Disclosure of date of subsequent event in the notes when approval received and FS is available for sale

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29
Q

Large accelerated filer files 10-K (more than $700MM)

A

within 60 days

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30
Q

Additional paid in capital

A

Difference (FV on Net assets (Assets-Liabilites) -Par value of common stock issued)

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31
Q

Prepaid expenses in Accrual accounting are not expenses. Benefits were not received yet

A

If prepaid Expenses increased in the end of the year- Substract for operating expense accrual basis

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32
Q

Salvage value Deducted!

A

Cost-Salvage value! Except for Double declining method

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33
Q

If disaster (hail)is frequent

A

NO DISCLOSURE in notes required

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34
Q

If equipment going to be disposed in 3 months

A

Measure it by NRV in BS

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35
Q

Capital balance accounted under goodwill method

A

FV of one partner-Cash of another partner=Total capital, allocate goodwill excess proportionally

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36
Q

If nonmonetary transaction has commercial substance, Gain on exchange recognized under GAAP:

A

FV-BV of asset given (Cost-AD)

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37
Q

Gain loss in exchange with commercial substance

A

FV of acquired asset-Book value of the asset given up

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38
Q

In case of permanent impairment

A

Loss is added to accumulated depriciation

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39
Q

How to calculate COGS

A 
Beg Inventory
\+Purchases
COGAFS
-Ending Inventory
\_\_\_\_\_\_\_\_\_\_\_\_\_
COGS
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40
Q

Debt to Asset Ratio

A

Total Liabilities/Total Assets

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41
Q

Days in Inventory (Conversion Period)

A

Ending Inventory/(COGS/365)

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42
Q

Working Capital Turnover

A

Sales/ Avg Working Capital (Current Assets-Current Liabilities for 2 years)/2

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43
Q

Fixed asset sold voluntarily or involuntarily

Loses never calculated proportionally, only gains

If FV excess book value-always gain

A

Gain/Loss recognized as a part of continuing operations (proceeds/compensation-caring amount)

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44
Q

Nonmonetary Exchange Transactions

A
  1. Commercial substance-FV of asset given

2. Lack of commercial substance-reported amount of asset given/surrendered

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45
Q

Nonmonetary Exchange Transactions with lack of commercial substance

A

0 gain/loss recognized
-Gain recorded only if boot was received but not paid
-If FV of old asset given is more than caring value-no loss recognized
If no boot was received. no gain recognized
Book value of the asset received:
DR AD
DR New Truck (Plug)
CR Cash paid
CR Old truck

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46
Q

Sum of the year digits method: 3 years
Fixed Asset Cost-$12,000,
Salvage Value-$3,000
Calculated Depreciation in 3 year

A

Sum-of-the-years-digits: 3 + 2 + 1 = 6. Third year = 1/6 x $9,000 = $1,500.

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47
Q

Depletion cost

Depletion base-similar to amortization base
Depletion is similar to amortization

A

The depletion base equals the purchase price + the development costs +the estimated restoration costs-the expected salvage value /Depletion per ton;($Depletion Base/ # tons). Depletion per ton × 60,000 tons sold.

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48
Q

Segment test

A

In order to be a reportable segment, an individual segment must meet the 10 percent size test. The test is applied to revenues, reported profit (loss), and assets, and any segment that meets the 10 percent threshold in any of these categories will be reported separately. !!For the greater of combined profits or combined losses !!

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49
Q

net cash provided by operating activities

A

t. $151,400 net cash provided by operating activities, as follows:

Net income

150,000

Increase in A/R

(6,000)

Increase in allowance

200

Decrease in prepaid

4,200

Increase in A/P

3,000

151,400

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50
Q

Pension gain/loss for OCI calculation

A

Expected return (Beginning of the year assets*%)- Actual return

Actual return:
Beginning FV of assets
\+Contributions
- Benefits Paid
\+Actual Return
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
Ending FV of plant assets
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51
Q

The dividends paid to the noncontrolling shareholders (5,000 × .25 = 1,250) would decrease their noncontrolling interest under the equity method.

A

Eliminating Entry:
Debit (Dr) Credit (Cr)
Investment in Kidd
3,750

Noncontrolling interest
1,250

Dividends paid/retained earnings
5,000

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52
Q

Bond purchased year 1 and sold in year 2. At what amount AFS reported in BS?

A

Discount is not amortized on short-term investments. Price + change in FV.

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53
Q

Calculate total revenue from investment under equity method (more than 20%,less than 50%)

A

Preferred dividends+Equity in earnings

  1. Preferred stock dividends. Total%rateof ownership=Dividends received
  2. Net income-Paid preferred dividends=Net income available for common shareholders * % of ownership
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54
Q

To calculate goodwill impairment under GAAP: Compare Carrying amount vs FV of the reporting unit. If Carriyng >FV it’ is an impairment loss. Loss The loss will be equal to the difference between the Carrying amount and the fair value, not to exceed the amount of goodwill currently reflected on the balance sheet.

A

Good will impairment loss=

Carrying amount-FV amount. Loss doesn’t exceed Good will amount.

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55
Q

How to calculate gain in acquisition method

A
  • Common stock (BV Assets-BV LIABILITIES))
  • APIC
  • Retained Earnings
  • Investment in SUB
  • Non controlling interest
  • BS Adjustments ASSETS (FV Assets-FV BV assets)
  • Intangible assets recognized
  • Gain (difference)
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56
Q

Impairment Fixed Assets IFRS

A
  1. Excess CV- Recoverable amount

Recoverable amount-greater from 2:

  • FV-cost to sell or
  • Value in Use (PV of future CF)
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57
Q

How to calculate gain in acquisition method

A 
Common stock (BV Assets-BV Liabilities)
APIC
Retained Earnings
*Investment in SUB
*Non controlling interest
BS Adjustments
Intangible assets recognized
Gain (difference)
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58
Q

Non monetary exchange

A

If Cash (boot) is received. Because the cash is less than 10% of the total consideration, a proportional amount of the gain is recognized.

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59
Q

Times Interest Earned

A

(Income before Tax +add back interest Expense)/Interest Expense

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60
Q

Calculate Expense related to Software Cost

A
  1. Amortization Cost +

2. Impairment Loss Carrying Value (Cost -Amortization)-FV (Future Gross Rev-Future Cost to dispose)

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61
Q

amount capitalized as the cost of the equipment

A

The amount capitalized as the cost of the equipment should include all amounts necessary to purchase the equipment, bring the equipment to the location and condition as necessary for its intended use. These costs will include the cash paid for the down payment, the present value of the note payable, the shipping charges, and the installation charges

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62
Q

In an exchange lacking commercial substance (projected future cash flows are not materially different), gains are only recognized when cash is received. If cash received is less than 25% of the total consideration received, then a gain is recognized in proportion to the cash received.

A

Gain: FV given-BV given)*cash/FV

DR Cash
DR Inventory new (plug)
CR Inventory old
CR Gain

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63
Q

In any exchange, all realized losses are fully recognized in accordance with the principle of conservatism.

A

All realized losses are fully recognized regardless of the boot exchanged.

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64
Q

Return on assets

A

Net income after tax/Avg total assets

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65
Q

Uncollectible/Bad Debt Expense

A 
Beginning Balance
\+Recoveries
\+Expense (X)
-Write off
Ending Balance
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66
Q

Operating Cash flow

A

Cash Flow from operations/Total Current Liabilitties

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67
Q

Calculate current portion of provision for income tax

A

current portion of income taxes payable, which is simply 30% (current rate) of taxable income

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68
Q

Calculate current portion of provision for income tax

A

current portion of income taxes payable, which is simply 30% of taxable income

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69
Q

Finance lease

A

Variable lease payments not included in the lease liability are treated as cash outflows from operations and will therefore have a negative impact on bottom-line cash flow from operations.

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70
Q

Special revenue fund.

A

uses current financial resources measurement focus

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71
Q

Proprietary funds (which include both enterprise and internal service funds [SE]

A

use the economic resources measurement focus (similar to commercial accounting)

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72
Q

What amount s/b reported as cash

A

check is not disbursed as of December 31, Year 1, it should be added back to the checkbook balance

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73
Q

Major customer-10% of Revenue.

DONT MIX UP WITH REPORTING SEGMENT (10% rev, profit, assets)

A

A customer is considered to be a major customer if sales to the customer are at least 10% of total revenue, not 10% of combined assets.

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74
Q

Bank reconciliation from Bank statement to books

A

Cash balance per bank
+Deposit in transit
-Outstanding checks
+/- Bank errors

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75
Q

Bank reconciliation from Books to Bank

A 
Balance per book
-Service charge
-NSF
\+Interest income
\+/- Errors on company side
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76
Q

% of completion method

A
  • Net Current Asset -if the sum of cumulative costs incurred +cumulative GP recognized exceeds cumulative billings, excess is reported as a current asset.
  • Net Current liability recognized-if cumulative billings exceeds
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77
Q

Dollar-value LIFO inventory cost

A
  1. Annual Index =End of year 2 inventory cost/Base year 2 inventory cost
    Base year Inventory Cost +Increment
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78
Q

Net cash receipts from bond issuance

A

Sales price + Accrued Interest- Issuance cost

DR Cash

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79
Q

Non monetary transaction with commercial substance.What amount should be reported as an investment?

A

FV of truck surrender. Transaction is accounted for FV of of asset received or surendered. Whichever is more evident.

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80
Q

What amount of inventory was lost in the flood if sales is 250.000 and GP % on sales is 40%=GOGS is 60% of Sales

A

Inventory = Beg inventory + Purchases - Sales reduced to a cost basis
Inventory = $35,000 + $200,000 - ($250,000 x (1-.40)) = $235,000 - $150,000 = $85,000
Inventory lost in the flood = $85,000 - $30,000 = $55,000

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81
Q

Cash basis Accounting vs Accrual Basis of Accounting. In Cash basis of Accounting, net decrease of AR and AP will understates income:

A

Cash basis:
AR decrease=more mash were collected-Income would grow
Accrued Expenses decrease -cash was paid to decrease AP, it was for prior period and it reduces income, bit in accrual basis of accounting it would be less expenses and income would grow

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82
Q

Impairment loss recognized under GAAP when

A

Carrying value is MORE THAN FAIR VALUE

The carrying amount is not recoverable

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83
Q

Revenue Recognition

A

The 500 desks not shipped were “set aside” and therefore belong to the buyer even though they were not yet shipped.

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84
Q

Principal vs Most Adventures Market

A

Principal-greatest volume

Adventures (Price-Transaction cost)

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85
Q

Good will method of accepting new partner

A

New partner % is a base. His contribution/his % interest

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86
Q

Selling Price of the bond

A

SUM of PV of principal (facePV factor use MKT Rate)+ interest (paymentannuity rate MKT rate)

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87
Q

Loss on bond conversion

A

Mkt value of the stock issued - BV of the bonds before conversion

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88
Q

The higher the implied interest rate

A

The lower the PV of the Note and the higher is the discount amount

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89
Q

Bond issuance JE

Bond liability reported on BS=
FV - both discounts

A

DR Cash $955
DR (Discount=Discount on issuance
+Issue cost) $45
CR Bond Liability $1,000

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90
Q

Calculate interest payable from date

A

When bonds dated/

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91
Q

Issue price of bonds

A

Face value-Warrants

92
Q

If bond cares Detachable warrant

A

Total bond issuance price s/b allocated b/w bond and warrants

93
Q

Research and development cost

A

Expense all under GAAP except:

  1. If cost will be reimbursed by other company
  2. Cost for long lived assets with alternative use
94
Q

Comprehensive income:

A

Net income+ OCI (PUFIER)

Do not double count income/loss on Trading securities since it is already included in Net Income

95
Q

For calculating allowance for uncollectible accounts balance

A

Do not Sum Beg +Ending balances into calculation

96
Q

Dividends paid by SUB are not included in total amount of paid dividends. Total paid dividends= Dividends paid by Parent

A

The dividends paid to the noncontrolling shareholders (5,000 × .25 = 1,250) would decrease their noncontrolling interest under the equity method.

Eliminating Entry:
Debit (Dr) Credit (Cr)
Investment in Kidd
3,750

Noncontrolling interest
1,250

Dividends paid/retained earnings
5,0

97
Q

Liquidating dividends. liquidating dividends reduce the carrying amount of the investment account under FV and equity method

A

Dividends in excess of investor’s share of investee’s earnings

98
Q

Cash dividends from common stock investment

A

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

Under the equity method, receipt of a dividend is recorded as a decrease in the investment account.

99
Q

Equity method used to account for investment

A

What affects Investment income:

  • change in mkt value-NO (Changes in the market value of investee’s common stock are not considered income to the parent under the equity method.)
  • cash dividends form investee-NO (reduction in the carrying amount of the investment on the balance sheet of the investor.)
100
Q

APIC for business combination In an acquisition method

DR Legal Expense
DR Investment
CR Cash (legal+Registration)
CR Common stock
CR Apic redused for registration cost
A
  • registration and issuance costs- a direct reduction APIC

- legal and consulting fees - expensed

101
Q

Aqiusition

A

When using the acquisition method, 100% of the subsidiary equity accounts are eliminated in consolidation.

102
Q

Equity method used if there is significant influence

A

Beginning
Add Net income*%
Substract dividends
Ending balance investment in SUB

103
Q

Under equity method which of the following affects investor’s reported investment income

A

Undervalued asset amortization affects both the investment account (an asset) and the investment income account (a revenue), while cash dividends affect the investment account but not the investment income account.

104
Q

BE careful in Equity method:

Portion common stock dividend will reduce Anchor’s investment in Main on the balance sheet and will not be reported as dividend income on the income statement!

Notes:

Income from an investee is recognized only from date of purchase.

The dividends received reduce the investment account, but do not affect the income.

A
  • IF they ask for what should be reported as an investment (in BS) use BASE
  • IF they ask what should be included in IS as a result of an investment- take only % of earnings
105
Q

Equity method

A

The excess of an asset’s fair value over its book value is amortized over the life of the asset.

106
Q

Equity method in the middle of the year.

A

When significant influence is acquired, the equity method is adopted from that date and going forward. Retroactive adjustments are not required. Forget all what was before significant influence

107
Q

Bond liability amount

A

Discount or premium on the sale of bonds as well as the bond issuance costs are included in the carrying value of the bonds on the balance sheet.

$990,000 bond liability at 6/30 less $35,000 of bond issuance costs equals $955,000 net bond liability.

108
Q

Gain/Loss on bond retirement

A

FV
+ Unamortized bond premium
-Cash paid

109
Q

Carrying value of the bond in the balance sheet

A

Purchase Price

  • Accrued interest
  • Amortization of bond premium (remaining amortization*15/75)
110
Q

total tax expense for the period

A

Current Income Tax
+Tax Liability increased
-Tax Asset increased

111
Q

If Lessee classified lease as Finance

A

Lessor should classify it Finance as well

112
Q

For lease use

A

IMPLICIT RATE

113
Q

Deferred income tax liabilities

A
  • Increase in prepaid insurance-Prepaid insurance would be deducted for tax purposes in the year in which it was paid, but the expense belongs to other period. Pay less tax now, but more in next year.
  • Increase in rent receivable. Income earned but not received in cash, Tax will be paid in next year.
114
Q

Translation to the functional currency

A 
Capital accounts (Stock and APIC)- historical exchange rates.
IS accounts-weighted average
BS Accounts-Year end exchange rate

and liabilities.

115
Q

Deferred tax liability.

A

If Tax depreciation exceeds book depreciation*Rate next year

116
Q

What tax rates to use for deferred tax assets and liabilities

A

he tax rate used to compute the DTA or DTL should be the enacted tax rate for the year the temporary difference is expected to reverse.

117
Q

DTA and DTL

A

All deferred tax liabilities and assets must be offset (netted) and presented as one amount (a net non-current asset or a net non-current liability)

118
Q

Year end rate vs historical rate

A

When the translation method is used, all assets and liabilities are translated to the reporting currency using the current (year-end) exchange rate, while common stock and additional paid-in capital are translated using historical exchange rates.

119
Q

Current tax liability vs current tax expense

A

$300 current income tax expense (taxable income of $1,000 × 30%).

Lability-deduct permanent and temporary differences

120
Q

Income tax expense

A
  1. Tax Return Income*Tax rate=Tax payable
  2. Temporary difference=(DTA 2 year*10%unrealized)-DTA 1 year
  3. Tax payable-reduced DTA
121
Q

Income tax expense

A

Income tax expense—current
+Income tax expense—deferred
-Income tax benefit—deferred
Total income tax expense

122
Q

Profit for lessor

A

PV of of the selling price - Cost

123
Q

Total amount of interest revenue

A
  1. CF for 1 year=FV/annuity factor
  2. Total CF for *# of years
  3. Interest =CF-FV
124
Q

Lease liability

A

IMPLICIT RATE!

125
Q

Net gain to be reported in OCI on Pension

A

Expected return on plan assets-actual return on plan assets

1.Expected return=Beg FV× Expected rate of return
2.Actual return:
Beg FV
+Contributions
-Benefits paid
+Plug (Actual return on plan assets)
End fair value of plan assets

126
Q

Attribution period for pension

A

Date of hire -full eligibility date.

127
Q

Current asset construction in progress

A

Cumulative cost+GP-Billing

128
Q

Goodwill to original partners

A
  1. Start with new member %, calculate total capital, e.g 1/3 2/3. Calculate total new
  2. Calculate actual capital
  3. Difference=goodwill
129
Q

IFRS carrying value of the bond

A

Price (premium/discount)-BOND ISSUE COST

130
Q

PERMANENT DIFFERENCES IN TAX

A

Pretax income
-Municipal bond (not taxable)
+Life insurance premium there company is beneficiary (non deductible add back)

131
Q

Return on equity

A

Net income-Preferred dividends/Avg. Total Equity

132
Q

Governmental activities net position is computed

A

Fund Balance
+Capital asset
-AD
-N

133
Q

Income under equity method

A

Ignore dividends

134
Q

Asset Retirement obligation

A

DR Asset Retirement cost (PV)

CR Asset Retirement obligation

135
Q

Interest coverage ratio

A

EBIT/Interest Expense

136
Q

Income under FV method (less than 20%)

A

DR Cash

CR Dividend revenue

137
Q

Income under equity method (more than 20%)

A 
DR investment (minus %Dividends paid) in Balance Sheet!
CR Investee income (income statement)
138
Q

Service cost component of net periodic cost measured using

A

PBObligations

Service cost-increase in PBO for current year service

139
Q

City adopts cash basis budget. What basis s/b used in budgetary comparison?

A

Cash.

140
Q

Goodwill US GAAP

A

FV (Price Paid for SUB)-FV net assets MKT price

141
Q

Bon issue price

A

Is SUM of PV of maturity value(PV of 1$$1,000 at YIELD)+(Interest payment Annuity $1,0006%*PV PV of interest annuity at YIELD)

142
Q

Hospital Revenue

A

Patient service

  • Minus Charity Care
  • Contractual adjustments (difference rev-fees negotiated with third party)

DO NOT INCLUDE PROVISION FOR BAD DEBT

143
Q

Land and other real estate by endowments in government permanent fund

A

FAIR VALUE!

144
Q

Loss on disposal of land

A

Total cash cost-(Original Note amount-Principal paid exclude interest)

145
Q

Attribution period PBO (pension)

A

From date of hire till full eligibility date

146
Q

Statement of CF

A

Conversion of debt to equity should be disclosed as supplemental information in the statement of cash flows.

147
Q

Major government funds

A

Major funds: includes qualification as to revenues, expenditures/expenses, assets, or liabilities that are at least 10 percent of the associated total for ALL governmental OR enterprise AND at least 5 percent of the total of the associated totals for ALL governmental AND enterprise funds.

148
Q

IFRS fixed asset the same as GAAP

A

Freight capitalized
Interest in expensed.
Interest is capitalized only if asset self-constructed

149
Q

Total net periodic pension cost

A
  • Service cost
  • Interest cost=Beg PBO*discount%
  • Return on Plan Assets=Beg FV Assets
  • Amortization of Prior Service Cost (Unrecognized Prior Service Cost/Remaining service Life)
  • G (Amortization of gains/losses)
  • Amortization of transition asset (Net Transition asset/years of remaining service life)
150
Q

Company investment in it’s own stock is treasury stock

A

Exclude from total Equity

151
Q

Warranty expense

A

All cost recognized as expense in 1 year

152
Q

Taxable income=Pretax-Municipal bonds+ Insurance where company benef

A

Effective tax rate = Income tax expense / Pretax income

153
Q

Whenever income is recognized in the financial statement before it is reported as taxable income, a deferred tax liability should be reported

A

Even though a loss was recognized in Year 2, Accordingly, a deferred liability will still exist at the end of Year 2

154
Q

Lessor profit on sale for finance sale type lease

A

PV of payments-Carrying cost

155
Q

Depreciation (amortization) lease expense. for finance lease

A

(PV of payments-Salvage value)/useful life

156
Q

WACSO calculation. Weight each change separately.

A

Stock split and stock dividend must be treated as though it occurred at the beginning of the year. Count conversion of preferred shares.

157
Q

Non monetary exchange with boot received

A

DR Cash
DR New truck (plug)
CR Gain in exchange (Cash/FV of new truck)
CR Old Truck (net value)

158
Q

Consolidated stockholders’ equity

A

Parent Equity+Non controlling interest+NCI share of net income*-NC Share of dividends

NC Share of Net Income=
Retained Earnings Beginning
\+Net Income (Plug)
-Dividends
\_\_\_\_\_\_\_\_\_\_\_\_\_
Ending Retained Earnings
159
Q

When information regarding external customer of a segment s/b disclosed?

A

More than 10% of TOTAL ENTERPRISE revenue

160
Q

Company should report a liability related to the plan

A

The unfunded projected benefit obligation

161
Q

Calculate ending retained earnings

A

Ending retained earnings = Unadjusted Retained earnings − Cash dividends − Property dividends. Do not include excess of proceeds of treasury stock sold. Treasury stock affects retained earnings only if the shares are sold below cost and the difference exceeds any additional paid-in capital from treasury stock.

162
Q

Non for profit interrelated organization

A

Are both able to influence the operating and financial decisions + ongoing interest in net asset of the other

163
Q

Equipment accounted in governmental fund and government wide FS

A

In governmental fund- expenses, no effect on assets

In government wide FS-reduction of the accrued liability in

164
Q

If boot paid >25% of total consideration (FV+cash) in non monetary exchange

A

Commercial substance. Monetary exchange. Recognize gain

165
Q

CF Statement

A

Conversion of debt to equity should be disclosed as supplemental information in the statement of cash flows.

166
Q

Preferred stock fully participated

A

Common shares treated the same way as preferred

  1. Calculate dividends for pref and common (same %)
  2. The remaining dividends split proportionally
167
Q

Large stock dividends (.20-25% of outstanding stock)

Small stock dividends-PV mkt price

A

Record at par value

168
Q

Total Net periodic pension cost

A

Service cost
-Gain
+Amortization of unrecognized prior service cost
+Annual interest on pension obligation

169
Q

Components of net periodic pension cost (net pension expense) SIR AGE

DR Pension Expense
DR Net pension Cost

CR Pension Liability
CR OCI

A 
-Service cost
\+Interest cost
-Return on plan assets
\+Amortization of prior service cost
-Gains and losses
\+Amortization of Existing unrecognized net obligation or unrecognized net asset at implementation
170
Q

Funded pension status

A

FV of plan assets-PBO (overfunded-non-current asset/underfunded liability)

171
Q

What amount s/b reported in OCI related to pension cost. DR OCI if Assets and Gain because all decrease expense. CR if obligation and loss

A

Unrecognized prior service cost
Unrecognized transition obligation
-Unrecognized net gain/+loss
ALL net of TAX *(1-%)

172
Q

Recognition of prior service cost

A

Increase in Net periodic cost before tax

173
Q

Consolidated financial statements

A

Sum up for subs if more than 50% ownership

174
Q

Defer tax liability

A

Whenever income is recognized in the financial statement before it is reported as taxable income, a deferred tax liability should be reported.

175
Q

Equity method income earned from inverstment

A

Net income*% owned

-minus %amortization plant, inventory (FV more than BV)

176
Q

Accountability

A

Paramount objective of government financial reporting

177
Q

What amount of bond premium s/b amortized in gov fund?

A

Bond premium/discount is not amortized in its governmental funds

178
Q

Non monetary exchange with commercial substance

A

if a nonmonetary exchange has commercial substance, the transaction is accounted for using the fair value of the asset surrendered or received,

179
Q

For purposes of government-wide financial statements, internal service funds

A

Gov activities in gov wide FS

180
Q

Cash basis understates Revenue by decrease

A

AR-A net decrease in A/R means cash collected exceeds revenue recognized on the accrual basis. This would mean higher cash basis income than accrual basis income.

Accrued Expenses-A net decrease in Accrued Expenses means cash paid to reduce Accrued Expenses was more than the accrual basis expense recorded. This would mean a higher expense under the cash basis than under the accrual basis. This yields a “yes” for Accrued Expenses.

181
Q

Sell art to buy art

A

Investing activities

182
Q

Proceeds from general obligation bonds which are to be used to finance the construction

A

Capital projects fund

183
Q

Financial statements prepared in accordance with the provisions of GASB 34 will include

A

include a comparison of the government’s budgeted and actual performance

184
Q

R&D cost

A

Capitalize:
Equipment with future used
Cost to be reimbursed
Expense the rest

185
Q

Exchange rates

A

AR gain if sell abroad in US -cheaper RUB -AP loss if RUB decrease-bought in $

186
Q

Stock dividends and stock splits are not considered income to the recipient

A

they reallocate the investment account balance

187
Q

JE Stock compensation for employees

A
  1. Grant Date-Nothing
  2. DR Compensation Expense
    CR APIC Stock options
  3. Option Exercised:
    DR Cash
    DR APIC Stock options reverse
    CR Common stock
    CR APIC Common stock
188
Q

Income Tax

A

Future deductible amount-apply rate

Deferred Tax asset/liability- tax rate has been applied already

189
Q

Deferred Tax Liabilities (Pay later)

Expense first

A

Depreciation Expense Greater for Tax

Goodwill amortization

190
Q

Deferred Tax Liabilities (Pay later)

Revenue later

A

Prepaid Expenses

Installment sales, contractual

191
Q

Deferred Tax Asset (Pay now, save later)

Expense later

A

Warranty Expense

Bad debt Expense

192
Q

Deferred Tax Asset (Pay now, save later)

Revenue first

A

Unearned rent

Unearned interest

193
Q

Gov accounting. Noncapital financing:

Operating :sales of goods and services, interfund reimbursements, etc.

Capital and related financing activity: acquisition, construction or improvement of capital assets

Investing activities: cash receipts and disbursements associated with the purchase and sale of equity or debt securities

A
  • Proceeds or payments related to borrowing not attributable to the acquisition, construction or improvement of capital assets.
  • Cash receipts or payments related to grants or subsidies not attributable to capital purposes.
  • Property taxes not designated for capital purposes.
  • Cash paid to other funds (other than for interfund services).
194
Q

Total proceeds from bond issuance

A

Issue price 80.94+accrued interest

195
Q

Cash paid to suppliers

A

COGS
-Decrease in inventory
+Increase AP

196
Q

To write off AR

A

DR Allowance

CR AR No Effect on Net Income, No effect on Assets

197
Q

To collect AR previously written off

No effect AR
Allowance increased

A 
1. Restore written off AR
DR AR
CR Allowance
2. Cash collected
DR Cash
CR AR
198
Q

F.O.B. destination means that title passes when received by the buyer, and that packaging, shipping, and handling are costs of the seller, NOT included to COGS

A

F.O.B. shipping point means that title passes when the goods leave the seller’s location and that shipping is a cost of the buyer. Included in COGS

199
Q

equity method

A

under the equity method undervalued asset amortization will decrease the investor’s reported investment income, but cash dividends received will only affect the balance sheet investment account.

200
Q

FV and Carrying Value of financial instruments

A

Both must be disclosed

201
Q

Warranty cost recognized

A

When machine are sold

202
Q

Note payable reported in BS

A

Principal-payment of principal + accrued interest

203
Q

Exchange rate was One dollar to 20 euro

A

Increased to 21 euro. $ getting stronger, euro getting weaker. Gain recognized

204
Q

the current portion of income tax expense is the amount payable to IRS.

A

Taxable income*%

205
Q

Compensation cost for restricted share plans i

A

Total compensation cost = Market price of the share on date of grant

206
Q

Defined benefit pension plan reported only

A

on income statement and BS

207
Q

100% Stock Dividend-stock split

A

5% stock dividend is a true stock dividend, as opposed to a stock split effected in the form of a dividend. The fair market value of the stock dividend at declaration date is capitalized (transferred) from retained earnings to capital stock and paid-in capital.
DR Retained Earnings
CR APIC

208
Q

Cash paid to suppliers under direct method

A

COGS-decrease in inventory + decrease in AP (more cash paid)

209
Q

Net income from cash to accrual

Dividends not included

A

Operating activities

  • Depreciation
  • Goodwill impairment
210
Q

From accrual to cash from operating activities if Net income given
DON’T INCLUDE NONTRADE NOTES PAYABLE

A 
Net Income
\+Depreciation
-Gain on sale
-Increase in AR
-Increase in prepaid expenses
\+Increase in AP
211
Q

From Net Income to cash

A

-Increase AR-bad less cash received
+Decrease in prepaid-good more cash saved
+Increase in AP cash saved

212
Q

If term of note receivable doesn’t exceed 1 year

A

Recorded at face amount

213
Q

Lease

A

Lessee-Finance, Lessor-always finance

214
Q

General government fund revenue

Transfers form other funds not a revenue, other financial sources

A

Taxes+ licenses and fees+ Intergov rev

215
Q

Total consolidated stockholders equity if less than 100% acquired

A

Common stock
APIC
Retained earnings
+NCI:

NCI:
Price
+Share of net income after dividends
&Share of dividends

216
Q

Allowance for uncollectible accounts squize

A

Allowance for Uncollectible Accounts

Beginning balance 12-31-Year 1

$90,000

Add: Bad debt expense

16,000

Subtotal

106,000

Less: Actual bad debt write-off

(6,000)

← squeeze

Ending balance 12-31-Year 2

$100,000

217
Q

Allowance for uncollectible accounts squize

A

Allowance for Uncollectible Accounts

Beginning balance 12-31-Year 1

$90,000

Add: Bad debt expense

16,000

Subtotal

106,000

Less: Actual bad debt write-off

(6,000)

← squeeze

Ending balance 12-31-Year 2

$100,000

218
Q

Calculate profit/loss on extinguishment of bond

A

FV
-Unamortized portion of discount
-Unamortized bond issuance cost
Net carrying Value

Purchase price- Net Carrying value

219
Q

Increase in stockholders equity

A

“gain” (assuming no income tax effects) and the issuance of new stock increase stockholders’ equity

220
Q

Impairment of loan

A

PV of renegotiated note (reduced # of years the same % for principal, reduced % for interest)-Face value-Accrued interest for years before renegotiation

221
Q

Current liabilities Note Payble

A

Principal amount to be paid in next year

+ Accrued interest at Dec 31

222
Q

Recognition of a discount on the note receivable

A

Non-interest bearing note

223
Q

Realized/Unrealized gain/loss on common stock sail

A
  1. Change in FV vs Price (unrealized loss/gain) charger to IS
  2. FV-brokerage fee&tax=Realized loss/gain
224
Q

Goodwill

A

Goodwill = Fair value of subsidiary - Fair value of subsidiary’s net assets

225
Q

Cash paid to suppliers direct method

A

COGS+(change in inventory if decrease-)+(change in AP keep the initial sign)

FAR (12 decks)

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