FAR Own Flashcards 12
What type of assets and liabilities are purchasing power gains and losses associated with?
MONETARY GAINS AND LOSSES. In a period of inflation, a liability can be settled with less money, so a purchasing power gain is recognized. In a period of inflation, an asset must be bought with more money, so a purchasing power loss is recognized.
Calculate the balance in a bond sinking fund at year end
Bond sinking fund balance beginning \+investment \+dividend revenue \+interest revenue -administration cost =ending balance
In a non-monetary exchange lacking commercial substance, calculate the cost of the new van received if cash if paid?
NBV of Old Van 30,000
+ Cash Paid 5,000
= Cost of the new van 35,000
FV Given is equal to the FV received
Calculate the gain/loss on non-monetary exchanges that have commercial substance?
FV of asset given (surrendered) - CV of asset given (surrendered)
Where do you report deferred gross profit due 12 months beyond the balance sheet date for installment sales?
The amount of deferred gross profit relating to installment AR collections 12 months beyond the balance sheet date should be reported in the current asset section as a contra account (12 months due is one year so it’s current)
What is used to calculate the cost of the new asset received in a non-monetary exchange that has commercial substance?
If a non-monetary exchange has commercial substance, it is accounted for using the fair value of the asset SURRENDERED (given up) or received whichever is more evident
If a loss is recorded in a non-monetary transaction that lacks commercial substance, calculate the cost of the new asset?
Asset Received = BV of asset given up + cash paid - cash received - loss recognized
How do you calculate installment sales?
- Sales - COGS = GP
- GP/Sales = GP %
- Earned profit = Sale - ending installment receivable = collections * GP%= Gross profit earned
- Deferred GP = Ending installments accounts receivable *GP% = Deferred GP
How do you report temporary declines in AFS securities?
The temporary decline of an AFS security below aggregate cost should be reported in the valuation allowance account as an asset
DR: OCI
CR: Valuation allowance
the valuation account is a “contra asset” account
What amount should a company report as inter-company receivables for consolidated financials?
100% of all inter company balances among members of the consolidated group are ELIMINATED
How much do you eliminate regarding inter-company transactions?
Eliminate 100% for external reporting even when non-controlling interest exists. (only when consolidating)
How do you correct the accounts when inventory has been sold inter-company?
Remember to reverse the original inter-company transaction (sale and COGS internally) and Inventory sold to outsiders - correct cost of good sold, inventory still on hand - correct ending inventory
What is accretion expense?
The increase in the ARO Liability due to the passage of time. beginning asset retirement obligation * appropriate accretion rate (in some cases- the credit adjusted rate)
Are disclosures of credit risk and market risk required?
Credit risk - the risk that the other party to the instrument will not perform, must be disclosed. Market risk - the risk of loss from changes in market prices is encouraged but not required
What is required for a financial instrument to be considered a derivative?
having one or more underlyings (and one or more notional amounts), and as NOT requiring an initial net investment (or having an initial investment that is smaller than would be required for other types of similar contracts
