FAR Own Flashcards 13
When an investor sells shares and goes from control to non-control, how must they account for the gain/loss of sale?
They must record gain/loss from the sale of the stocks sold as well as remeasure the remaining shares to fair value (both are recognized as gain/loss on income statement )
DR: Cash 1250000
CR: Gain on Sale 250000
CR: investment 1000000
And
DR: investment in sub 150000
CR: Gain 150000
What are debenture bonds?
They are UNSECURED BONDS
What is the full goodwill method and what is the partial goodwill method?
Full goodwill method: Goodwill = FV of subsidiary - FV of subsidiary’s net assets
Partial goodwill method: Acquisition cost - FV of subsidiary’s net assets acquired
Calculate NCI using the full goodwill method and the partial goodwill method
Full goodwill method: NCI = FV of subsidiary * NCI %
Partial goodwill method: NCI - FV of subsidiary’s net assets * NCI %
Which inventory system will produce higher ending inventory in a period of rising prices, weighted average or moving average?
perpetual moving average method will produce a higher ending inventory carrying amount than periodic weighted average method when prices are increasing
What is the difference between the periodic inventory system and the perpetual inventory system?
The periodic system is a physical count with a plug to COGS. Can be found using:
Beg Inventory
+purchases = COGAFS
-Ending Inventory (physical Count)
=COGS
The perpetual system is when inventory is updated for each purchase and each sale as they occur. COGS recorded with each sale
(periodic at PERIOD END PLUG) (perpetual AS YOU GO)
How do you handle a guaranteed residual value for a capital lease under different circumstances?
Don’t include a guaranteed residual value in the PV of MLPs if it is guaranteed by a third party and not the lessor. Only if it is guaranteed by the lessor
When does a discount or premium arise from the issuance of bonds?
When the Market Rate is GREATER than the Stated Rate = Discount
When the Market Rate is LESS than the Stated Rate = Premium
A DTL arrises when?
Future taxable income is GREATER than future financial (Book) income (FS income first, Tax income later, OR Tax return expense first, FS expense later) -installment sales contractor accounting equity method depreciation expense amortization of franchise prepaid EXPENSES
A DTA arrises when?
Future taxable income is LESS than future financial (book) income (Tax return income first, FS income later, OR FS expense first, Tax return expense later) bad debt expense est. liability/warranty expense start up expenses unearned rent, interest, royalties
Calculate a deferred tax EXPENSE?
The CURRENT PERIOD temporary differences times the enacted tax rate. Not the cumulative differences or the net deferred tax asset.
How do you calculate the profit on sale of a capital lease from the perspective of a lessor?
The PV of the selling price(PV of lease payments) - Cost = profit
