FAR Own Flashcards 2
How do you report deferred gross profit relating to installment A/R collections 12 month beyond the balance sheet date?
They should be reported in the current asset section as a contra account
When do current cost financial statements report holding gains?
They report holding gains for good sold during the period and holding gains on inventory at the end of the period
Calculate a holding gain
Replacement Cost
- Original Purchase Price
= Holding Gain
Where do you disclose the effect of changing prices?
They should be disclosed in supplementary info to the financial statements
When can you reverse a previous impairment of fixed asset under US GAAP?
If the FV exceeds the CV the year after impairment under US GAAP, you can reverse it if the asset is HELD FOR DISPOSAL
Are impairment reversals allowed under IFRS and if so where are they reported?
Yes, and they are reported on the income statement.
Under the cost method of accounting, how do you account for dividends?
Dividends are included as income (but not earnings)
When would the cost basis investment account be reduced?
- Shares of stock are sold
- Cumulative dividends are greater than cumulative earnings (a return of capital)
- subsidiary incurs losses that substantially reduce net worth
How do you account for preferred stock?
Preferred stock does not allow the investor to exercised influence, so preferred stock is accounted for using the COST METHOD
How does a liquidating dividend effect an investment in the cost method vs. the equity method?
A liquidating dividend decreases the investment in subsidiary account for BOTH the cost and equity method
Calculate the NCI under IFRS Partial Goodwill Method
NCI=FV of the subs net assets * NCI%
Calculate goodwill under the full goodwill method
FV of the sub - FV of the subs net assets
Calculate goodwill under the IFRS Partial Goodwill method
Acquisition cost - FV of subs net assets ACQUIRED
Calculate NCI using the Full Goodwill Method
FV of sub * NCI%
What will result in the most conservative ending inventory when applying the lower of cost or market rule?
Applying the LCM rule to each individual inventory item will result in the most conservative EI
What is the LIFO reserve and what is the adjusting entry
The difference between inventory on the LIFO method vs. any other method
To decrease LIFO:
DR: COGS
CR: LIFO Reserve
How do you handle obsolete inventory in the COGS equation?
TAKE THEM OUT: it is an operating loss and does not factor into the COGS equation
How do you handle interest incurred during the construction of machinery used by a firm?
CAPITALIZE it as part of the HC to acquire the fixed asset only during the construction process (then expense)
How do you handle interest incurred during the construction of machinery to be sold?
EXPENSE all interest costs (this machinery is inventory not a fixed asset)
Calculate the weighted average interest rate
[(6,000,000/14,000,000).08]+[(8,000,000/14,000,000).09]=8.57%
What interest rate do you use if the average accumulated expenditures outstanding exceeds the amount of specific new borrowing for construction?
The interest of the excess is computed based on the interest rate for other borrowings of the company
What is the equation for sum of the years digits deprectiation
(Cost - Salvage Value) * Years(Years + 1)/2
For example: if useful life is 5 years: 5(5+1)/2=15
What is the equation for declining balance
IGNORE SALVAGE VALUE:
Net Book Value as of Beginning of year * 2/useful life (If double declining)
Calculate the total land depletion cost:
REAL property (Residual Value) \+Extraction/development cost \+Anticipated restoration costs \+Land purchase price
