FAR - RESTUDY Flashcards by Lilly Ban

Which account is part of Comprehensive Income?

A) Deferred Revenue
B) Sales Revenue

B) Sales Revenue

Comprehensive Income = Income Statement + OCI

On the Income statement, the first line is: REVENUE

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How is Comprehensive Income presented on the financial statements?

Comprehensive Income may be shown as a separate section under Net Income, or in separate statement.

Tax effects for each component must be disclosed either in the financial statement notes, or on the face of the statement.

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How are gains and losses on “fair value hedges” be reported in the financial statements:

Earnings, as part if Net Income

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How are gains and losses for “net investment hedges” be reported in the financial statements:

OCI

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What is the formula for computing EPS with the Treasury Stock method?

Number of Shares
Less: (# of Shares * Exercise Price)/Avg. Market Price
= Additional Shares Outstanding

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How many days does Large Accelerated Filers have to file their 10K?

60 days

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How many days does Accelerated Filers have to file their 10K?

75 days

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How many days does Non-Accelerated Filers have to file their 10K?

90 days

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How many days does Large Accelerated Filers have to file their 10Q?

40 days

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How many days does Accelerated Filers have to file their 10Q?

40 days

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How many days does Non-Accelerated Filers have to file their 10Q?

45 days

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Adjustment for the prior year understatement of amortization expense is reflected in ________.

Beginning retained earnings

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When translating a foreign financial statement, where would the gains and losses from remeasurement reported?

Net Income

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When translating a foreign financial statement, where would the gains and losses from translation reported?

OCI

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What is a liquidating dividend and how does it differ from a normal dividend?

A liquidating dividend reduces capital (APIC) and is not like a regular dividend that is distributed from earnings. However, it still does reduce stockholder’s equity since capital is part of SE.

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How do you reflect a change in accounting principle in the financial statements?

Retrospectively, all prior period FS are changed, with the cumulative effect of the changed adj in beg RE of the earliest period presented

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How do you reflect a change in accounting estimate in the financial statements?

Prospectively

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How do you reflect a correction of an error in the financial statements?

Retrospectively, disclosure required

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How do you reflect a change in reporting entity in the financial statements?

Retrospectively, disclosure required

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Net Profit Margin

Net Income / Net Sales

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Debt Ratio

Total Liabilities / Total Assets

Asset Turnover

Net Sales / Avg. Assets

A/R Turnover

Net Sales / Avg. AR

How do you adjust cash to accrual?

Add: Increases to Current Assets
Subtract: Decreases to Current Assets
Add: Decreases to Current Liabilities
Subtract: Increases to Current Liabilities

Where should company disclose the timeframe of the fiscal year for financial statements?

Summary of significant accounting policies

What must be done if a company recognizes revenue incorrectly in the previous years?

This is considered a correction of error. Adjust beg retained earnings of the earliest period presented.

JE to record credit loss adjustment

D: Allowance for Credit Losses CR: A/R

Which inventory method is the best for lowest ending inventory during an inflationary environment?

FIFO

How do you calculate depreciation under the Double Declining Depreciation Method?

Step 1: Calculate Straight Line Rate (1 / Useful Life) Step 2: Double it (Straight Line Rate * 2) Step 3: Apply DDD % to Carrying Value each year used (not the depreciable base as we don't use salvage value) (depreciation each year will be a different number!)

How do you calculate the index number under Dollar-value LIFO?

Ending inventory at current year cost / Ending inventory at base year cost

Pledging of receivables as collateral only requires _____.

A disclosure because the receivables remains on the company books.

Inventory Equation

Beg Inventory Add: Purchases Add: Freight In Add: Transportation costs = Cost of Goods Available For Sale Less: Ending Inventory = COGS

What is the key feature of the periodic inventory system?

Inventory is only updated through physical counts, usually at the end of the period.

What is the key feature of the perpetual inventory system?

Inventory is continuously updated after every purchase and sale.

How is COGS calculated under the periodic inventory system?

COGS = Beginning Inventory + Purchases − Ending Inventory

How is COGS determined in a perpetual inventory system?

COGS is recorded with each sale, based on the cost of the specific inventory sold.

Which inventory system allows real-time tracking of inventory?

Perpetual inventory system.

Which inventory system is simpler and cheaper to maintain?

Periodic inventory system.

Which inventory valuation method is best for reflecting the true economic value of ending inventory during?

Dollar-Value LIFO because it uses a price index that adjusts for inflation or deflation (End Current Year Inventory/End Base Year Inventory).

Which intangible asset has a limited useful life?

Patents, therefore it is subject to the recoverability test when testing for impairment

When do you capitalize and depreciate an asset?

A physical asset used in a trade or business with a useful life greater than one year.

Under the percentage-of-receivables method, how do you adjust allowance for credit losses at year-end?

Step 1: Calculate how the company determines its allowance for credit losses at year-end. It usually a % of A/R at YE. Step 2: Compare the balance of the allowance for credit losses (usually given in the problem) to the YE allowance in Step 1. Step 3: The difference from Step 2 is what the company needs to adjust by. DONT USE THE ANSWER FROM STEP 1. That is the ENDING balance for allowance for credit losses (after any write offs).

Interest during construction should be ________.

Capitalized

Interest before or after construction should be ________.

Expensed as incurred

Under the periodic inventory system, if ending inventory is understated then: COGS? Net Income?

COGS is OVERSTATED Net Income is UNDERSTATED

Under U.S. GAAP, long-lived assets that are impaired can only have their carrying value restored if they are _________.

Held for disposal.

When the current expected credit loss (CECL) method of recognizing credit loss expense is used, the allowance would decrease when a (an):

Specific accounts receivable balances are written off.

How should restoration costs for land be treated after mining operations are done?

Add to the depletion base of the mine.

When a payable arises from transactions with customers/vendors in the normal course of business, for example issuing a bond due in 9 months in exchange for services, how do you account for this in the financial statements?

Since the payable is due in less than a year, than the face amount of the bond would be reported on the balance sheet as a current liability. Interest rates don't need to be computed

How is the amount of ARC (Asset Retirement Cost) and ARO (Asset Retirement Obligations) determined?

By discounting the expected future cash flows to present value (fair value).

Bond issuance costs ____ the cash received from the bond issuance and are ____ from the carrying value of the liability.

Reduced, Deducted

How do you calculate accrued interest when a bond is retired between interest payment dates?

1. Start with Face Value of the bond. 2. Multiply by the Annual Coupon Rate to get the yearly interest. 3. Divide by 2 if interest is paid semiannually (or use actual frequency). 4. Determine the fraction of the period that has passed since the last interest payment. 5. Multiply the interest amount by the time fraction to get accrued interest.