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Conceptual Framework And Financial Reporting > FASB > Flashcards

FASB Flashcards

1
Q

Operating expenses

A

Liability (accrued expense)

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2
Q

Accounts receivable

A

Asset (accrued revenue)

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3
Q

Unearned revenue

A

Liability

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4
Q

Accrued expense

A

Liability (accrued expense)

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5
Q

Prepaid expense

A

Asset (deferred expense)

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6
Q

Sales on account

A

Asset (accrued revenue)

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7
Q

Supplies not on account

A

Asset (deferred expense)

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8
Q

Interest expense

A

Liability (accrued expense, salaries)

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9
Q

Interest revenue

A

Asset (accrued revenue)

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10
Q

Taxes

A

Liability (accrued expense)

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11
Q

Accrual to Cash basis

A

Cash = L + E - other assets

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12
Q

Cash basis to accrual

A

E = A - L

Or opposite sign of cash basis

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13
Q

Qualitative characteristics of accounting

A

Primary

Enhancing

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14
Q

Primary characteristics of accounting

A

Relevance
Faithful representation

(FAR)

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15
Q

3 characteristics of relevant

A

Predictive value
Confirmatory value
Materiality

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16
Q

3 characteristics of faithful representation

A

Completeness
Neutrality
Free from error

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17
Q

4 enhancing characteristics

A

Comparability
Verifiability
Timeliness
Understandability

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18
Q

Negative economic consequences means

Cost of complying with GAAP
inability to raise capital
Cost of government intervention
Failure of internal controls

A

Inability to raise capital

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19
Q

Choose the correct statement about GAAP

GAAP are laws

Only publicly traded companies must comply

It’s a violation of SEC regs to depart from GAAP

Firms may not restate FIN STATE already issued

A

Violation of SEC. regs for public ally traded companies to depart from GAAP

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20
Q

Level 1 hierarchy

A

Quoted prices in active markets for identical assets or liabilities

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21
Q

Level 2 hierarchy

A

Inputs such as quoted prices on similar assets or liabilities or observable for the asset or liability, such as interest rates and yield curves

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22
Q

Level 3 hierarchy

A

Unobservable inputs for the asset or liability that reflect the reporting entity’s own assumptions about the assumption that market participants would use in pricing in the asset or liability (including assumptions about)

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23
Q

Fair value option

A

An Election to value certain financial assets and financial liabilities at fair value is available. Entities may not elect to measure certain items such as investments in entities to be consolidated

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24
Q

IFRS elements

A 
Assets
Liabilities
Equity
Income
Expense
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25
Q

Which of the following is a contra account

Accumulated depreciation, equipment

Depreciation expense, office equipment

Dividends

Unearned revenue

A

Accumulated depreciation, equity

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26
Q

Which of the following is a component of other comprehensive income

Minimum accrual of vacation pay

Cumulative currency-translation adjustments

Changes in market value of inventory

Unrealized gain/loss on equity securities at FV

A

Currency translation adjustments

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27
Q

Which of the following is not disclosed in the statement of cash flows when prepared under the direct method

Major classes of gross cash receipts and cash payments

Amount of income taxes paid

Reconciliation of net income to net cash flow from operations

Reconciliation of ending RE to net cash flow from operations

A

Reconciliation of ending RE to net cash flow from operations

28
Q

The unamortized bond discount account decreased by $25,000. How should it be reported in statement of cash flows

Financing cash inflow

Financing cash outflow

Addition to net income in operating activities

Subtraction from net income in operating activities

A

Addition to net income

29
Q

AR turnover

A

Net credit sales/ average AR

30
Q

Current ratio

A

Assets/liabilities

31
Q

Quick ratio

A

Cash+AR / current liabilities

32
Q

Debt to equity ratio

A

Liabilities/equity

33
Q

Ratio of quick assets to daily operating expenditures that indicates the length of time in days a firm can operate with its present liquid resources

A

Defensive interval ratio

34
Q

Ratio of income to average owners equity, profitability ratio

A

Return on stockholders equity

35
Q

Measurement at a fixed unchanging amount. Examples are lands, cash, prepaid, current liabilities, contributed capital accounts, and treasury stock.

A

Historical cost

36
Q

Reflect remaining portion at a fixed unchanging amount. Examples include property, plant, equipment, intangibles, natural resources

A

Depreciated/amortized cost

37
Q

Selling price of assets and amount currently required to retire a liability. Examples include Marketable securities like stocks and bonds

A

Fair value/market value

38
Q

Another type of current value, amount the firm expects to receive from the sale or collection of an item. Examples include AR, and inventory.

A

NRV

39
Q

Discounted value, measure of current sacrifice when extinguishing the debt at the balance sheet date. Examples include bonds and long term debt

A

Present value

40
Q

Added to balance sheet

A

Adjunct

41
Q

Subtracted from balance sheet

A

Contra

42
Q

Calculate retained earnings

A

Revenue - expenses - taxes = NI

NI + RE beg of year = RE end of year

43
Q

Reporting AR at NRV is a departure from the accounting principle of

Conservatism

FV

Market Value

Historical Cost

A

Historical cost

44
Q

Income statement format

A

Net sales
- COGS
=gross margin

  • operating expenses
    +/- miscellaneous gains/losses
    +/- unusual items
    = income from continuing operations before tax
  • income tax expense
    = income from continuing operations

+/- income from discontinued operations
= net income

EPS:
Income from continuing operations
Income from discontinued operations
Net income

45
Q

How do you calculate the cash balance at the end of the year provided operating, investing, and financing activities

A

Operating - investing + financing + beginning cash

46
Q

Calculate operating activities

A

Net income

47
Q

Cash flows from operating activities - direct method

A

Inflow:
From customers
Dividends
Interest received

Outflows:
To suppliers for op exp, goods
To employees for payroll
Interest paid
Income taxes
48
Q

Cash flows from investing activities

A

Inflows:
Sale of LT assets
Collection of loan principal
Disposal of debt and equity (AVS security)
Sale of other productive asset (not inventory)

Outflows:
Purchase of LT assets
Lending
Investment in debt and equity security 
Purchase of other productive assets (not inv)
49
Q

Cash outflows from financing activities

A

Inflows:
Sale of own stock
Proceeds from borrowings (bonds notes)

Outflows:
Repurchase of treasury stock
Paying back lenders (principals only)
Payment of dividends

50
Q

Prepaid interest

A

Asset

51
Q

Unamortozed bond discounts

A

Assets

52
Q

Working capital

A

Current assets - current liabilities

53
Q

Working capital ratio

A

Current assets/ current liabilities

54
Q

Acid test ratio, aka quick ratio

A

(Cash + net receivables + marketable securities)/current liabilities

55
Q

Times interest earned ratio

A

(Net income + interest expense + income tax)/interest expense

56
Q

AR turnover

A

Net credit sales / average AR

57
Q

Number of days in average receivable

A

365/ AR turnover

58
Q

Inventory turnover

A

COGS/average inventory

59
Q

Number of days supply in inventory

A

365/inventory turnover

60
Q

Profit margin

A

Net income/ sale

61
Q

Total asset turnover

A

Sales/average total assets

62
Q

ROA

A

Net income / avg total assets

63
Q

ROE

A

Net income / avg shareholders equity

64
Q

Leverage

A

Avg total assets/ avg shareholders equity

65
Q

COGS

A

Beg inventory + purchases - ending inventory

Conceptual Framework And Financial Reporting (1 decks)

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