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CPA > Final FAR Review Deck 2 > Flashcards

Final FAR Review Deck 2 Flashcards

1
Q

What are trading securities reported at and where is the unrealized gains or losses reported?

A

Trading securities are reported at fair value on the financial statement and unrealized gains and losses are reported on the income statement

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2
Q

What are available for sale securities reported at?

A

Available for sale securities are reported at fair value on the financial statement

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3
Q

What is held to maturity securities reported at?

A

Held to maturity securities are reported at amortized cost on the financial statement

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4
Q

What is the equity method investments?

A

This is the method used when an investor owns more than 20% but less 50% of voting shares in an entity and/or has “significant influence” over the investee

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5
Q

What is the voting interest model?

A

This is when an investor owns more than 50% of the voting stock

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6
Q

Under the acquisition method, What is recorded during consolidation? CAR IN BIG

A

CAR- Common stock, APIC, and retained earnings of the subsidiary are eliminated
I- The parent company’s investments in the subsidiary is eliminated
N- Noncontrolling interest is created if the parent owns less than 100 percent of the subsidiary
B- Balance sheet of the subsidiary is adjusted to fair value for 100% of assets and liabilities
I- Identifiable intangible assets of the subsidiary are recorded at their fair value
G- Goodwill (or Gain) is required

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7
Q

Under US GAAP how is goodwill calculated?

A

Goodwill= Fair value of a subsidiary - Fair value of a subsidiary’s net assets

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8
Q

Under IFRS how is goodwill calculated?

A

Goodwill= Acquisition cost- Fair value of the subsidiary’s net assets acquired

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9
Q

When is a lease classified as a finance lease?

A

When one of the five listed (OWNES) criteria is met
- Ownership transfer to lessee at end of lease
- Written purchase option exists (purchase option < estimated fair value)
- The present value of the minimum lease payments is > ninety (90) percent of the fair value of the leased property
- The lease term is > seventy-five (75) percent of the asset’s economic life
- The asset is specialized such that it will not have an expected, alternative use to the lessor when the lease term ends
If none of the above criteria are met, it should be treated as operating by the lessee

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10
Q

What are the three types of cash flow on a cash flow statement?

A
  • Operating
  • Investing
  • Financing
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11
Q

What is operating on the statement of cash flow and what does it include?

A 
Operating: Changes in cash resulting from business
operations
⁃ Cash received from customers
⁃ Dividend income
⁃ Interest income/expense
⁃ Cash paid for business expenses
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12
Q

What is Investing on the statement of cash flow and what does it include?

A

Investing: Changes in cash resulting from investing activities
⁃ Purchase/sale of investments or long-term assets
⁃ Making loans (getting a loan would be financing)

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13
Q

What is financing on the statement of cash flow and what does it include?

A

Financing: Changes in cash resulting from financing
activities
⁃ Issuing and selling company stock
⁃ Purchasing treasury stock
⁃ Getting a loan (also making payments on a loan)
⁃ Paying dividends
⁃ Issuing bonds

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14
Q

What is the earnings per share (EPS) equation?

A

Earnings per share (EPS)= Net income-preferred stock dividends/ Weighed Avg # of outstanding common stock

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15
Q

What are the required financial statements for a defined benefit pension plan?

A

-Statement of net assets available for benefits as of the end of the plan year
-Statement of changes in net assets available for benefits
for the year then ended

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16
Q

What are the required financial statements for a defined contribution pension plan?

A
  • Statement of net assets available for benefits as of the end of the plan year
  • Statement of changes in net assets available for benefits
17
Q

How do you reconcile bank balance to book balance ?

A 
Bank balance
Add: Deposits in transit
Less: Outstanding checks
\+/- Bank errors
\+/- Errors on ledgers
= Book balance
18
Q

What is the allowance method?

A 
Allowance
\+ Beginning Balance 
- Write offs (WO's)
\+ Provision for BD
\+ Recovery
= Ending Balance
19
Q

How is FIFO and average-cost method valued?

A

Lower of cost of

net realizable value

20
Q

How is LIFO valued?

A

This uses lower of cost or market

21
Q

What is is the lower of cost or market?

A

This is replacement cost subject to a ceiling and floor. If replacement cost is in between the ceiling and floor, then use replacement cost.
Ceiling = NRV
Floor = NRV - profit margin

22
Q

When are cost capitalized?

A
  • Costs to get the asset ready to use
  • Costs to extend the asset’s useful life or increase
    productivity (Maintaince cost is not included)
23
Q

What is included from the cost of inventory?

A 
Included:
• Purchase returns
• Freight-in (shipping costs to get the inventory to the
warehouse)
• Sales tax on acquisition
• Insurance on transit
24
Q

When do you record an impairment cost?

A

When its fair value becomes less than carrying value.

25
Q

What is excluded from the cost of inventory?

A
  • Freight out- this is a selling expense

* Interest on purchase - this is financing

26
Q

What accounts are monetary?

A
  • Account Receivable

- Long term debt

27
Q

What accounts are non-monetary?

A
  • Inventory
  • Fix Assets
  • Common Stock
  • COGS
  • Depreciation
  • Prepaid assets
28
Q

What value is the remeasure method valued on the balance sheet and income statement?

A 
Balance sheet 
- Monetary = Yr end
- Non-Monetary = Historical 
   Rate
Income Statement
- Weighted average (not related 
   to B/S)
29
Q

What value is the translation method valued on the balance sheet and income statement?

A 
Balance sheet
- Assets and liability = Yr end
- Common stock = Historical
Income statement
- Weight Average
30
Q

What are the two financial statement that a governmental funds?

A
  • Balance sheet

- Statement of revenue, expenditures, and changes in fund balance

31
Q

What are the two financial statement that a proprietary funds?

A
  • Statement of net position

- Statement of revenues, expenses, and changes in fund net position

32
Q

What are the two financial statement that a fiduciary funds?

A
  • Statement of fiduciary net position

- Statement of changes in fiduciary net position

33
Q

What is underlying?

A

Is a specified price or rate, such as a stock price.

34
Q

What is the notional amount ?

A

Is a specified unit of measure, such as # of

shares.

35
Q

What is settlement amount?

A

Is determined by the underlying being multiplied by the notional amount (notional * Underlying)

36
Q

What is lower of cost or market?

A

This is replacement cost subject to a ceiling and floor. If
replacement cost is in between the ceiling and floor, then use replacement cost.
Ceiling = NRV
Floor = NRV - profit margin

37
Q

how do you calculate Net realizable value (NRV)?

A

Net realizable value (NRV) = Selling price - Costs of

completion

38
Q

How do you calculate the funded status?

A

Funded status= Fair value of plan assets-PBO

39
Q

How do you calculate the ending funded status (pension . benefit asset/liability)?

A

Beginning funded status (pension benefit asset/liability)
+ Contribution
- Service cost
- Interest cost
+ Expected return on plan assets
- Prior service cost incurred in the current period due to plan amendment
+ Net gains incurred during the current period
- Net losses incurred during the current
= Ending funded status (pension . benefit asset/liability)

CPA (3 decks)

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