Financial Statements Flashcards

1
Q

Where in the cash flow statement (indirect) are bond discounts and premiums listed and how are they adjusted (addition or subtraction)

A
Operating section
discount is added (Int exp exceeds cash)
Dr Int Exp
   Cr Discount
    Cr Cash
premium is subtracted (cash exceeds Int exp)
Dr Int Exp
Dr Premium
   Cr Cash
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2
Q

When can a ST liability be listed as a LT liability in the financials after YE but before the statements have been issued?

A

If the company shows the ability and intent to refinance.

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3
Q

What is the Dividends per share payout ratio and the Price earnings ratio?

A
  1. )Dividends per share/Earnings per share

2. )Market price share/Earnings per share

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4
Q

What is the Cost of sales formula?

A

COGS=COGM + FGBeg - FGEnd

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5
Q

Disclosures related to financial instruments, both derivative and nonderivative, that are used as hedging instruments must include…?

A

(1) objectives and the strategies for achieving them,
(2) context to understand the instrument,
(3) risk management policies, and
(4) a list of hedged instruments.

Disclosures must be separated by type of hedging

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6
Q

What are items that would be included in the investing section of the CF statement?

A

making and collecting loans and acquiring and disposing of debt or equity instruments and property, plant, and equipment

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7
Q

What are items that would be included in the financing section of the CF statement?

A

Sales of equity securities
Issuance of Debt
Payment of LT debt

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8
Q

What is an example of an accounting error and when does it require adjustment in the F/S?

A

Forgetting to record uncollectable accounts. The error would be fixed retrospectively by adjusting beg RE.

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9
Q

Does a self-correcting error need adjusting?

A

Yes, the prior year statements presented would have to be adjusted.

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10
Q

What is an example of a change in principle and how is it corrected in the F/S?

A

Changing from LIFO to FIFO (one GAAP principle to another). The is adjusted retrospectively, but prior-year statements are not adjusted.

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11
Q

What is an example of a change in estimate and how is it adjusted in the F/S?

A

Change in the useful life of an asset. This is adjusted prospectively only.

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12
Q

Does the double-declining method incorporate the salvage value?

A

No.
Ex: 500,000 equip with 50,000 salvage, 5-year life.
Yr1= 500,000/5= 100,000 x2 = 200,000 Depreciation
Yr2= 300,000/5= 60,000 x2= 120,000

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13
Q

What cost flow does the weighted average method use?

A

The periodic

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14
Q

In financial reporting of segment data, what must be considered in determining if an industry segment is a reportable segment?

A

Sales to unaffiliated customers and Intersegment sales

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15
Q

When should long-lived assets be reviewed for impairment?

A

When circumstances indicate that the carrying amount of an asset might not be recoverable.

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16
Q

What is the acid (quick) test formula

A

ST assets= cash, AR, ST securities
divided by
ST liabilities

17
Q

Which depreciation methods use salvage value?

A

SL: (Bk val - Sal val)/Life
DDB: (BK/ life) x 2
SYD: (Bk Val - Sal val) x (n/sum of all years)
Service hour: (Cost- Sal Val)/ useful life
Composite/ group and units use SL

18
Q

Can previously recognized losses for assets still in use be restored?

A

No

19
Q

What are the market, income and cost approaches?

A

Market uses pricing models on similar securities.

The cost approach uses values needed to replace asset.

The income approach converts future amounts into present values.