FINANCIAL STATEMENTS NEW PLAN Flashcards
When there is a problem which has a Prepaid paid expense of 300,000 and the income tax also ends up being 300,000, what amount should be accounted for the calc of Current Assets?
0
BECAUSE THE PREPAID AMOUTS ARE COVERED BY THE INCOME TAX EXPENSE
During the accrual basis of accounting if revenue is received do we recognize it as revenue for accrual basis of accounting?
NO
We don’t recognize it because during accrual accounting revenue is (Earned) NOT (Received) so we subtract the receivables
True or False When financial statements are prepared under the cash basis of accounting The cash basis are modified so accrual of income taxes was reported? Does that modified cash basis of accounting?
TRUE
When a short term obligation are to be refinance to long term obligation does it need to change from from current obligation to noncurrent?
YES
When an entity declared a 5% stock dividends do we need to adjust it for all stock issued and declared?
YES for all businesses
WHEN Stocks are issued for an entity how do we calc it?
When it’s issued we
4/1 Issued 30,000 shares of common stock
6/1 Issued 36,000 shares of common stock
30,000 x 9/12 x 1.05 from the dividends declared
In computing WACC outstanding during the year
MUST BE ACCOUNTED RETROACTIVELY adjusted so declaration and distribution of stock dividends would be approriate
Calc, the COGS for the year?
Remember the formula COGM + BI - EI = COGS
When there is a event or transaction that is unusal in nature or infrequent in occurrence must be reported
before the results of discontinued operations. Such items are NOT reported on the income statement net of income taxes
The purpose of reporting comprehensive income?
to summarize all changes in equity of a business
A simple capital structure includes items such as stock options and convertible debt outstanding?
No it includes the following
Common Stock
Preferred Stock
Debt outstanding
When calc the gross profits for contract for let’s say YEAR 3 do we need to include the calc for Year 2 as well?
Yes, we need to include the calc for year 2 as well
When revenue for a contract cannot measure the outcome of the contract how is the revenue from the contract should be recognized ?
Only to the extent of the costs incurred
Why isn’t operating income not required to allocate intraperiod income tax?
BC in order to allocate the income tax expense you need the discontinued operations, OCI, and Income from continuing operations
You can’t use use operating income
According to GAAP and FASB an entity that presents a full set of financial statements must report
Comprehensive income if it has OCI items however if it doesn’t have any it doesn’t need to report
Calc, the bonds dilutive securities?
Step 1 - We have Net Income of 600,000
Step 2 - We can 5,000,000 face amount x 9% = 450,000 - 20,000 discounts being amortized x (1-25%)
Gains from remeasuring a foreign subsidiary financial statements should be included?
In the income from continuing operations
FASB’s standard on revenue from contracts with customers includes
Products or service warranty contracts
In order to calc the expense amount that should be included in the third quarter interim F/S?
We need to allocate the property taxes by 4 quarter and unanticipated major repairs on factory equipment by the quarters as well
How to adjust the prior period error correction?
By restating the prior period statements and the correction must not include in the current year net income
For the change in accounting estimate not effected by the change in principle?
Neither the cumulative effect of a change in Accounting principle & Pro Forma effect of retrospective application of new depletion base effect the change in principle
During the prior period adjustment
change from unaccepted principle to accepted principle
Are prior period adjusted included in net income for the current period?
No
When see anything that a change from chash basis to accrual basis how is that adjusted on the financial statements?
prior period adjustment bc we need to go back to the cash basis in order to accrual basis of accounting since the adjustment was made prior period
When inventory costing method when from LIFO to FIFO on calender year 3, how is this adjusted since it was LIFO during year 2 and FIFO during year 3?
Year 2 would be adjusted for cumulative effect which which are inventory and retained earnings
When there is a change in estimate how are they reported?
In the current periods and future periods
TRUE or FALSE Are all period required to be adjusted for the period specfic effect of applying the new principal?
YES example would be FIFO periodic inventory system to WACC System
When new information has been obtained is that change in accounting estimates or change in accounting reports?
If new Information has been obtained then that is change in accounting estimates (Prospectively)
Calc the prior period adjustment for depreciation?
Step 1 - Allocate the tax rate 30%
210,000 machine x (1-30%)
210,000 x 0.70 = 147,000 understatement of net income equal
Step 2 - 210,000 machine purchased - 10,000 salvage value = 200,000 / 10 years = 20,000 depreciation expense
Step 3 - 20,000 x 3 years x (1.0 - 30%) 42,000 bc there was the result of an overstatement of net income equal
Step 4 - 147,000 understatement of net income - 42,000 overstatement of net income equal = 105,000
When an error is found for prior period such as depreciation after the balance sheet date how would that be adjusted in the current year?
There would be no adjustments made bc the the corrections of the prior period errors must not be included in Net income for the current year
Depreciation is more so a prospectively bc the bc the change in estimate
When there is change in the reporting entity does that need to be reported propectively or retrospectively?
Any changes in the reporting entity are required to be changed retrospectively
