Formulas

Question 1

How is Goodwill calculated?

Answer 1

Goodwill is calculated by subtracting the acquisition cost minus the FMV of the entity.

Assets FMV
-Liability FMV
=Net FMV

Acquisition price
-Net FMV
=Goodwill

Question 2

How is the Gross Profit calculated?

Answer 2

Gross Profit = Sales X Gross Profit margin

Question 3

How is Cost of Good Sold Calculated?

Answer 3

Cost of Good Sold = Sales X (1-Gross Profit Margin)

Question 4

How is ending inventory calculated using the Gross Profit Margin percentage?

Answer 4

Beginning inventory
\+Purchase 
=Good available for Sales
-Cost of Good Sold
=Ending Inventory

Question 5

What is the formula for Cost Of Good Available for Sales?

Answer 5

Cost of Good Available for Sales= Cost of Good Sold + Ending Inventory

Question 6

What is the formula for Conversion Cost?

Answer 6

Conversion cost = Direct Labor Used + Manufacturing Overhead

Question 7

How is the Gross Profit Margin percentage calculated?

Answer 7

Gross Profit Margin % = Gross profit ÷ Sales

Question 8

What is the formula for calculating Ending Warranty Liability?

Answer 8

Beginning Warranty Liability
+Warranty Expense recognized in the current period
-Warranty payment in the current period
= Ending Warranty Liability

Question 9

How is double declining balance of depreciation is calculated?

Answer 9

Rate % X Book Value= depreciation expense

The depreciation expense cannot be more than the salvage value. Salvage value is not taking into consideration when calculating depreciation expense.

Question 10

How is impairment loss recognized?

Answer 10

Impairment loss is immediately recognized in income from the continuous operation

Question 11

How is the bond interest payment calculated?

Answer 11

Carry amount of the bond × the effective interest rate = Interest payment

Question 12

How is the impairment loss be calculated?

Answer 12

Impairment loss = Carrying amount - FMV

Question 13

How is the contribution margin be calculated?

Answer 13

Contribution Margin = Revenue - all variable cost.

Question 14

What is the formula for Prime Cost?

Answer 14

Prime cost = Direct Materials + Direct Labor

Question 15

What is the formula for Contribution Margin format of income statement?

Answer 15

Net Of Sales Revenue
Less: All Variable Costs
= Contribution Margin (This represent the amount available to cover fixed cost)
Less: All fixed Costs
=Operating Income