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Gleim Flashcards

1
Q

impairment loss IFRS doesnt compare ?

A

impairment loss IFRS doesnt compare carry amount vs miscounted CF;;

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2
Q

wut r the limitation of financial reporting

A

use historical cost to measure asset/lia; use estimate; exclusion of some economic resources

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3
Q

impairment loss of asset group

A

1) carry amount vs sum of undiscount CF; 2) carry amount vs fair value

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4
Q

when to use units of production

A

use unit of production when asset service potential decline with use

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5
Q

an entity dispose of nonmonetary asset in a nonreciprocal transfer G/L recorded at when?

A

G/L recorded when it transfer to another entity and a shareholder ;; recorded at FV of asset transfered

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6
Q

lacked CS, paid cash < 25% , new book = ?

A

new book = carry value of old + cash paid

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7
Q

under direct write of method, write off entry?

A

Dr bad debt exp, Cr A/R

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8
Q

DEPS with income from continuing ops and loss from discontinue ops ?

A

income / (C/S + noncummulative converted to C/S)

inc - loss from discontinue / ((C/S + noncummulative converted to C/S)

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9
Q

risk of accounting loss vs off B/S risk

A

risk accounting loss = AR - allowance

off B/S risk = account loss cant exceed amount recog as asset (Ex: recourse obligation on receivable sold)

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10
Q

trade account receivable doesnt include wut?

A

trade AR doesnt inclue cash sale, doesnt inclue note receivalbe

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11
Q

if equipment is permanently impaired and that 70k recovered over the useful life

A

the 70k will be the new base

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12
Q

wut is the maturity amount for noninterest bearing note receivable ?

A

the maturity of a non-interest bearing note receivable is its face amount

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13
Q

infrequently occurring gain, net income, find comprehensive income ?

A

infrequently occurring gain already included in net income so do not add it when calculating comprehensive income

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14
Q

sold equipment for noninterest bearing note find G/L ?

A

compare cost vs present value of note

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15
Q

suffer loss on customer bankruptcy after B/S date before issuance date, recog ? dis ?

A

no recognition, disclose only

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16
Q

equity method, after date of acquisition, wut happen to investment account of investor ?

A

investment account increase/decreae by share of earning/loss of investee, decrease by its share of cash dividend received from investee

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17
Q

cash surrender value ?

A

cash surrender value = annual premium x year - total insurance expense

cash surrender value = is non current asset

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18
Q

when to use accelerated method ?

A

use accelerated method when asset is subject to rapid obsolescense

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19
Q

carry amount of bond vs unamortized dis vs unamortized pre vs unamortized issue cost

A

carry amount - unamortized dis + unamortized premium - unamortized issue cost

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20
Q

how to recog decommission lia (ARO) ?

A

the change in lia is recog in PnL , actual cost incurred vs carry amount of lia

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21
Q

issue by government unit bond ?

A

rev bond

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22
Q

wut bond pay interest only at maturity ?

A

deep discount bond (zero coupon bond) provide capital appreciation , not periodic interest income

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23
Q

amount of interest expense gonna be higher in wut bond ? yr 1 or yr 2?

A

interest will be higher in year 2 as discount is amortized , because carry amount of bond increase , lead to higher interest rate

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24
Q

find stated interest rate on bond under effective interest method ?

A

stated interest rate = cash paid / face amount ;; if semi, get cash paid x2

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25
Q

find effective interest rate ?

A

effective interest rate = interest exp / bond carry amount

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26
Q

estimated cost of inventory ? find COGS ?

A

estimated cost of inventory = ending inventory
find COGS = 1) find sale , use AR T account, sale= begin AR + ending AR - collected
2) rate of markup cost is 50% , COGS = sale / 150%

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27
Q

moving average method

A

moving average only work in PERPEPTUAL

new weighted average computed after every purchase

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28
Q

fair value of FIFO inventory and land exceed their carry cost, how does it affect equity in earnings for the year under equity method ?

A

inventory excess = decrease in NI
land excess = no effect NI
adjustment for acquisition differentials (inventory , property, plant, equipment ) when assets depreciated or sold

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29
Q

under wut inventory method that it can affect NI with last minute purchase that can alter COGS ?

A

under LIFO

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30
Q

MD&A pertain to what ?

A

MD&A pertain to liquidity, capital resource, and result of expansion

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31
Q

find dollar value LIFO ?

A

1) find index price, 2) get layer change of base year * by index . 3) add this number to previous year dollar value LIFO

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32
Q

selling price of unsold gold on consignment of 130% cost and not included in ending inventory ?

A

this should not be included in AR , subtract off AR . Instead add this to inventory , 13k/130%

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33
Q

adjusting entry from average cost to LIFO ?

A

Dr COGS, Cr LIFO reserve;; LIFO reserve: allowance that adj inventory balance ( if LIFO affect is 55k , and account has 35k credi bal ;; must be credit 20k)

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34
Q

wut is realization concept ?

A

realization concept: 1) sale of asset for cash or claims for cash , 2) depreciated equipment was sold in exchange for a note receivable

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35
Q

when cost is failing, which one increase profit ?

A

when cost is failling, a change from FIO to weight average inventory increase profit

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36
Q

gross profit margin = 40% , what is COGS ?

A

gross profit margin 40% of net sale , COGS = 60% of net sale

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37
Q

a previously recog impairment loss may not be reserved under ?

A

previously recog impairment loss can NOT be reserved under GAAP;; if it held for sale, it can be reserved but gain is limited to previous write down

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38
Q

in a involuntary conversion, the determination of loss is based on ?

A

the loss will be based on = carry amount + removal/clean up cost

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39
Q

3yr1 issued 20 yr bond at discount ; 9yr6 bond quoted at 106 when excercise right to retire bonds at 105. Loss or gain on this ?

A

loss cuzz bond issued at discount and then retire early for more than carry amount

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40
Q

Owe 1.2 mil , paid 400k cash, also issue 80k share, $1 par at $1.25

what is trouble debt restructuring G/L JE ? find net increase in total equity ?

A 
Dr lia 1.2mil
Cr Cash 400k
Cr C/S 80k
Cr APID 20k
Cr gain 700k
Increase in FV = 80+20+700
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41
Q

6yr1 issued 500k, 10% 15yr bond , pay semi bond , issue cost 6k, SL to amortize. 6yr 6 retire half of bond at 98, wut is G/L on retirement of debt ?

A

its semi , x2, 6yr1 to 6yr6 = 5 yrx 2= 10 ;; 10/15x = 10/30 , then * by 6000 , amortized = 2k, unamortized = 6-2=4k ;; carry amount = 500k +4k = 504k ;; then divide by 2 = 252k

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42
Q

defined benefit pension plan rule under IFRS ?

A

1) interest : recog in I/S

2) remeasurement of plan asset: recog in OCI , never reclass to PnL

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43
Q

wut is bearer instrument ?

A

bear instrument = coupon bond ; whoever present interest coupon is entitle to payment

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44
Q

disclosures of defined benefit pension plan ?

A

1) funded status of plan and amount recog in B/S
2) net periodic pension cost recog
3) recon of begin and ending bal of oligation

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45
Q

IFRS re-measurement of plan asset rule ?

A

IFRS : remeasurement of define benefit obligation recog in OCI, never reclass to PnL

Begin Fv + contribution - benefit paid + interest income on plan asset (=begin plan asset*discount rate) + remeasurement of plan asset = ending FV

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46
Q

if premium on bond payable is not amortize , wut is the effect of on interest exp and effect on stockholder equity ?

A

interest expense and carry amount of bond DECREASE each period when amortizing a premium ,

if premium is not amortize, interest = overstated, stockholder equity= understated

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47
Q

know loan payment at each end of year, find amount allocated to interest ?

A

1) get payment * present value

2) then * rate

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48
Q

carry amount of bond at initial , carry amount of bond at year end , SL ?

A

carry amount at issuance date= proceeds - interest accrued - issuance cost
carry amount at year end = face - unamor dis + unamor premium - unamor issue cost
SL = # * (months remaining in yer / total months )
discount amount = interest exp - interest payable (=cash amount)

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49
Q

wut is PBO ?

A

PBO = present value of benefit accrued to date based on FUTURE compensation level

APBO = based on current compensation level

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50
Q

how to find lia for pension benefit ?

A

1) find funded status of plan FV at year end = begin + return
2) find projected benefit obligation = service cost + interest + prior service cost
2) - 1) = lia

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51
Q

exchange of nonmonetary asset that facilitate sale to customer ?

A

based on carry amount of asset given up
if boot received < 25% ,1) potential gain = FV asset given up - carry value of asset given up
2) gain amount = (1) * cash/(FV asset received + cash)

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52
Q

what is the effect of unrealized gain on trading securities in tax ? DTL or DTA ?

A

trading , will be in IS , book income > tax income , tax less this year, tax more next year ,, DTL

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53
Q

wut is subsequent event ?

A

both provide evidence about conditions exist on BS and did not exist on BS

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54
Q

defer income tax expense = ?

A

defer income tax expense = net change of DTL and DTA ;; increase DTL - increase in DTA ;; or increase DTL + decrease in DTA

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55
Q

capital maintaince approach formula ?

A

capital maintaince approach = decrease in asset - capital stock sold + dividend declared

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56
Q

primary objective of income tax ?

A

primary objective of income tax = to recog defer tax lia and asset reported for future tax consequences

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57
Q

bad debt expense effect on tax ?

A

DTA , because book inc < tax income, tax more this year, tax less next year

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58
Q

which method has tax advantage of anticipating deduction ?

A

allowance

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59
Q

FIFO advantages ?

A

FISO ending inventory appropriate market value ;; year end inventory and COGS are same under perpetual and periodic

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60
Q

which include in inventory cost : insurance premium or advance commission ?

A

only insurance premium is included in inventory cost

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61
Q

wut is securtization ?

A

securitizaiton = transfer financial asset to a trust or other entity and sale of beneficial interests in that entity to investor

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62
Q

wut is factoring ?

A

factoring = a mean of discounting receivable on a non-recourse , non-notification basis

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63
Q

FIFO vs LIFO for lower of cost or market LCM ?

A

LIFO = use LCM

FIFO and other cost = use lower of cost or net realizable value

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64
Q

IFRS inventory measure at ?

A

IFRS inventory measure at lower of cost or NRV (=sell price - cost of completion - disposal)

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65
Q

wut information public entity present about geographic areas ?

A

present external rev to foreign, rev from external customer, asset

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66
Q

dilutive EPS numberator = ?

A

income + after tax interest ;; DO NOT SUBTRACT OR ADD PREFF stock DIV

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67
Q

change from FIFO to LIFO , when to apply ?

A

from FIFO to LIFO, apply prospectively at earliest date practicle

68
Q

sale price of 75k , which is 25% mark up, COGS = ?

A

COGS = sale price / 1+markup

69
Q

consigment T account ?

A

consignment in T account = has debit bal = debit = adverise + delivery + installment + commission ;; credit = sale ;; final bal = remit to seller

70
Q

freight cost for good shipped , paid by consignee, recorded as wut on consignee book ?

A

record as receivable on consignee book

71
Q

when that u can only use weight average inventory ?

A

weighted average inventory only work in periodic system

72
Q

% of sale vs % of AR , balance sheet vs IS approach ?

A 
balance sheet (% of AR) = ending bal
IS approach , (% of sale) = the expense
73
Q

exchange equipment for note in 3 year, know present value rate, find interest rev in yr 2 ?

A

discount the note , this is the initial carry amount, get carry amount * rate = interest for 1st year,
interest yar 2 =( cary amount year1 + interest year 1 ) * rate

74
Q

hold the note then discount to bank, wut to remember ?

A

always find the maturity value first , maturity = face amount + interest for that whole note

2) then use this amount * rate * time remaining, let say note is 8, u hold for 3 months then discount to bank, u will * by 5 months

75
Q

process of discounting

A

maturity amount = face + total interest recei (=Facestatednoteterm)
bank dis = maturitybankratenoteremaining
cash receive = maturity amount - bank dis amount
carry amount of note = face + accrued interest (=facestatednote elapsed)
G/L = cash received - carry amount

76
Q

book income to tax income formula ?

A

pretax book income - municipal bond income (non taxible, so subtract) + life insurance premium (non deductible, so add back) - excess of tax depreciation = taxable income

77
Q

how to find effective tax rate ?

A

taxable income * current rate = tax expense

effective rate = tax expense / taxable income

78
Q

wut is potential common stock ?

A

potential common stock entitle holder to obtain CS

79
Q

how impairment loss affect accumulated depreciation ?

A

debit the impairment loss to AD

80
Q

how to report intem infrequent in occurance and unusual in nature or both ?

A

report them separate component of income , NOT NET OF TAX

81
Q

equity method is not required when ?

A

equity method is not required when it is held for sale

82
Q

capital expenditure vs rev expenditure ?

A

capital expen = betterment, benefit future period

rev = costs, COGS, repair expense

83
Q

obligation callable by credititor within 1 year ?

A

curr lia

84
Q

machinery for own use vs machinery held for sale, interest exp ?

A

machinery held for sale = expense all

machinery for own use = expense interest incurred after completion

85
Q

weighted average accumulated expenditure use wut months ?

A

use remaining months

86
Q

income tax basis differ from GAAP cuzz ?

A

recog rev, expensese in diff reporting period

87
Q

warranty cost vs tax deductible ?

A

warranty cost is not tax deductible until it actually occur, result a DTA

88
Q

how to disclose defer tax ?

A

disclose the temporary diff and operating loss , and tax credit carryforward

89
Q

book depreciable asset > tax basis , effect ?

A

tax has higher depre expen , lower income in curr year, will get tax more , DTL

90
Q

enactment rate change in Sep, become effective in Jan, changes in tax law initially reported ?

A

changes in tax laws initially report in period that include the enactment rate ( in interim FS for 3 months ending Sep)

91
Q

didnot record insurance cost that related to inventory, effect on accrued lia and RE ?

A 
understated lia (dr inventory, cr lia)
overstated RE cuzz COGS understated
92
Q

how to pick probability tax benefit ?

A

pick the ones that > 50% probability and has highest amount

93
Q

what type of asset that qualify for interest capitalization ?

A

asset that qualify for interest capitalization are asset constructed for the reporting entity’s own use

94
Q

how to present non-curr asset held for sale ?

A

report non-curr asset held for sale at 1 line item in the curr asset section

95
Q

which : 1) do not provide for periodic payment of interest , 2) not secured by collateral ?

A

AP

96
Q

curr income tax expense =

A

curr income tax expense = taxable income * enacted rate

97
Q

Income b4 income tax exp 60k in year 2, tax rate 30% , 40k net operating loss carry forward from yr 1. max income tax benefit for yr 2?

A

tax benefit = 40k*30% rate

98
Q

tax basis has higher ending accumulated depreciation , DTA or DTL ?

A

tax has higher AD , more taxable in future , DTL

99
Q

use cost incurr for book , and completed contract for tax ; effects on the final year?

A

the first 2 years: more reve in boook than tax , DTL

final year completion; report all rev in tax , decrease DTL

100
Q

reporting LIFO inventory at lower of cost or market value , illustrate wut ?

A

illustrate the practice of convertism

101
Q

an increase of prepair insurance cause wut in tax ?

A

an increase of prepaid insurance cause increase in DTL

102
Q

an increase in rent receivable cause what in tax ?

A

an increase in rent receivable cause increase in DTL

103
Q

bad debt exp effect in tax ?

A

DTA

104
Q

installment sale effect in tax ?

A

DTL

105
Q

gain on sale of land effect in tax ?

A

DTL

106
Q

what is defer tax ?

A

defer tax is a lia that represent accumulated difference between inc tax exp reported on book and inc tax actually paid

107
Q

how to find inc tax exp ?

A

inc tax exp = curr tax exp (=taxable inc*rate) + increase in DTL - increase in DTA

108
Q

organization cost between book and tax , effect of DTL or DTA ?

A

book: expense all organizational cost ,, lower book inc, tax more this yer, tax less next year = DTA

109
Q

curr maturity of long tern debt is wut lia ?

A

curr maturity of long term debt is current lia

110
Q

how to get to taxable inc if : 1 ) depreciation in book > tax depre by 8k , 2) equity method result book inc of 35k , 3) 25k div , 80% deduction

A

pretax - excess book depre - untax equity inc + 80% div taxable

111
Q

how to report rev from coupon ?

A

unearned rev at the cash received amount

112
Q

how to report the receivable from sub ( 30% owned) ?

A

report the receivable separately

113
Q

how to find cash collected on contract % completion ?

A

contract billing - AR

114
Q

wut r the alternatives for estimating the standalone selling price ?

A

1) use the estimatate in seller’s market 2) residual apporach

115
Q

software cost capitalization (internal develop software): exp, capitalize, amortize?

A

expense : until tech feasiblity establish
capitalize: after tech feas…until available for sale
amortize : greater of SL or rev ratio( =( capitalize cost*project rev)/ life time rev))

116
Q

cost of market research activities ?

A

cost of market research activities are not RnD cost

117
Q

wut to pay attention about goodwill ?

A

goodwill is capitalized, and test for impairment but NOT amortized
goodwill is not subject to recoverability test cuzz it has indefinite useful life

118
Q

internal develop patent , capitalize or expense ?

A

internal develop patent: expense the related RnD , capitalize: legal fee, sucessful defending , amortize shorter of useful life or legal life

119
Q

in IFRS, if CGU has impairment loss ( carry amount > recoverable amt) wut to do ?

A

impairment loss must reduce all goodwill to zero first

120
Q

if gross margin = 25% of sale , COGS ?

A

COGS = 75% of sale

121
Q

RnD cost expense vs capitalize ?

A

1) cost of equip acquired, constructed is RnD expense when it use only on research and have no alternative future use
2) RnD expe = salaries, design , testing prototype

122
Q

a long lived asset is measure at the lower of carry amount or fair value minus cost to sell if it is ?

A

held for sale

123
Q

numerator of dilutive EPS ?

A

NI + - divident on preff stock + after tax interest (=facestated ratediscount amortization)

124
Q

when impair of long lived asset become loss ?

A

impair: when carry amount > fair value
loss: when carry amount > undiscount CF

125
Q

equity ratio ?

A

equity ratio = equity / total asset

126
Q

if ratio > 0 , equal decrease in numerator and denominator ?

A

increase ratio

127
Q

journal entry for when customer return invoiced goods for which they have not paid ?

A

Dr sale return , Cr Ar

Dr inventory, Cr COGS

128
Q

what is the stock split effect on C/S ?

A

stock split decrease the par value on each share, increase # of share

129
Q

distribute dividend effect on C/S ? entry ?

A

distribute dividend has no effect on C/S

Dr RE, Cr APIC, Cr Cash

130
Q

treasury stock at cost method, effect on # of C/S ?

A

doesnt affect C/S account when TS bought and sold at cost method ,, it just increase # of share

131
Q

RE appropriation can be used to ?

A

RE appropriation can be used to restrict earnings available for dividend

132
Q

JE for issuance of bond with detachable warrant ?

A

Dr cash (=$*share excercise at buy price) , Dr warrant (=if 90% exercise * $ wut was credit to warrant initially) , Cr C/S, Cr APIC

133
Q

how to find bond discount when know total proceeds + fair value of warrant attach ?

A

(FV of bond / total FV bond + FV warrant)*total proceeds

134
Q

8yr1, 500k 1 year , noninterest bearing note, discount at 10.8% , use SL method, carry amount at dec 31 yr1 ?

A

discount amt = 500k10.8% = 54k ;; begin carry amount = 446k ; SL amortization = 446k +54k5/12

135
Q

how to find begin ARO? period depreciation ARC ? yr 2 accretion expense ?? settlement loss ?

A

1) begin ARO = undis CFpresent value at credit adj risk free rate
2) depre = (1)/# of year
3) accretion exp = (begin AROCAF rate)+begin ARO
4) settlement loss = watch out for the yr

136
Q

wut financial instrument issued by a public company should be reported on issuer book as a lia on date of issuance ?

A

C/S that contain a unconditional redemption feature

C/S, preff that is not redemable is treated as equity

137
Q

weighted average expenditure when there is purchase land and progress payment /

A

(purchased land * # remaining/12 + progress payment*#remaining/12) * rate

pick the lower of this or total loan interest

138
Q

future contract G/L entries , at inception vs end of yr vs settlement ?

A

@ inception = no entries
@ end of yr= Dr future contract , Cr Unrealize gain ( this gain go to OCI)
@ settlement = relass gain from OCI to NI , Dr Cash , Cr future contract

139
Q

average total asset formula

A

average total asset = net rev (=avg AR*AR turn over) / total asset turnover

140
Q

price to earning ratio

A

price to earning ratio = market price per share / basis EPS

141
Q

which FS analysis express the final items as a % of base year amount ?

A

horizontal common size analysis

142
Q

foreign curr transaction G/L report where ?

A

income

143
Q

foreign curr translation reported where

A

OCI

144
Q

Band use equity method to account for investment in Guard, how should Band record 2% stock dividend received from Guard ?

A

this is STOCK DIV ,, just a memorandum entry reducing the unit cost , this apply for both Fair value and equity method

145
Q

wut is nonreciprocal transfer ?

A

transfer of asset, services in 1 direction , record at fair value when transfer to another entity or a shareholder of the entity

146
Q

JE to declare property div , effect on RE ? if property carry amount 60k, FV 70k ?

A

decrease RE 60k (=net effect of 70k - 10k gain)

147
Q

2-1 stock split vs 10% stock div ?

A

stock split : has no effect on the account , decrease par value of C/S
10% stock div: Dr RE (Fair value of stock) Cr capital stock acc (par value), Cr APIC ( excess of fair value over par value) ;; RE decrease but total equity no change

148
Q

liquidating dividend effect ?

A

liquidating dividend result in distribution in excess of corporate’s RE ;; effect: decreaes contributed capital (C/S + APIC)

149
Q

IFRS impairment loss ?

A

IFRS impairment loss may be reversed ,
compare carry amount vs recoverable
recoverable = greater of value in use (present value of discounted CF) or net realizable value (sale proceed less cost to sell)

150
Q

wut to do with unamortized cost of replaced software for internal use ?

A

when software is replaced , unamortized cost of old software is expensed

151
Q

estimate uncollectible expense using the ratio of past return loss from uncollectible account to past net credit sale , this follow accounting concept of ?

A

concept of matching

152
Q

organizational cost in tax vs book ?

A

book; expense organizational cost;;;

tax: captalize , and amortize over 15 years

153
Q

IFRS , how to measure intangible asset ?

A

IFRS, measure intangible asset using cost model or revaluation model

154
Q

legal fee ? expense or capitalize ?

A

legal fee = organizational cost = expense

155
Q

how to treat underwriter fee for initial stock offering ?

A

treat underwriter fee for initial stock offering as reduction in the proceeds , not organizational cost

156
Q

how to treat exploration cost and purchase of mineral right ?

A

exploration cost and purchase mineral right are capitalize item

157
Q

how to record compensation expense when company issue restricted stock ?

A

at grant date = (# of share * $ price at grant date )/ # of years;;; if issue more at yr 2: yr2 shares*$ / # of yer , then add yr 1

158
Q

effect of amortization of prior service cost in FS ?

A

prior service cost = cost of amendment initially recog as debit to OCI @ amenment date: Dr OCI, Cr pension lia

when prior service amortize: Dr pension exp, Cr OCI ;; increase OCI

159
Q

fair value of plan asset formula ?

A

begin FV + contribution - benefit paid +- actual return on plan asset ( actual > expected – gain ) = ending FV

160
Q

how to find net gain loss for defined benefit pension plan ?

A

net of asset gain (=actual return - expected) and lia G/L (=from PBO formula)

161
Q

PBO formula =

A

begin PBO + service cost + interest cost + prior service cost - prior service credit - benefit paid + lia loss- lia gain = ending PBO

162
Q

previously recog impairment loss ?

A

previously impairment loss can not be reversed under GAAP

163
Q

income bond vs other bond ?

A

income bond pay interest only if the issuing company has earned the interest , the principal still be paid on the due date

164
Q

periodic pension expense =

A

service cost + interest cost (=(begin PBO+prior service cost)* discount rate) - expected return on plan asset (=begin FV*expected rate) +- amortization of net gain, loss (=gain - 10% of (greater of begin PBO or Fair value)) +- amortization of prior service cost

165
Q

how to depreciate capital lease ?

A

depreciate lease over asset life when lease contain a bargain purchase option

MISC (6 decks)

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