Liabilities Flashcards
When should threatened litigation be reported?
If it is reasonable possible
For an asset retirement obligation (ARO), reported liability is:
Projected fair value of the future debt, which is the present value of the future debt. There is no initial debt recorded.
What is Faithful Representation?
- complete
- neutral
- free from error
- depicts what it purports to represent
What is materiality?
relates to the capacity of the info to influence a user’s decision
What is consistency
Similar accoutning practive from period to period
If market rate of interest is higher than stated (coupon) rate, then the bond is sold at____?
Discount
gem of the question - bonds with warrants
Bonds with detachable stock warrants: allocate total proceeds to bonds as a liability and the warrants as equity at FMV
Ordinary annuity payments are due when?
Due at the end of a period
Annuity due payments are due when?
At the beginning of the period
how to account for a change in accounting estimate
prospectively, always (future)
how to account for depreciation, prospectively or prior period adj
prospectively
when do subsequent events occur
AFTER year end, BUT BEFORE completion of financial statements are distributed
current ratio
Total current assets/
Total current liabilities
acid test or quick ratio
cash+marketable securities+net rec/total current liabilities
accounts receivable turnover
net cr sales/average NET AR (need to take into account allowance for doubtful accounts)
