MISC Flashcards
CASH INCOME TO ACCRUAL INCOME
SAME ASSET, FLIP LIA
realized gross profit
(cash received - interest portion ) * gross profit %
where does NCI appear on FS
in the owner equity section
book value per share
common equity / # of common share ousta ;;;; if preff is non-cumu, the equity of preff is the liquidation value, subtract this from total equity to get common stock equity; if preff is cumu, liquidation value of pref is its par value plus premium plus div in arear OR liquidation value + div in arrear
asset turnover ratio
Net sales ÷ Total assets
profit margin %
NI / sales
% return on asset
net income / avg total asset
transfer from Available for sale to held to maturiry
amount recognized in OCI are not reversed. they are amortized into earnings same way as premium or discount
transfer from held to maturity to available for sale
Any unrealized gains or losses that were previously unrecognized are recognized in OCI
if ratio is less than 1, wut cause the increase in the ratio
transaction that result increase in denominator and numerator will improve da ratio
remeasurement ( sub operate in Local curr, but functional curr is US), wut rate to use?
non monetary items BS items and related rev, exp (COGS, depreciation, amortization) use HISTORICAL rate - Round Neo Refused Eyeless Ham
Monetary and curr items (Allow, rent) use curr rate
fair value hedge
This hedge is a foreign currency fair value hedge because it hedges a foreign currency exposure of an unrecognized firm commitment whose cash flows are fixed
average number of days in the operating cycle
Average days’ sales in inventories + Average days’ sales in accounts receivable
effective portion of a cash flow hedge of a forecasted transaction
is included in accumulated OCI (an equity account to which periodic OCI is closed) until periods in which the forecasted transaction affects earnings.
intrinsic value of an option
The intrinsic value of an option is the difference between the market value of the underlying and the exercise price of the option. The amount paid for the option is not relevant
A gain on a foreign currency receivable and a loss on a foreign currency payable resullt when ?
A gain on a foreign currency receivable and a loss on a foreign currency payable result when the dollar weakens.
translation , wut rate to use ?
Assets and liabilities are translated at the exchange rate at the balance sheet date
revenues, expenses, gains, and losses are usually translated at average rates for the period
SHE is historical rate
Tasty Cops Ate Hooks
expressing all financial statement items as a percentage of base-year amounts is called
horizontal common size
price to earning ratio
the market price divided by basic earnings per share.
cash paid to interest expense ?
same as indirect CF , flip asset, same lia
AR turnover
net credit sale (after subtract allowance) / avg AR
foward contract
use da future rate at transaction date vs future rate at year end
avg day sale in inventory
365 / inventory turnover
time interest earned ratio
earning b4 interest and tax / interest expense
cash flow hedge ( effective and ineffective)
effective, recog in OCI first, then reclass to earning when done, ineffective, recog in earning immediately
Equal increases in the numerator and denominator of a fraction that exceeds one
decrease da fraction
cash flow hedge
a hedge of the foreign currency exposure of a forecasted transaction
A receivable or payable stated in a foreign currency
should be recorded at the current exchange rate and then adjusted to the current exchange rate at each balance sheet date
a gain or loss on a foreign currency transaction that hedges a net investment in a foreign entity
the translation loss and the transaction gain should be reported in accumulated other comprehensive income.
Journal entry to record subscription for no par common stock with stated value
Dr. Cr.
Stock subscriptions receivable XXX
Common stock subscribed (for shares
subscribed x stated value per share) XX
Additional paid-in capital X
entry to eliminate valuation allowance for tax
Valuation allowance 1,200
Tax expense/benefit - deferred 1,200
purchase 3 month treasury bill, wut is it on CF?
it is cash equivalent and has no effect on CF
collection of overdue AR from a customer, CF?
operating
proceeds from a note payable
financing
collection from a note receivvable from a related party
investing cf
a monthly payment to finance the note
are repayment of debt obligation, financing CF
bond redemption amount , CF ?
financing
amortization of bond discount entry , and effect on CF
dr interest exp, cr dis
its a noncash item that reduce income
add back to operating CF
if its a premium, subtracct it
collection from customer equal? on CF
sale minus increase in gross AR , ( flip asset, same lia , same as accrual to cash NI)
interest expense to cash paid for interest ?
interest exp plus increase discount amortization , let say dis count amortization increase by 500, add this ; unamortize discount will decreae by 500, subtract this
interest exp minus decrease in unamortize discount
cash paid for selling exp ?
same asset, flip lia,
selling expense - depreciation allocated to selling expense
cash paid to supplier ?
since cash paid for interest to interest = same as indirect = flip asset, same lia
this one is = same asset, flip lia
increase in Investment in Videogold, Inc., stock, all of which was acquired in the previous year, carried on the equity basis , CF ?
subtract from operating
Accumulated depreciation, caused by major repair to projection equipment
should not be expense as it benefit more than one period, non expense , no effect on CF
premium on bond payable ? CF?
subtract from operating CF , if there is a decrease on premium, u add it back
Deferred income tax liability , CF?
treat it just like lia , on operating
If an entity uses the indirect method to present its statement of cash flows, wut to report in supplemental disclosure ?
disclose interest and income tax paid
nonmonetary exchanges be recorded based on fair value wen
if fair value is determinable, unless the exchange transaction lacks commercial substance
The nonmonetary exchange of assets is measured at the fair value of the new truck received because the fair value of the truck given up is not available. The gain or loss on the exchange is the difference between the fair value of the truck received of $5,000 and the total carrying amount of the assets given up of $5,000 [($10,000 – $7,000) carrying amount of old truck + $2,000 cash paid]. Accordingly, no gain or loss is recognized on this nonmonetary exchange.
depreciation expense in CF when knowing AD?
ending AD - AD sold + begin AD = depre
AD sold = cost - carry value
payments to acquire debt instruments of other entities (other than cash equivalents and debt instruments acquired specifically for resale)
investing
not be reported in disclosures related to the statement of cash flows is
item that does not affect recognized assets or liabilities ;;;;;;;;;;;;A stock dividend declared during the year.
conversion of debt to equity . CF ?
disclosure
Nontrade notes payable increase, CF ?
not an operating item
find COGS in CF ?
get COGS + same asset, flip lia , in inventory and trade AP
since cash paid to interest is flip asset, same lia
inventory loss recognize in interim
ASB ASC 270-10-45-6 provides that inventory losses from market declines should be recognized in the interim period in which the decline occurs. If these losses are recovered in a later period a gain should be recognized in that period but these gains “should not exceed previously recognized losses.”
In regard to the situation described in the question, the dollar amount of inventory would decrease by the amount of price decline in the first quarter and increase by the same amount in the third quarter.
available for sale, cost 50k, sold for 48k, previous unrealized loss of 5k in OCI, final effect?
2k loss in net income, 5k reversal out of OCI , will be gain of 5k in OCI, comprehensive income will be 3k gain
how to report note receivable that are customary trade term?
report them at face amount
period to amortize the intangible asset (copy right)
the useful life of an intangible as the period over which the asset is expected to contribute to future cash flows
defer gross profit
= (credit sale - ar written off - cash collected ) * gross profit %
received proceeds from insurance from death of officer, wut amount to recog?
the proceeds minus cash surrender value
how to recog legal and consultant cost when issuing stock?
expense
how to recog registration and issuance cost when issuing stocK?
debit AIPC
how to find G/L when u settle ARO?
dont compare the inital ARO vs the settlement
gotta find the Expected cash flow adjusted for inflation and market risk , then compare this to settlement to find g/l
when u see incentive stock option on a dilutive EPS question, wut to do ?
check to see if excercise price > market price, IGNORE
if excercise price < market price, add the diff to EPS denominator, diff is calculated based on the ( # stock * excercise price) / market price,
if Jan-Mar = 15k, April-May 14k, weighted = 153/12 , 142/12
adjuting entry for when there is a gain for future contract
Dr option , Cr unrealized gain
both trade stuffs, have commercial sub, received cash as well, wut to do ?
The cash received by Vey is taken into consideration in determining the fair value of the equipment surrendered, but is not taken into consideration in determining the fair value of the equipment received
Noting that interest rates are declining, Blue Township opted to retire an existing, callable general obligation bond and replace it with a new bond issue with lower interest. A $4,000,000, 5% bond originally issued at par value with 15 years remaining was retired for $4,100,000. A new $4,000,000, 2%, 30-year bond was issued. The new bond issue was sold at 104 and printing, legal, and administrative costs for the transactions amounted to $5,000. On the government-wide financial statements, this refunding would result in:
This “current” refunding used the proceeds of the new debt to repay the old debt in its entirety. For current refundings reported in the government-wide statements, GASB D20.108 states that the difference between the reacquisition price of the old debt and the net carrying amount of the new be amortized over the shorter of the remaining life of the old debt or the life of the new debt, and debt issue costs be deferred. Cash flows for the refunding included outflows of $100,000 for call premium and $5,000 for issuance costs to be amortized over the remaining life of the old bonds, and a $160,000 premium on the new bonds to be amortized for the life of the new bonds. Therefore, for the 15-year remaining life of the retired bond, the difference between the reacquisition price of the old debt and the carrying value of the new debt is being amortized as a component of interest.
Noting that interest rates are declining, Blue Township opted to retire an existing, callable general obligation bond and replace it with a new bond issue with lower interest. A $4,000,000, 5% bond originally issued at par value with 15 years remaining was retired for $4,100,000. A new $4,000,000, 2%, 30-year bond was issued. The new bond issue was sold at 104 and printing, legal, and administrative costs for the transactions amounted to $5,000. On the government-wide financial statements, this refunding would result in
$4,000,000 liability due at maturity in 30 years plus a $105,000 contra liability to be amortized as a component of interest over 15 years, and a $160,000 additional liability to be amortized as a component of interest over 30 years.
how to recog unconditional promise for NFP ?
record unconditional promises to give as contributions revenue when the promise is made at net realizable value, or net of any allowance for uncollectible pledges
basically recog it in period received at fair value
wut increase net asset of a NFP ?
Investments are initially recorded at fair value if received as a contribution or gift.
Unrealized gains on investments carried at fair value also increase net assets. As the investments themselves were an unrestricted gift, the unrealized gain would increase net assets without donor restrictions.
Investment income includes dividends that increase net assets without donor restrictions unless there are donor stipulations.
Which of the following disclosures should prospective financial statements include
accounting policies + significant assumptions
pledge AR for a loan to A
A will retain control of receivable and continue to collect the receivable and applies the collection to the loan balance
how to find the cash proceed when issued the bond ?
present value of face @ effective rate + present value of ordinary annuity of payment(stated) @ effective rate
bond with stated rate less than effective rate, cash payment vs interest expense ?
cash will be less than interest expense
Interest expense is Carrying amount × Effective interest rate.
Cash payment amount is Face amount × Stated interest rate.
In this example, the stated rate is less than the effective rate, so the cash payment is less than the interest expense.
payroll tax lia vs pay roll tax epx
payroll tax lia = withheld amt + employee FICA + employer FICA
payroll tax exp = just the employer FICA
compensation stock option plan, process of recog
the additional paid-in capital—stock options account should be reduced at the excercise date
recog exp over service period, Dr compen exp, Cr APIC stock option (increase) when stock excercise, Dr cash (amt employee pay), Dr APIC stock option (reduce it), Cr CS par, CR APIC plug
a large accelerated filer must file its Form 10-Q with the U.S. Securities and Exchange Commission within how many days
40 days
how G/L from discontinue ops reported ? wut about in interim period ?
The gain or loss from the disposal should be reported separately net of income tax effects
same thing for interrim period, not at year end
what account does a CITY close at year end ?
expenditure cuzz its a nominal (operating statement) account used in periodically measuring outflows of financial resource
BS accounts do not close at year end
government fund balance sheet include wut ?
a separate column for each major governmental fund and a column with aggregated information for all other (nonmajor) governmental funds as well as a total column for all governmental funds.
basic financial statement of governmetns
government-wide statement of net position,
government-wide statement of activities,
governmental funds balance sheet,
governmental funds statement of revenues, expenditures, and change in fund balances,
proprietary funds statement of net position,
proprietary funds statement of revenues, expenses, and changes in fund net position,
proprietary funds statement of cash flows,
fiduciary funds statement of net position,
fiduciary funds statement of changes in fiduciary net position, and
notes to financial statements.
lifo retail method
adjust ending retail inventory back to normal price = divided by 1.10 if 10% price increase get the ( retail inventory layer from above, *cost retail ratio*1.10 ) + beginning cost inventory
what 10Q include
The Form 10-Q contains financial statements, a discussion from the management, and a list of “material events” that have occurred with the company.
cash, cash equivalent? cash in bond sinking fund, posted date check, petty cash?
bond sinking fund = not cash
posted date check = not cash, its receivable
petty cash = cash
what is factoring receivable ?
Factoring arrangements are a means of discounting accounts receivable on a nonrecourse, notification basis. Accounts receivable are sold outright, usually to a transferee (the factor) that assumes the full risk of collection, without recourse to the transferor in the event of a loss. Debtors are directed to send payments to the transferee. Red Co. will have its cash immediately upon the sale, whereas the other methods may accelerate the receipt of cash but will not result in a great deal of cash being received immediately.
what is depreciable base /
Depreciable base is Purchase price - Salvage value:
When a company is bought, ? goodwill?
purchase cost of stock - Less 30% of identifiable assets (30% of $600,000)
requires that debt issuance costs be presented in the
this is debt issue cost, not equity issuance cost : presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability, consistent with debt discounts; the recognition and measurement guidance for debt issuance costs were not affected by the amendments. Amortization of debt issuance costs also shall be reported as interest expense; issue costs will no longer be reported in the balance sheet as deferred charges.
right dividend distribution, then issuer redempted them since no right has been excercise, entry ? effect
initial : memo only
redem = Dr RE , Cr Cash ;;; reduce SHE
owns 2,000 shares of Arlo, Inc.’s, 20,000 shares of $100 par, 6% cumulative, nonparticipating preferred stock and 1,000 shares (2%) of Arlo’s common stock, Declared and paid 240k for preff in year 2, what is div income ?
since this is culumlative: year 1 = 120
year 2 = 120
(120+120)*0.1 = 24k
net periodic pension cost
service + interst cost - Expected return on plan assets + Amortization of prior service costs +- Amortization of unrecognized (gain) loss + Amortization of unrecognized transition obligation
$5,000,000 face value 10-year convertible bonds outstanding on January 1. The bonds were issued four years ago at a discount that is being amortized in the amount of $20,000 per year. The stated rate of interest on the bonds is 9%, and the bonds were issued to yield 10%. Each $1,000 bond is convertible into 20 shares of Chan’s common stock;;;; find interest exp (net of tax) for DEPS numberator
Interest: Cash ($5,000,000 x .09) $450,000 Discount amortization +20,000 ------------------------------------------------------ Tax ($470,000 x .25) (117,500)
option contract to purchase share at specific price + option cost, but did not excercise it until next year, effect at Dec 31?
still recog G/L in earning
# share * intial price + option cost
less # share * end of yer price + option cost
reversal of impairment loss of intangible asset, goodwill and long-lived asset?
is prohibited
long lived asset held for sale, can be restored
A gain should be recognized for any subsequent increase in fair value less cost to sell, but not in excess of the cumulative loss previously recognized for a write-down to fair value less cost to sell.
On January 1, 20X1, Bay Co. acquired a land lease for a 21-year period with no option to renew. The lease required Bay to construct a building in lieu of rent. The building, completed on January 1, 20X2, at a cost of $840,000, will be depreciated using the straight-line method. At the end of the lease, the building’s estimated market value will be $420,000, carry value of building at yr 2?
building is classified as leashold improvement, will be depreciate less of lease term OR life ,
840/20 - 840 = 798 CARRY AMOUNT AT YR 2
Technological feasibility is established when
completion of a detailed program design or completion of a working model.
reconcile govern fund to govern WIDE?
ADD Capital asset purchases and payments of long-term debt principal
ADD internal service fund assets and liabilities
SUBTRACT book value of capital assets sold
contribution revenue ?
restricted reg when promised or received conditional promise r not reve until conditions r met (upon completion of a building, 70% complete) exchange transaction ( $1500 received for subscriptions to a monthly child care magazine with a fair market value to subscribers of $1,000) , contri rev is reduced by fair value of consideration , only 500 is contri rev
conversion of debt to equity , CF?
disclosed as supplemental information
Merchandise out on consignment at sales price, including
40% markup on selling price , wut inventory account should be reduced ?
reduce this extra 40% mark up , get the # * 0.4
investment in equity securities are recog on bs at ? unrelized G/L recog in ?
at fair value at BS
unrealized G/L recog in earnings
equity method, stock dividend vs cash dividend ?
cash dividend = reduce carry amount of investment
stock dividend = as memorandum entry reducing the unit cost of all guard stock owned
dividend in arrear, ? report where ?
dividend in arrears is not accrued lia until actually declared ( div from cumulative preferred stock)
report as disclosure on FS
disclosure about postretirement benefit and cost of providing those benefit
disclose the trend
accumulated post-retirement benefit obligation
future contract to purchase 50 swiss francs, wut rate to use at year end ?
use the future 30 day rate at year end vs the contract price rate
operating lease interest payment, let say lease term is 5 years, payments r 56 months, entered lease agreement on Jun 1
payment * 56 months
then divided by 60 months
then * 7 months since June
escheat property held report where in goverment fund ?
in private purpose trust fund when principal and income are reported
in agency fund when the fund is held for another government
wut format does enterprise fund use to report CF operating activities ?
direct method
minimum requirement for general purpose external financial statements of govern?
MD&A, government-wide and fund financial statements with the notes to the financial statements, and RSI other than MD&A in addition to CAFR), which includes information additional to the basic general-purpose financial statements.
when not to use blending unit
Because only two of the seven school board seats are occupied by council members, the governing body of the school board is not “substantially the same” as the city council.
the amount of intergovernmental receivables reported by the general fund at the close of the fiscal year
The receivable would equal the difference between the amount of the advance and the revenues of $400,000 (the amount spent on qualifying expenditures).
reve less advance received = intergovernmental receivable
how should interest on debt be reported on governent wide FS ?
Interest that clearly derives from borrowing that is essential to support a program should be reported as a direct expense of that program,
interest that does not qualify as a direct expense should be reported as a separate line.
The two types of interest should not be combined. Interest is reported as a component of other functions or a separate line, but not at the bottom of the statement. Although interest on long-term debt is usually an indirect expense, it should be reported as a separate line and not allocated.
which statements r required for NFP ?
The basic financial statements for a not-for-profit entity are statement of financial position (like a balance sheet), statement of activities, statement of cash flows, and for voluntary health and welfare entities, a statement of functional expenses
Assets, liabilities, and net assets on financial position
The financial reporting framework for small- and medium-sized entities has been developed by the
AICPA
what is monetary asset ?
r items whose amounts are fixed in term of number of dollars
ex: demadn bank deposit, net long term receivables
issue cost and debt insurance in government fund ?
expense all
statement of net assets available for benefits of the plan must include
total asset, total lia, net asset reflecting all investments at fair value, net asset available for benfits
