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FAR > Module 2 > Flashcards

Module 2 Flashcards

1
Q

Subsequent event evaluation
SEC filers and non- filers

A

SEC: Evaluate events through the date statements issued
Non: “available to be issued”

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2
Q

Fair value

A

The most advantageous market price for an asset or liability after considering transaction costs

Uses the “exit” price

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3
Q

Fair value hierarchy

A

Level 1 input is highest
Level 3 is lowest

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4
Q

Fair value disclosures

A
  1. Valuation techniques and inputs including judgements and assumptions
  2. The uncertainty in the measurement at the reporting date
  3. How changes in the measurement affect the entity performance and cash flows
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5
Q

3 tests to determine operating reportable segments - only has to meet 1 of the 3

A
  1. 10% combined revenues to internal and external parties
  2. 10% of the greater of reported profit or loss
  3. 10% of combined assets of all operation segments
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6
Q

Reportable segments
75% reporting sufficiency test

A

Requires that reportable segments total at least 75% of revenue from external parties

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7
Q

Segment operating profit (loss)
Definition/equation

A

Segment revenues from sales (to internal and external customers)
Less directly traceable costs
Less reasonably allocated costs
Equals segment operating profit loss

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8
Q

Segment disclosures

A
  1. Segment profit loss
  2. Segment assets
  3. Other certain items
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9
Q

Disclosures for all public entities

A
  1. Products and services
  2. Geographic areas
  3. Major customers
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10
Q

SEC reporting requirements are outlined in Regulation

A

S-X

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11
Q

SEC electronic filing must use

A

XBRL
eXtensible Business Reporting Language utilizes a taxonomy w tags that identify and define data found in the statements and footnotes

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12
Q

OCBOA - other comprehensive basis if accounting

A

Cash basis statements
Modified cash basis
Income tax basis

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13
Q

Partnership contribution recording

A

Fair value
Less the present value of liabilities assumed by the partnership

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14
Q

Admission of new partners
Accounting methods

A

Exact method- no adjustment to partner accounts
Bonus method - adjust partner accounts for any difference
Goodwill method - adjust partner accounts for any difference and adjust the goodwill assets

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15
Q

Withdraws of partners - accounting methods

A

Bonus method
Goodwill method

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16
Q

Partnership contributions
Partner contributes assets cost 10K w fair value 20K, which figure to use

A

Use the fair value for the contribution
20K

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17
Q

Partnership net income
Deduct partner draws to determine partner shares?

A

No

18
Q

Ratio
Days in inventory aka Inventory Conversion period

A
  1. Cost of good sold/365 days
  2. Ending inventory/ figure #1
19
Q

Ratio
Return on assets

A
  1. Average total assets - beginning or year and end of year divided by 2
  2. Net income / average total assets from #1
20
Q

Partnership contribution
Assets with liens

A

Fair market value of the asset net of any liabilities is the amount of the new partners capital account

21
Q

Ratio
Inventory turnover

A
  1. Average inventory - add beginning and ending then divide by 2
  2. Cost of good sold / #1 average inventory
22
Q

Calculating cost of goods sold

A

Beginning inventory
Add purchases
Subtract ending inventory
Equals cost of good sold

23
Q

Common modifications to cash basis stmts (modified cash basis)

A
  1. Recording long term liabilities
  2. Accrual of income taxes
  3. Capitalization of inventory
24
Q

Calculating partnership capital account interest

A
  1. Net profit - deduct the partnership interest owed
    Then any profit or loss remaining gets split to the partner accounts
  2. Plus the interest the accounts were owed
25
Q

Income tax basis financial statements

A

Recognize income and expenses when these items are recognized on the entity’s tax return…. So they are adjusted to the reporting period

26
Q

Partnership accounts are equity accounts

A

Natural debit balance

27
Q

Partnership - Exact Method

A

Exactly how much does a partner need to contribute to become an equal partner - old partner accounts stay the same

28
Q

Partnership
New partner gets 1/5 interest of partnerships 180,000 net assets
How much does she need to contribute?

A
  1. Take 5-1=4
  2. 180,000/4= 45,000
29
Q

Partnership - new partner joining for 20%, net assets not given

A
  1. Total the current capital account balances
  2. 20% is 1/5…5-1=4
    Divide current capital account balances total by 4
30
Q

Partnership - Bonus Method

A

Bonuses can affect either new partner or the old ones. It increase (decreases) the individual partner accounts without changing the net assets.
If the bonus goes to the old partners then it is split according to their profit ratio

31
Q

Partnership - Goodwill method

A

The goodwill always goes to the old partners, never the new
The goodwill increases the individual partner accounts and also changes the net assets of the partnership

32
Q

Partnership distributing profit and loss

A
  1. Pay any guarantees
  2. Pay any interest on ending capital account balances
  3. Pay any salaries
  4. Then calculate distribution according to profit and loss ratios
  5. Then repay draws
33
Q

Partnership liquidation

A

Partnership advances can’t be repaid if any of the partners have a negative capital account balance
The partner capital accounts have to absorb the negative capital account balance first before the advances are repaid

34
Q

Partnerships - calculating additional paid in capital APIC

A

Assets (D)

Liability-fair value (C)
Common stock (C)
APIC (C). xxx
Assets = Liabilities + Common stock issued + APIC … squeeze for the APIC

35
Q

Market participants

A

Independent of one another
Knowledgeable and acting in their best interest

36
Q

Conversion cash basis to accrual
Revenue

A
  1. Add ending accounts receivable
  2. Subtract beginning a/r
  3. Subtract ending unearned (or deferred) revenue
  4. Add beginning unearned (or deferred) revenue
37
Q

Determining fair value when there’s no principal market

A

Evaluate the options using the quoted price netted with the transaction cost to determine the right market, but the fair value answer is only the quoted price with out the transaction cost

38
Q

Principal market
Most advantageous market

A

Principal market sells the most quantity

Most advantageous offers the best price after transaction costs (but the answer is the price without the transaction costs factored in)

39
Q

Level 1, 2, and 3 inputs

A

Level 1 active market, identical asset
Level 2 uses inputs other than quoted prices that are observable or unobservable
Level 3 unobservable inputs

40
Q

Determining most advantageous market with transportation costs

A
  1. Determine the most advantageous market- transport costs not a factor

2 in the final answer subtract the transport cost from the exit price of the most advantageous market price

41
Q

Fair value measurement methods

A

1 Market approach - aka most advantageous market, comparing markets
2 Income approach - impaired items
3 Cost (replacement) approach

FAR (17 decks)

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