New Study Plan Deck 5 Chapter 7 Flashcards
When an entity uses allowance method for recognizing credit losses on A/R. Ignoring deferred taxes the entry to record the write off is uncollectible account
It affects neither the net income nor working capital
For the double decline method do we subtract the salvage value from the equipment cost?
No Sir
For the sum of the year digit do we need to subtract the salvage value?
Yessir
Machinary 170,000 - 20,000 salvage value = 150,000
When computing diluted DEPS convertible securities that are potential common stock are
recognized only if they are dilutive
How to calc the disposal asset?
You need to know the cost - accumulated depreciation (which are given in the problem) this in result will provide the time of its disposition
Next we subtract the cash received and we get a final answer of disposal of asset
When ending inventory is overstated by 1000 then would happen to retained earnings?
Overstated by 1000 since ending inventory is overstated and COGS is understated which results RE to be overstated
Weighted AVG for the year inventory costs flow method is applicable for which inventory systems?
Periodic ONLY not perpetual
Perpetual is more applies to moving AVG method
Calc for operating income?
Revenue which includes Sales revenue - COGS = Gross Profit
Operating Expenses
=
Formula for depreciable base?
Purchase used equipment 135,000 - 15,000 salvage value = 120,000 depreciation base
Methods of depreciation will result in the lowest reported net income in the earl life of a depreciation asset?
Sum of the year digit
Calc the interest expense for income statement?
reported cash paid interest 70,000
Accrued interest payable is a (Liability) 17,000 decrease
Prepaid interest is a (Asset) so it 23,000 decreased ago we add
70,000 - 17,000 + 23,000 = 76,000
Are general administration expenses
NO for interest and Advertising
If NP has no stated interest rate then how should it be presented in the statement of financial position?
At the face amount minus a discount calculated at the imputed interest rate
level 2 observable
Are impairment loss that are reversal. Are they recognized or not?
They are prohibited
A failure to record the credit affects assets or liabillites?
it usually affects the liabilities not assets
How to recognize revenue for license and arrangements and license commencement date?
By the Present Value of calc and payments?
How are revenue recognized for Royalty revenues?
based on the usage and sales
How are equity and liabilities increased?
By crediting it
Items such as
Net Income
Issued Common Stock
unrealized gain on available for sale
Examples of Approriated RE and Unapproriated ?
Appropriated retained earnings are usually capital projects, future expansion, legal contingencies, and debt repayments
Unapproriated retained earnings are paying dividends, reinvestment in the business or just maintaining a reserve fund
What are some ways to adjust the statement of changes in equity for the correction of errors?
Errors from prior periods should be corrected by restating the beginning balances of equity accounts for the earliest period presented
For the indirect method for the investing activities what are some Non relevant Items?
Are gains subtracted from net income and losses added?
Yes
For the investing activities what are activities would be included in the cash flows?
PURCHASE & Sales of PP&E
What are items that are already included for Net Income?
INTEREST PAID & DIVIDENDS RECEIVED
What are Non cash transactions that are ADDED back into NET INCOME?
DEPRECIATION EXPENSE & AMORTIZATION
What type of activities are included in financing activities?
repayments and settlement of debt obligations
What are the some financing activities included for the statement of cash flows?
issurance of stock
payment of dividends
treasury stock transactions
issurance of debt
obtaining cash from creditors
the excercise of share options resulting in excuss tax benefits
receiving resources that are donor restricted to long term use
examples of non cash financing and investing activities?
Acquired land by assuming a mortgage for full acquisition cost
Issuing equity instruments are classified as cash inflows
From Financing activities
Are cashflows per share reported?
No they’re not
Step to calc the Noncontrolling interest?
STEP 1 - Calc the total FMV
STEP 2 - Calc NONCONTROLLING BEGIN
STEP 3 - Calc Noncontroling Net Income
STEP 4 - Calc Noncontroling Dividends
STEP 5 - Calc Noncontroling Ending
STEP 6 - Calc Total Equity (C/S + APIC + Retained Earnings)
STEP 7 - Calc the Non controlling ending + Total Equity
How are adjustments for accounts receivable and payable made for consolidated statements?
When there are adjustments made the parents and subsidiary parent we need to eliminate the entries
When determining inner company gain how do we adjust those gains?
By using the original cost - original book value
When a NFP receives the funds however didn’t didn’t meet the requirements for the funds. How is that recorded on the statement of financial?
it’s recorded as a liability even though they received the funds the still have cleared the requirement to obtain the funds
So the NFP has no unconditional
In consolidated financial statement of a parent and they owned 90% of that subsidiary
comprehensive income or loss attributable to the parents. The total consolidated total, the controlling interests share and the parents share
Examples of investing activities?
Purchase of real estate for 550,000
Sold available for sale debt securities 500,000
purchase machinary and equipment
What kind of skills are required to be recorded as FV?
Donated skills that are specialized skills would need to purchase by organization to be recorded as FV
Rules for increase or decrease in Net Assets with donor restrictions
Rules for increase or decrease in Net Assets without donor restrictions
expense always decrease net assets without donor restrictions expect investments
What is the two step process for net assets released from restriction expenses from without donor restriction and with donor restriction?
First they are recorded as expenses as without donor restriction and equivalent amount released from net assets with donor restrictions (only when there is a restriction)
