New Study Plan Deck 5 Chapter 7

Question 1

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

Answer 1

It affects neither the net income nor working capital

Question 2

For the double decline method do we subtract the salvage value from the equipment cost?

Answer 2

No Sir

Question 3

For the sum of the year digit do we need to subtract the salvage value?

Answer 3

Yessir

Machinary 170,000 - 20,000 salvage value = 150,000

Question 4

When computing diluted DEPS convertible securities that are potential common stock are

Answer 4

recognized only if they are dilutive

Question 5

How to calc the disposal asset?

Answer 5

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

Question 6

When ending inventory is overstated by 1000 then would happen to retained earnings?

Answer 6

Overstated by 1000 since ending inventory is overstated and COGS is understated which results RE to be overstated

Question 7

Weighted AVG for the year inventory costs flow method is applicable for which inventory systems?

Answer 7

Periodic ONLY not perpetual

Perpetual is more applies to moving AVG method

Question 8

Calc for operating income?

Answer 8

Revenue which includes Sales revenue - COGS = Gross Profit

Operating Expenses

=

Question 9

Formula for depreciable base?

Answer 9

Purchase used equipment 135,000 - 15,000 salvage value = 120,000 depreciation base

Question 10

Methods of depreciation will result in the lowest reported net income in the earl life of a depreciation asset?

Answer 10

Sum of the year digit

Question 11

Calc the interest expense for income statement?

Answer 11

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

Question 12

Are general administration expenses

Answer 12

NO for interest and Advertising

Question 13

If NP has no stated interest rate then how should it be presented in the statement of financial position?

Answer 13

At the face amount minus a discount calculated at the imputed interest rate

Question 14

level 2 observable

Question 15

Are impairment loss that are reversal. Are they recognized or not?

Answer 15

They are prohibited

Question 16

A failure to record the credit affects assets or liabillites?

Answer 16

it usually affects the liabilities not assets

Question 17

How to recognize revenue for license and arrangements and license commencement date?

Answer 17

By the Present Value of calc and payments?

Question 18

How are revenue recognized for Royalty revenues?

Answer 18

based on the usage and sales

Question 20

How are equity and liabilities increased?

Answer 20

By crediting it

Items such as

Net Income
Issued Common Stock
unrealized gain on available for sale

Question 21

Examples of Approriated RE and Unapproriated ?

Answer 21

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

Question 22

What are some ways to adjust the statement of changes in equity for the correction of errors?

Answer 22

Errors from prior periods should be corrected by restating the beginning balances of equity accounts for the earliest period presented

Question 23

For the indirect method for the investing activities what are some Non relevant Items?

Question 24

Are gains subtracted from net income and losses added?

Answer 24

Yes

Question 25

For the investing activities what are activities would be included in the cash flows?

Answer 25

PURCHASE & Sales of PP&E

Question 26

What are items that are already included for Net Income?

Answer 26

INTEREST PAID & DIVIDENDS RECEIVED

Question 27

What are Non cash transactions that are ADDED back into NET INCOME?

Answer 27

DEPRECIATION EXPENSE & AMORTIZATION

Question 28

What type of activities are included in financing activities?

Answer 28

repayments and settlement of debt obligations

Question 29

What are the some financing activities included for the statement of cash flows?

Answer 29

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

Question 30

examples of non cash financing and investing activities?

Answer 30

Acquired land by assuming a mortgage for full acquisition cost

Question 31

Issuing equity instruments are classified as cash inflows

Answer 31

From Financing activities

Question 32

Are cashflows per share reported?

Answer 32

No they're not

Question 33

Step to calc the Noncontrolling interest?

Answer 33

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

Question 34

How are adjustments for accounts receivable and payable made for consolidated statements?

Answer 34

When there are adjustments made the parents and subsidiary parent we need to eliminate the entries

Question 35

When determining inner company gain how do we adjust those gains?

Answer 35

By using the original cost - original book value

Question 36

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?

Answer 36

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

Question 37

In consolidated financial statement of a parent and they owned 90% of that subsidiary

Answer 37

comprehensive income or loss attributable to the parents. The total consolidated total, the controlling interests share and the parents share

Question 38

Examples of investing activities?

Answer 38

Purchase of real estate for 550,000 Sold available for sale debt securities 500,000 purchase machinary and equipment

Question 39

What kind of skills are required to be recorded as FV?

Answer 39

Donated skills that are specialized skills would need to purchase by organization to be recorded as FV

Question 40

Rules for increase or decrease in Net Assets with donor restrictions

Question 41

Rules for increase or decrease in Net Assets without donor restrictions

Answer 41

expense always decrease net assets without donor restrictions expect investments

Question 42

What is the two step process for net assets released from restriction expenses from without donor restriction and with donor restriction?

Answer 42

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)

Question 43

What are special purpose frameworks examples?

Answer 43

OCBOA Cash basis, modified cash basis, tax basis and regulatory basis

Question 44

For external reporting purpose the NFP reporting model?

Answer 44

Permits disaggregation of information by the fund groups