Notes in my own words SFCPA

Question 1

The income tax basis of accounting

Answer 1

Revenues expenses assets and liabilities are recognized according to the tax laws and regulations. May differ slightly from GAAP.

Question 2

Liquidity ratios

Answer 2

Current ratio
Quick Ratio

Question 3

Solvency ratios

Answer 3

Debt-equity ratios
interest coverage ratio(interest times)

Question 4

Profitability ratios

Answer 4

Net profit margin
Return on assets
Return on equity

Question 5

efficiency ratios

Answer 5

Asset turnover ratio
inventory turnover ratio

Question 6

Market value ratios

Answer 6

earnings per share
Price-to-earnings ratio: Market Price per share/ earnings per share

Question 7

Cash flow ratios

Answer 7

operating cash flow ratio= operating cash flow/ total debts
Free cash flow to equity=cash from operations-capital expenditures-debt payments+new debt issued.

Question 8

LCNRV Lower of cost net realizable value (IFRS)

Answer 8

compare each inventory item (or group) to the net realizable value. if the items acquisition cost exceeds the NRV, then record it at the lesser the NRV.

Question 9

LCM Lower of cost or market

Answer 9

compare the cost of inventory to the market value if the cost exceeds the market value reduce the inventory to market value.

Question 10

CECL model and AFS debt securities

Answer 10

this model is used to show a company’s leases, loans, and debt instruments’ total credit losses.

Question 11

Equity method investments

Answer 11

this method is applied to investments with certain circumstances, normally when an investor gains significant influence over the investee, but does not have control.
Significant influence
joint control or lack of some control

Question 12

Asset retirement obligation

Question 13

Troubled debt restructuring TDR

Answer 13

When a borrower’s payback on debt is less likely. A lender can grant a change to their loan that would not be considered if the circumstances were normal.

Question 14

Effective interest method determining the debt issuance costs on a bond.

Question 15

Present value of an annuity future interest payments

Answer 15

calculating future payments based on market interest rate

Question 16

Present value of future cash flows

Question 17

If a bond is issued below face value there is what?

Answer 17

a discount on the bond

Question 18

If there is a yields percentage on the bond then… using the effective interest method to amortize a bond.

Answer 18

you add to the discounted rate the bond is issued at until it reaches the face value.

Question 19

how to determine what is due to bonds payable using the effective interest method of amortizing bond discount.

Answer 19

find the annual interest payment
find the effective interest expense year 1
find the difference between the annual interest payment and the effective interest payment for year 1= the amortization of the bond discount. Be careful read whether it is for a full year or 1/2 year.

Question 20

Annual interest payment on a bond

Answer 20

= face value * % issued at

Question 21

effective interest expense year 1

Answer 21

= amount the bond is issued at (the discount amount) * the yields percentage

Question 22

What kind of bonds will not all mature on the same date?

Answer 22

Serial bonds

Question 23

Present value of bond issuance

Question 24

period amortization

Answer 24

(premium/discount and bond issuance)/ number of periods the bond is outstanding.

Question 25

SEC reporting!

Question 26

transaction Vs translation

Answer 26

Translation is when converting a whole set of financial statements rather than one transaction.