Random CPA Knowledge FAR Flashcards
Type one subsequent event
A type one subsequent event provides additional detail about conditions that existed at the balance sheet date.
A company issues a $100,000 bond payable at a discount of 5%. How should the journal entry to record the issuance of the bond be made?
Debit bonds payable
Debit discount on bonds payable
Credit bonds payable
What is the primary reason for creating a valuation allowance against a deferred tax asset?
To ensure the tax asset is not overvalued due to uncertainty in its realization.
Trade receivables
Beginning Balance + Credit Sales – Cash Receipts
How should a change in accounting principle inseparable from an accounting estimate be recorded?
As a component of income from continuing operations.
What type of bonds mature in installments?
Serial bonds mature in installments rather than maturing all at once
Statement of cash flows indirect method steps
Step 1 The indirect method starts with the net income. (direct method is easier).
Step 2: Add back non cash transactions (depreciation)
Step 3: Adjust for gains and losses on sale of assets. correct so that there’s no effect on cash flows.
Step 4: Adjust for changes in working capital no effect on the cash flows
Step 5: Calc cash flows from operating
Next is interest and financing adjustments. Then you can calculate the ending cash balance by doing the operating income-interest-financing=cash flows.
Which inventory costing method is best for COGS vs ending inventory?
COGS=LIFO
Ending inventory FIFO
What can be capitalized for a patent?
when a patent is added any legal costs to successfully defend the patent should be capitalized and amortized over the lesser of the patent’s useful economic life or its legal life.
How do you know if a convertible bond will be anti-dilutive
Convertible bonds are anti-dilutive if converting them into common stock increases EPS above basic earnings per share
BasicEPS= NI/weighted average shares outstanding
Diluted EPS=
double declining depreciation vs sum-of-the-years-digits method
Sum of the years digits method is an accelerated method of determining depreciation. In double declining you depreciate less of the asset over time.
Where should other comprehensive income be located
It is reported in the balance sheet as a reduction of equity.
Other comprehensive income
PUFI
pension adjustments
unrealized gains
foreign currency adjustments
instrument-specific credit risks
comprehensive income formula
Net income+ other comprehensive income
Accelerated filers 10-k 10-Q
Accelerated filers have 75 days after the fiscal year-end to file their annual report (10-K) and 40 days after the fiscal quarter ends to file their quarterly report (10-Q)
Where does other comprehensive income show in the financials
In the balance sheet as a reduction of equity.
What would be Measurable performance-related barriers that are typically indicative of conditions attached to promises (pledges) or resources received by a not-for-profit organization would include which of the following?
Entitlement to assets that are contingent upon the achievement of producing specific outputs or measurable outcomes.
Contribution revenue recognition for not-for-profit organizations is based on the concept of:
Satisfying conditions
The bonds will be anti-dilutive if basic earnings per share is no greater than a maximum of:
convertible bonds are anti-dilutive if converting them into common stock increases earnings per share above the basic earnings per share.
Calculate the cash balance given: a company had net cash provided by operating activities of $351,000; net cash used by investing activities of $420,000; and cash provided by financing activities of $250,000. New England’s cash balance was $27,000 on January 1. During the year, there was a sale of land that resulted in a gain of $25,000 and proceeds of $40,000 were received from the sale. What was New England’s cash balance at the end of the year
New England’s cash balance at the end of the year includes the cash balance at the beginning of the year, the net cash provided by operating activities, the net cash used by investing activities, and the net cash provided by financing activities ($27,000 + $351,000 − $420,000 + $250,000 = $208,000).
Not-for-profit financial statements
Statement of financial position
Statement of activities
Statement of cash flows
retained earnings approach accomplishes what?
A “retained earnings appropriation” can be used to restrict earnings available for dividends.
Rule: A retained earnings appropriation debits (reduces) “unappropriated retained earnings” and sets up (credits) “appropriated retained earnings.” It does not affect the income statement.
Year 1 income statement, what amount should be reported as interest income? a non-interest-bearing note that was purchased for the face amount with the he present value of 1 at 10% for three periods is 0.75.
A non-interest-bearing note should be recorded at its present value and calculated using the prevailing market interest rate. The market interest rate is then used to calculate interest on the note.
Which of the following supplemental disclosures to the statement of cash flows is not required when the indirect method is used?
Reconciliation of net income to net cash provided by operating activities.
During Year 11, Hadley declared and paid both the Year 11 dividend and the Year 10 dividend in arrears. How should Woody report the Year 10 dividend in arrears that was received in Year 11?
Include in Year 11 income from continuing operations. preferred stock dividends are not guaranteed
Consolidated Business Inc. financial statements
lookup in super fast cpa notes
Where in the financial statements should the balance be properly shown if accumulated other comprehensive income account at the end of the current year is a debit balance?
In the balance sheet as a reduction of equity.
Retained earnings appropriation can be used to…
restrict earnings available for dividends
Dollar value LIFO
inventory measured in units and at unit prices
if stated rate of interest is less than the effective interest rate when the bond is issued
When the first interest payment is made, the discount is amortized. The discount amortization will increase interest expense for the period so that interest expense exceeds the interest payment to bondholders.
U.S. Securities and Exchange Commission (SEC) regulations for the financial statement presentation and disclosure requirements of SEC filings can be found in:
Regulation S-X.
5 steps to revenue recognition
Step 1: Identify the contract with the customer. …
Step 2: Identify the performance obligations in the contract. …
Step 3: Determine the transaction price. …
Step 4: Allocate the transaction price to the performance obligations in the contract. …
Step 5: Recognize revenue when, or as, the entity satisfies a performance obligation.
Where is other comprehensive income recorded?
in the balance sheet, used to effect equity.
