Random Quiz #3 Flashcards
When a govt Enterprise fund receives interest from an investment, how is this interest treated in a statement of cash flows?
Unlike GAAP business principles, govt acctg treats this interest as cash inflow from INVESTING.
Treatment for a probable and estimable gain
Gain contingencies are never accrued, but they ARE DISCLOSED
What are the 3 essential characteristics of an Asset?
P – C – T
- provides a Probable future benefit
- under the Control of the entity
- results from past Transaction or event
Given COGs for Parent & Sub, What do you need to eliminate to arrive a P’s COGs?
- Eliminate percentage of Subs. inventory that was sold.
2. Eliminate percentage of mark-up (Parent Sales/COGS) x Subs remaining inventory.
Under completed contract method, total revenue is recog when?
In the period in which the contract is completed [Completed-contract method - duh] Ignore anything about “progress billings”
When reporting currency remeasured to functional currency - 7600 gain. When translated - 8100 gain. How much is a gain in I/S?
Remeasurement = I/S
Translation = B/S (OCI)
(remember… ‘translation from foreign curr’ is the T in DENT)
when is a nonrefundable lease bonus, paid by a lessee recognized?
Over the life of the lease. (Treated as part of minimum lease payments and recognized over the term of the lease.)
Under IFRS an intangible asset is considered identifiable if it is:
Separable OR
Arises from contractual or legal rights.
Treatment - Change in accounting principle
GAAP to GAAP
Retrospective
Beginning of first year presented; Direct effects only; result in adjustment to RE on B/S
Tmt - Change in Accounting Estimate
Prospective - current and future; must disclose impact on f/s; if acct chg inseparable from chg in est, treat as change in estimate. (inc. chg depreciation method)
Tmt - Change in Accounting Entity
Retrospective - prior periods presented are corrected; any remaining balance affects RE, net of tax, as a prior period adjustment.
Tmt - Correction of Error
RetroACTIVE - Prior F/S restated’ difference in presentation and disclosure from Change in Principle,
3 disclosures:
- Effect on line items,
- Cumulative effect,
- Stmt that previous f/stmts have been restated.
Lease Liability balance
determine efficiently
pvLL x ImpRate
= IntExp - Pmt
=Amortization Amt
Disclosures for defined benefit pension plan
NO: Estimates of future contributions for next 5 years! YES: Plan description Pension Expense by component Weighted Ave. Disc. Rate
How report pledges in a non-govt. NFP that will be collected over more than one year?
As Pledges Recvbl at PV
pledges to be received over more than one year, thus rpt at PV
Use in Current Asset formulas:
Incl Cash, A/R, Inventory from off the B/S
Diluted EPS numerator
Interest on dillutive bonds (net of tax) must be added back to Net Income to compute diluted EPS.
- Determine annual interest
- Add in any amortization of discount, (premium too?)
- Multiply total interest by tax rate
- Add Interest net (minus) of tax to Net Income for numerator in EPS.
When asked ‘what will improve current ratio’ fastest way to answer
Boil answers down to ST L, LT L inc or decrease and ST-A, or LT -A increase or decrease. Looking for either increase in S-T Assets or in both top and bottom to increase ratio.
When decision is made to dispose of a segment, how would you report the revenue and expenses incurred from the beginning of the period through the date on which the decision was made?
Reported as gain or loss from a discontinued segment.
Income from Discontinued Operations
Deferred Tax Assets per IFRS…..
Required that all deferred tax assets be recognized as NONCurrent and off-settable by income
What is included in inventory for consignment items on the sellers B/S?
Unsold inventory - YES
Freight Out (to ship to consignor) - YES
Reimbursable advertising - NO
Commission - NO
TRICKY Q: B/S given along with extra info including 300,000 in prepaid income tax. Asks for Current Asset total on B/S at year end.
If you look at Rev minus Exp, Income = 1 M. x Tax Rate of .30 = 300,000 so you must surmise that the PPD Tax was reclassified from CA to Inc. Tax Expense and do not include it in your CA total.
Using Effective Interest Method, INTEREST PAYABLE (int. paid, int payment is what x what? Stays the same
Face Value x STATED or contractual Interest Rate
cv x eff rate = int exp - int pybl (cash pmt) = amort amt
Using Effective Interest Method, INTEREST EXPENSE is what x what? Changing always
CV x EFFECTIVE Interest Rate
(cv x eff rate = int exp - int pybl (cash pmt) = amort. amt
In Basic Earnings per Share, do you subtract
a) Preferred Dividends that have been declared
b) Cumulative Preferred Dividends from current year
c) Cumulative Preferred Dividends from past year
a) Yes - Pref. Divs (must be declared but not nec. paid)
b) Yes - Cum. Pref. Divs. (current year only)
c) No - Cum Pref Divs from prior year
Basic EPS formula
Net Income - Preferred Dividends/
Wtd Ave. Shares Outstanding
Basic EPS is concerned only with the common stockholders, so any preferred divs must be taken out of equation. If there is NET LOSS, Add the Pref. Divs.
Joe has an investment in 50% of common stock of Vohl Corp. Cost was $20,000. FV in 20x1 is 180,000. Vohl’s NI was 300,000 and Divs Paid were 40,000. How much does Joe record investment at in personal financial statements?
Investments in personal financial statements should be recorded at their estimated FAIR MKT VALUE as of the date of the statements ($180,000 in Joe’s case).
How do you calculate the intrinsic value of a stock option?
The market price less the strike price (exercise price).
Looking at B/S and I/S of Parent and Subsidiary, given info such as stock purchases between P & S, tax rate, inventory values, and more. “What should consolidated Net Income be?”
Stockholder Equity and Net Income will be the same for a consolidated B/S as for the individual statements of the parent only. All complex info was ignored in this problem and NI came right off the I/S (parent)
