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CPA FAR > Roger Chapters 1-5 > Flashcards

Roger Chapters 1-5 Flashcards

1
Q

What are the 4 characteristics of hedges?

A

No net investments

Underlying = (what you multiply notional amount by)

Notional amount = # units

net Settlement = settled at a net amount

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2
Q

What is functional currency?

A

Currency that has the greatest economic impact

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3
Q

What are IFRS’s 5 key elements?

A 
Assets
Liabilities
Equity
Income
Expenses
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4
Q

LT construction costs journal entry

A
  • CIP

* cash

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5
Q

What rate does remeasurement use for monetary, non-monetary, and income statement items?

A

Monetary assets/liabilities = current rate

Non-monetary assets/liabilities = historical rate

Income statement = weighted average rate

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6
Q

Times interest earned

A

Income before interest expense and taxes / interest expense

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7
Q

LT construction Billings and collections journal entries

A

Billing

  • construction receivable
    * billings

Collections

  • cash
    * construction receivable
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8
Q

What are enhancing qualitative characteristics?

A

Comparability (consistency)
Understandability
Timeliness
Verifiability

CUT like a V

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9
Q

Defensive interval ratio

A

Cash, marketable securities, receivables / average daily expenditures

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10
Q

Rate of return in common stock equity (return on equity)

A

(Net income - preferred divs) / average common SE

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11
Q

Working capital

A

Current assets - current liabilities

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12
Q

What are the 5 key elements for IFRS?

A 
Assets
Liabilities
Equity
Income
Expenses
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13
Q

What is transaction/local currency?

A

Currency of a particular country where books and records are kept.

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14
Q

Length of operating cycle

A

days’ sales average receivables + # days’ supply in average inventory

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15
Q

What are the levels for fair value measurement?

A

Level 1: Actual market in active market, identical assets

Level 2: Actual market but similar transaction or NON-ACTIVE market

Level 3: Unobservable data, mgmt judgement

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16
Q

Days payables outstanding

A

Ending accounts payable / (COGs/365)

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17
Q

Receivables turnover

A

Net credit sales/ avg trade receivables (net)

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18
Q

What makes something have faithful representation?

A

Free from error
Neutrality
Completeness

FENCe

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19
Q

Earnings per share

A

(Net income - preferred divs) / Weighted average shares outstanding

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20
Q

What do you do when a security goes from available for sale to held to maturity?

A

Reclass at FMV

Unrealized gain/loss to OCI then AOCI (amortize this over the remaining life of the security)

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21
Q

Dividend payout ratio

A

Cash dividends / net income

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22
Q

Debt to total assets

A

Total debt / total assets

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23
Q

What rate does translation use for assets/liabilities and income statement items?

A

Assets/liabilities = current rate

Income statement = weighted average rate

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24
Q

What do you call going from functional currency to reporting currency?

A

Translation

Put on the balance sheet under OCI

25
Q

How do you recognize revenue for right to use vs access to property?

A

Right to use: Recognize once access given to customer (ex: giving access, unlimited uses)

Access to: Recognize over period of time (ex: obligation to maintain)

26
Q

How do you reconcile from book to bank balance?

A 
Book balance
\+ amounts collected by bank
- unrecorded bank charges
\+/- errors made in the books
—————————————————-
Bank balance
27
Q

% completion recognize profit journal entry

A
  • CIP
    • gross profit on CIP
  • CIP
  • construction expense
    * construction receivable
28
Q

What is the definition of FV price?

A

Price when SOLD or price PAID when transferred

29
Q

What are monetary and non-monetary assets?

A

Monetary asset = asset that buys less is rising inflation (ex: cash)

Nonmonetary = asset that does NOT guarantee a fixed amount received (adjusted for inflation)

30
Q

What is OCI is made up of?

A

Derivative cash flow hedges
Excess adjustment between PBO and FV
Net unrealized gain/loss from AFS securities
Translation foreign currency

31
Q

% completion equation

A

Costs incurred to date / total construction costs = % complete

% complete x total profit = profit recognized to date

Profit recognized to date - profit previously recognized = profit recognized this period

32
Q

days sales in average receivables

A

365/receivables turnover

33
Q

Quick ratio

A

Cash, marketable securities, and receivables (net) / current liabilities

34
Q

What do you when a security goes from held to maturity to available for sale?

A

Reclass at FMV

Unrealized gain/loss in OCI

35
Q

days’ supply in average inventory

A

365/inventory turnover

Or

Average ending inventory / average daily COGs

36
Q

What do you call going from transactional currency to functional currency?

A

Remeasurement

Put on the income statement

37
Q

Price earnings ratio

A

Mkt price of stock / EPS

38
Q

Current cash debt coverage ratio

A

Net cash from operating activities / average current liabilities

39
Q

What is the difference between recognition and realization?

A

Recognition = booking in the financial statements

Realization = getting the cash (non-cash to cash)

40
Q

What is reporting currency?

A

Currency financial statements are prepared in (USD $)

41
Q

Asset turnover

A

Net sales / average total assets

42
Q

What is risk based off of for PCD assets?

A
  1. Market risk makes up part (difference between stated and market rate)
  2. Credit risk is the other part (risk the person won’t pay)
43
Q

What are GAAP’s 10 key elements?

A 
Assets
Liabilities
Equity or net assets
Investments by owners
Distributions to owners
Comprehensive income
Revenue
Expenses
Gains
Losses
44
Q

Cash conversion cycle

A

Days sales A/R + Days in inventory - Days payable outstanding

45
Q

Profit margin on sales

A

Net income / net sales

46
Q

How do you reconcile from bank to book balance?

A 
Bank balance
\+ deposits in transit
- outstanding checks
\+/- errors made by bank
———————————————-
Corrected book balance
47
Q

Inventory turnover

A

COGs / average inventory

48
Q

Debt to equity

A

Total debt / SE

49
Q

Rate of return on assets

A

Net income / average total assets

50
Q

Cash debt coverage ratio

A

Net cash provided by operating activities / average total liabilities

51
Q

Put option vs call option

A

Put option = right to sell

Call option= right to buy

52
Q

How does a principal recognize income vs an agent?

A

Principal: Recognize all revenues. Payment to agent is an expense

Agent: Recognize revenue as amount received from principal

53
Q

What makes something relevant?

A

Predictive value

Confirmatory value

PC

54
Q

What do you do when a security goes from trading to available for sale or vice versa?

A

Reclass at FMV

Put the difference as realized gain/loss on income statement

Eliminate any related valuation allowances

55
Q

What makes information useful?

A

Relevance and faithful representation

56
Q

Book value per share

A

Common SE / Outstanding shares

57
Q

ON-TIDe-N-OC

A 
Operating income
Non-operating income
Taxes
Income from continuing operations
Discontinued operations g/l
Net income
Other comprehensive income
Comprehensive income
58
Q

Current ratio

A

Current assets / current liabilities

CPA FAR (7 decks)

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