Test Bank Conceptual Framework Flashcards
IFRS Requirements for Cash advancements and loans from bank overdrafts (CASH FLOW)
IFRS requires cash advances and loans from bank overdrafts to be classified as operating activities
Consistency and Verifiability
are components of comparability, are both enhancing qualitative characteristics relating ot both relevance and faithful representation.
ASC Topic 280 - External Revenues reported by reportable operating segments
Must be enough segments reported so that at least 75% of unaffiliated revenues is shown by reportable segments.
Sales to external customers total $30,000,000, so external revenues reported by reportable operating segments must be at least $22,500,000 (30,000,000 x 75%)
Warranty liability (FV)
a company can elect the FV option to record its warranties it the warranty liability can be satisfied by contracting with a third party.
Inventory Turnover
COGS/Average inventory
Average Inventory (Beg +End/2)
COGS \+End Inv =COG available for sale - Purchases =Beginning Inventory
Dilutive Securities? Decrease the BEPS
7% convertible bond, issued at par, with each $1,000 bond convertible into 40 shares of common stock. TAX Rate 30% would have the following effects on the num and denom ($70 interst - $21 tax expense)/ 40 shares = $1.225 to 2 ratio, which would reduce the basic EPS of $1.29
Cash Flow Financing Activities
Include all cash flows involving liabilities and owner’s equity other than operating items.
Include:
- Dividends Paid
- Proceeds from sale of treasury stock
Impaired equipment
Undiscounted expected net future cash inflows (450) are less than the carrying amount of the equipment (500), therefore equipment is deemed impaired.
Impairment Calculation:
CV of Equip - FV of equip
Concentration of Credit Risk
Credit risk is the risk of loss due to a particular borrower’s nonpayment loan. This would be risk for the same industry.
Adjust service revenue from cash to accrual basis
Accrual:
Service Rev = Cash fees collected + End. AR - Beg AR + Beg unearned fees - ending unearned fees
Return on common stockholders’ equity
(NI - Preferred Dividend)/ (Average common stockholder’s equity)
Beg comm + retain +end com+ retain/ 2
Consumer Price Index
Use to compute information on a “Constant Dollar” basis
Goodwill calculation
Consideration transferred
+ FV of noncontrolling interest
- FV of net identifiable assets
=Amount of goodwill
Gain (loss) from a fire, etc. calculation of conversion of gain or loss
Proceeds 100,000 (from insurance)
+ Book value (BV - Half deprecation - 6 months (june))
= gain
Operating Expenses (Selling Expenses and General and Admin expenses)
Selling expenses - related to sale of a company’s product
- Freight-out (cost of delivering goods to customers)
- Sales representatives salaries
G&A expenses - to company’s general operations
- Accounting and legal fees
- Officer’s salaries
- Insurance
Interest expense, net of income taxes, on a convertible debt that is dilutive should be
IF convertible securities are deemed to be dilutive, then interet expense should be added back net income when computing diluted earnings per share.
Identify Reportable segment tests
- Operating segment’s revenue from all sources (internal and external) is 10% or more of the combined (internal and external) revenues of all of the company’s reported operating segment
- Operating segment’s operating profit or loss (absolute value) is 10% or more of the greater of the following two amounts (absolute value)
- combined operating profit of all operating segments that did not report an operating loss
- the combined loss of all operating segments that did report an operating loss - The operatings segment’s identifiable assets are 10% or more of the combined assets of all operating segment
Acid-test ratio(solvency ratio_
measures the ability to pay current liabilities from cash and near-cash items
(Cash + net receivables + Marketable securities) / (current liabilities)
Debt to equity ratio
leverage ratio that measures the relative amount of leverage or debt a company has.
(Total liabilities / Common Stockholder’s equity)
Bases of accounting used to prepare financial statements in conformity with a comphrensive basis other than GAAP
- Cash basis
2. Basis of accounting used to file an income tax return.
SEC form 10-Q represents
quarterly reviewed financial information and other information about the company
COGS Manufactured
Beg Work In process \+ Direct Materials used \+ Direct Labor \+ Factory Overhead - Ending Work in Process = COGs Manufactured
Cost of Sales Formula
Beg Finished Good
+ COGs Manufactured
- Ending Finished Goods
= Cost of sales
AR Turnover
Credit Sale / Average AR
