Unit 2 - Financial Statements

Question 1

Cost of Goods Sold Equation (COGS)

Answer 1

Beginning FG Inventory
+ Purchases or COGM (Cost of Goods Manufactured)
= Goods Available for sale
- Ending FG Inventory
= Cost of Goods Sold (COGS)

Question 2

Discontinued operations are reported

Answer 2

Net of tax on the IS

Question 3

Discontinued operations: When a component is classified as held for sale, it is measured at….

Answer 3

Lower of its Carrying amount or FV minus costs to sell (Refer to Unit 2.2 JE example for visual)

Question 4

Components of comprehensive income
(Not included in net income and presented net of tax)

Answer 4

• Unrealized holding gains/losses for AFS (Available for Sale Securities)
• Certain foreign currency items (eg. translation adjustment)
• Gains/losses on derivatives designated and qualifying as cash flow hedges
• Changes in FV to instrument-specific credit risk of financial liabilities

Question 5

Unrealized holding gains/loss on AFS that are NOT RELATED to credit losses

Answer 5

are reported in OCI (Other Comprehensive Income)

Question 6

Benefit plans:
Statement of changes in net assets available for benefits (IS) should present the following at a minimum during the year:

Answer 6

1- Net appreciation or depreciation of the fair value of investments
2- Contributions from employers, segregated between cash and noncash contributions
3- Contributions from participants or other identified sources
4- Benefits paid to participants
5 - Administrative expenses
6 - Payments to insurance entities to purchase contracts that are excluded from plan assets

Question 7

Present value measurement includes 5 elements

Answer 7

(1) estimates of cash flows,
(2) expectations about their variability,
(3) the time value of money,
(4) the price of uncertainty inherent in an asset or liability, and
(5) other factors (e.g., liquidity or market imperfections)