Day 15 Flashcards

1
Q

Equity securities held for investment are carried at fair value unless:

A
  1. The investment is carried using the Equity Method
  2. The Equity Securities will be consolidated and therefore eliminated
  3. The fair value cannot be readily determined

Note: if #3 the Investment is carried at cost and adjusted for any impairment

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2
Q

On 11-30-23 ABC plans to close one of is offices, they offer a termination benefit to the 50 employees of $10k of they do not quit until 9-30-24. ABC estimates 40 employees will take the $10k benefits. What amount is recognized as a Liability on ABC BS on 12-31-23?

A

$40k

The employees offered the termination benefit must provide future services, therefore the liability should be recognized over time

40 employees × $10k × 1/10 months = $40k liability @ 12-31-23

MCQ-16154

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3
Q

ABC owns 75% of XYZ. XYZ had net income of $20k and paid $8k dividends.

ABC net income was $30k and paid $15k dividends separately from XYZ .

What amount of dividends paid would ABC show on its consolidated Stmt of RE?

A

$15k

During consolidation, XYZ’s dividends is eliminated

MCQ-05920

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4
Q

ABC bought 75% of Tesla stock. At the time of the acquisition Tesla has $800k of common stock and $240k of Retained Earnings.

ABC uses the Acquisition Method to record the transaction, what amount of CS and RE of Tesla will be reported on the consolidated FS?

A

$0 & $0

Under the Acquisition Method, the preacquisition of subsidiary is not carried forward. Consolidated Equity = The Parent Corps equity

MCQ-07467

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5
Q

Stock Dividends on CS should be recorded at FMV by the investor when the investment is accounted for under the Cost Method or Equity Method?

A

Neither

Rule: stock dividends and splits are not considered income to the investor

The investor would relocate the investment account balance over more shares. The per share price decreases

MCQ-01562

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6
Q

Indirect Method: Cash provided by Operating Activities equation

(Reconciliation)

A

Net Income
LESS: Increase in AR
PLUS: Increase in AP

= Cash provided from Operating Activities

MCQ-05698

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7
Q

How would a 5% stock dividend affect APIC and RE?

A

APIC - Increase

RE - Decrease

The FMV of the stock dividend at the declaration date is transferred from RE to Capital Stock and Paid In Capital

MCQ-01523

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8
Q

Dollar value LIFO

MCQ-00080

Concept Video: Assumptions: Part 2 - 09:30min

A
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9
Q

Equation: Days in Inventory

A

Ending Inventory / (COGS / 365)

MCQ-02633

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10
Q

Matching Revenues and Related Expenses: Unearned Revenues AJE

A

JE: to record unearned revenue
DR Cash $1,000
CR Unearned Revenue $1,000

AJE: to record unearned revenue that has been earned
DR Unearned Revenue $1,000
CR Revenue $1,000

MCQ-07527

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11
Q

What is the rule when two or more purchases of stock cause ownership to go from less than 20% to more than 20%?

A

Rule: When two or more purchases of stock cause ownership to go from less than 20% to more than 20%, The Equity Method should be used starting on the date of “Significant Influence”

No prior period adjustments are required

Equity Method = NI × Ownership %

MCQ-00344

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12
Q

What is the normal balance for: Allowance for Uncollectible Accounts?

A

Credit Balance

MCQ-07225

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13
Q

During the year, ABC wrote off a customer’s AR. ABC used the Allowance Method for Uncollectible Accounts. What impact would the write-off have on Net Income and Total Assets?

A

NI = No Effect
Total Assets = No Effect

JE: Write-off AR under Allowance Method
DR Allowance for Doubtful Accounts $1,000
CR AR $1,000

MCQ-07225

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14
Q

Changes in debit balance accounts have what effect on Cash Flows?

A

The Opposite

MCQ-05397

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15
Q

Changes in credit balance accounts have what effect on Cash Flows?

A

The Same

MCQ-05397

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16
Q

What section of the Cash Flows Stmt is Dividend Received classified under?

A

Financing Activities *- include Non-Current Liabilities and Equity activities

MCQ-05397

17
Q

How are Preferred Stock Dividends in arrears reported?

A

Disclose Preferred Stock Dividends that are in arrears in the FS

Note: Dividends in arrears are not reported as a liability until the Dividends are DECLARED

MCQ-01561

18
Q

In June, ABC sold refundable merchandise coupons. ABC received $10 for each coupon redeemable from July 1 to December 31 for merchandise with a retail price of $11. At June 30, how should ABC report these coupon transactions?

A

Unearned Revenues at the Cash Received Amount (the $10 amount aka Coupon Sales Price)

MCQ-00942

19
Q

The Lessee will record the lease as both an ______ and a _______ at the ________.

The lease cost components are?

A

Record the lease as both an ASSET and a LIABILITY at the PV of minimum lease payments

The Lease Cost has two Components:
1. Required Payments: $100k × (PV factor for an annuity due)
PLUS:
2. Expected Residual Value: $20k

MCQ-08608

20
Q

Criteria for a Lessee to qualify a lease as a Finance Lease:

OWNES

A
  • Ownership
  • Written option to purchase
  • Net Present Value of lease payments equals or exceeds the asset’s Fair Value - (90%)
  • Economic Life - lease represents a major part of asset’s life - (75%)
  • Specialized asset that will not have any other uses