3. General Purpose Financial Stmt

Question 1

BS element

Answer 1

Current, non current

Question 2

Current assets definition

Answer 2

Expected to be consumed or sold during a normal operation cycle or 12 mo, whichever is longer

Question 3

Current liability

Answer 3

Expected to be extinguished through the use of current assets or by incurrence of other CL

Question 4

Current ratio

Answer 4

CA / CL

Question 5

Quick or acid test ratio

Answer 5

Cash, ST investments, AR / CL

Question 6

Internally generated GW on BS?

Answer 6

No, expenses

Question 7

Classify accrued liab, deferred taxes

Answer 7

AL: CL
DT: NCL

Question 8

What valuation accounts?

Answer 8

Used to increase/decrease BV of an item to current value = adjunct accts
Not all contra or adjunct accts are valuation accts

Question 9

Examples of valuation accts?

Answer 9

Allowance for uncollectible accts (contra), Valuation allowance (adjunct)

Question 10

Examples of contra and adjunct accts?

Answer 10

Accum. Depreciation (contra), Bond premium (adjunct), Bond discount (contra)

Question 11

What’s liquidation value?

Answer 11

MV of net identifiable assets. Remaining after paying off liabilities

Question 12

What’s market capitalization?

Answer 12

Total value of a firm’s outstanding stock

Question 13

GW computing using market capitalization

Answer 13

Market capitalization - MV of net identifiable assets

Question 14

What does expenses provide that losses do not?

Answer 14

Benefits

Question 15

What does comprehensive income includes?

Answer 15

NI and OCI

Question 16

Income Stmt structure and presentation for top and bottom parts

Answer 16

Top: income relating to operations, no specific format
Bottom: unrelated to continuing operations, specific presentations, discontinued operations

Question 17

Operating margin included in single step or multiple step format?

Answer 17

Multiple step

Question 18

Stmt of comprehensive income can be presented separately or together?

Answer 18

Yes

Question 19

Individual component of OCI must be reported where?

Answer 19

BS, stmt of OE, or footnote

Question 20

How many yrs of OE required by SEC?

Answer 20

Three

Question 21

How to calculate average issue price: par $2, increase in CS $2000, APIC $10,000.

Answer 21

$2000/2=1,000 shares. $10,000/1,000=$10. $2+10=$12

Question 22

Cash equivalent examples

Answer 22

Treasury bills, money market funds

Question 23

Is investment in equity securities cash equivalent?

Answer 23

No, because they are not convertible to a known amount

Question 24

Policy to designate cash equivalent should be disclosed?

Answer 24

Yes. If the policy changes, it’s a change in accounting policy

Question 25

Presentation of Stmt of CF

Answer 25

OIFF (operating, investing, financing, foreign currency translation)

Question 26

Can disclosure of non cash activities be on the face of stmt of CF?

Answer 26

No

Question 27

Which method shows the actual operating activities? Direct or indirect?

Answer 27

Direct method

Question 28

Divi rcvd which activity?

Answer 28

Operating

Question 29

Divi pmt, which activity?

Answer 29

Financing

Question 30

Interest rcvd and pd, which activity?

Answer 30

Operating

Question 31

Examples of investing activity

Answer 31

Sales/purchase of LT assets, collection of loan principal, purchase/disposals of debt/equity securities, lending,

Question 32

Examples of financing activity

Answer 32

Sale/purchase of own stock, proceeds from borrowing, paying back lenders

Question 33

Stmt of CF: add back

Answer 33

Depreciation, regular amortization, depletion, losses, increase in unearned revenue

Question 34

CF: subtract

Answer 34

Gains, amortization on discount on bond investment, premium on bond payable, increase in CA, decrease in CL, decrease in unearned revenue

Question 35

Risk/uncertainties disclosure required by GAAP?

Answer 35

Yes

Question 36

Risks and uncertainty required in condensed or summarized interim stmt?

Answer 36

No

Question 37

Proposed changes in government regulations, accounting principles, possible effects of wars, deficiency in internal controls - a part of risks and uncertainties?

Answer 37

No

Question 38

Disclosure required items

Answer 38

Nature of operations, use of estimates, certain significant estimates (if probable near term - yes), significant concentration (if severe - more than material), management going concern assessment

Question 39

When is "subsequent"?

Answer 39

After the date of financial stmt, but before issuance

Question 40

Do conditions existed at the date of BS require recognition? If not existed, treatment?

Answer 40

Yes. Footnote only

Question 41

Stock dividend, splits required to adjust financial stmt if occur after BS date but before issuance date?

Answer 41

No

Question 42

Inventory turn over

Answer 42

COGS / Inbentory

Question 43

Receivable turn over

Answer 43

Sales / AR

Question 44

Fixed asset turn over

Answer 44

Sales / Fixed assets

Question 45

Total asset turn over

Answer 45

Sales / Total assets

Question 46

Total debt ratio

Answer 46

Total assets - Total equity / Total assets

Question 47

Debt to equity ratio

Answer 47

Total debt / Total equity

Question 48

Times interest earned ratio

Answer 48

EBIT / interest

Question 49

OE ratio

Answer 49

Total OE / Total assets

Question 50

Profit margin

Answer 50

NI / Sales

Question 51

Return on assets

Answer 51

NI + (1-tax) x interest / Average assets

Question 52

Return on equity

Answer 52

NI / Average equity

Question 53

EPS

Answer 53

(NI - current pref. divi) / weighted average # of shares outstanding

Question 54

PE ratio

Answer 54

Market price com. stock / EPS

Question 55

Com. Stock divi payout ratio

Answer 55

Cash divi to com. shareholders / NI

Question 56

Per share basis

Answer 56

Cash divi per com. shareholders / Earning per com share

Question 57

Com. Stock yield

Answer 57

Divi per com share / market price per com. share

Question 58

BV per com. share

Answer 58

Com. Shareholders equity / # of outstanding com. shares

Question 59

BV per pref. share

Answer 59

Pref. Shareholders equity / # of pref. shareholders stock

Question 60

How is the cash equivalent reported on stmt of CF?

Answer 60

No effect

Question 61

Is cash flow per share reported on stmt of CF?

Answer 61

Not allowed

Question 62

Is pricing of inventory a significant account policy?

Answer 62

Yes

Question 63

Does indirect method display interest paid, net of amounts capitalized and income tax paid?

Answer 63

Yes