Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

CPA > FAR - Becker F3 > Flashcards

FAR - Becker F3 Flashcards

1
Q

AFS securities and held to maturity securities are generally non-current assets? T/F?

A

TRUE

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What valuation is used for trading securities?

A

Fair market value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What valuation is used for available for sale securities?

A

Fair market value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What valuation is used for held to maturity?

A

Amortization

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What method is used for equity ownership ship less than 20%?

A

Cost method

BUT, sometimes if the question states that the 1) largest shareholder or 2)majority of Boar. Then use equity method.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What method is used for ownership of 20%-50%?

A

Equity method

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What are the 3 marketable securities?

A
  • trading securities
  • available for sale securities
  • held to maturity securities
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

When the acquisition price exceeds the fair value of net assets acquired, assets and liabilities should be presented at what value?

A

100% Fair value

Goodwill will occur

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Are fees of finders and consultants expensed in an acquisition?

A

Yes, they are expensed in the period incurred

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Are registration fees expensed in an acquisition?

A

No, it decreases additional paid in capital. So you would net the fee and record the entry after

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Under IFRS, no controlling interest can be calculated using either the:

A

Partial good will method

FV of subsidiary’s net identifiable assets x non controlling interest %

OR

full goodwill method

100%FV of subsidiary x non controlling interest %

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Full good will method is used under GAAP? T/F?

A

True

No controlling interest = 100 %FV of subsidiary x no controlling interest %

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Good will calculation in an acquisition are:

A

1)Full goodwill method

FV of subsidiary- FV of subsidiary’s net assets (A-L)

2)partial goodwill method

Acquisition cost - FV of subsidiary’s net assets acquired (A-L)

  • partial goodwill and full goodwill methods differ only when the parent owns less than 100% of the subsidiary
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Beginning retained earnings in an acquisition needs to be calculated if you are given current year end balance. So,

A

Back out dividend and net come by adding dividend income and subtracting net income to get beginning retained earnings

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What method is no longer used to account for marketable securities?

A

Lower of cost of market

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Permanent impairment in value results in a:

A

Write down and a charge to income as if the loss was realized

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

When marketable equity securities are transferred between trading and AFS, the transfer is made at:

A

Fair value, and the difference (if any) is recorded as unrealized loss and charged to the income statement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Marketable debt securities that a company has the intent and ability to hold to maturity, both “long” and “short” term, are reported at:

A

Carrying amount (amortized cost) UNLESS, there is a permanent decline in market value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Securities that are expected to be sold within a year is:

A

Trading securities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Securities that a company is unsure of its intention is classified as:

A

Available for sale securities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Trading securities are affected by both realized and unrealized gains and losses, so:

A

The net effect will be reported on the income statement at year end

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

When an available for sale security is determined to be impaired because of an other than temporary decline in FV below cost, the asset must be:

A

Written down to the lower fair value by recording a loss that is recognized on the income statement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Available for sale securities can ONLY be reported on the income statement, when:

A

The securities are impaired and when there are realized gains and losses

Otherwise, if it’s unrealized gains or temporary losses, it is reported in other comprehensive income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Unrealized losses are debited or credited to other comprehensive income?

A

Debited.

It is then credited if there are gains or if it needs to be eliminated

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Under IFRS, unrealized gains and losses for ALL available for sale securities and foreign exchange gains and losses for available for sale securities are reported as:

A

Other comprehensive income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Under IFRS, foreign exchange gains and losses for available for sale DEBT (bonds) securities are reported on the:

A

Income statement

But, unrealized gain and loss for bonds is reported in other comprehensive income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Under IFRS, reversals of impairment losses are ALLOWED, and the increase would be booked to:

A

The current year’s income statement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

What are the exceptions to NOT consolidating a majority-owned subsidiary:

A
  1. When the subsidiary is in legal organization or bankruptcy

And/or

  1. When the subsidiary operates under severe foreign currency exchange restrictions, controls, or other governmentally imposed uncertainties so severe that they cast significant doubt on the parent’s ability to control the subsidiary
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Consolidated financial statements are prepared in recognition of the accounting concept of:

A

Economic entity

Meaning: with the concept that then economic entity can be identified with a unit of accountability.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Under the cost method, dividends (not earnings) are reflected as income by the investor. The cost basis investment account is reduced only if:

A
  1. Shares of stock are sold

Or

  1. Cumulative dividends exceed cumulative earnings (a return of capital)

Or

  1. Subsidiary incurs losses that substantially reduced net worth
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

Under the equity method, 100% of the dividend paid would:

A

REDUCE the investment account.

32
Q

Preferred dividends should be taken out of net income before calculating percentage of net income available to common shareholders? T/F?

A

TRUE

After the net income is calculated, then preferred dividend will be added to the net income available to common shareholders based on owner’s percentage

33
Q

Stock dividend and stock splits are not considered income to the recipient, so investors DO NOT record stock dividends at:

A

Fair value

They simply reallocate the investment account balance over more shares so that value per share decreases

34
Q

Once a cost method investor becomes an equity method investor:

A

The investment account must retrospectively reflect the proportionate share of investee income recognized at each percentage level investment

35
Q

Under the cost method, receipt of a dividend is recorded as:

A

Income

And DOES NOT affect the investment account

36
Q

Under the equity method, receipt of a dividend is recorded as a:

A

Decrease in the investment account

37
Q

Liquidating dividends received should be reported as:

A

As a reduction of investments in balance sheet and NOT as dividend income

38
Q

Can significant influence be exercised by holding NON-VOTING stock?

A

No, even if it is preferred stock. So, the cost method should be used.

39
Q

Any goodwill created in an investment accounted for under the equity method is ignored, so it is neither;

A

Amortized nor tested for impairment

40
Q

In a vertical chain, where parent co. owns more than 50% of subsidiary company and subsidiary owns more than 50% of a third company, consolidate:

A
  1. Third company into subsidiary

Then,

  1. Subsidiary co. (now consolidated with third company) into parent company
41
Q

Fees of finders and consultants are:

A

Expensed in the period incurred

42
Q

Registration fees for equity securities issued decrease:

A

Additional paid in capital

43
Q

Acquisition method mnemonics:

A

IN CAR BIG

I - investment in subsidiary
N- no controlling interest

C- common stock
A- additional paid in capital
R- retained earnings

B- balance sheet adjustment to FV
I- identifiable intangible assets
G- goodwill or gain

44
Q

When a subsidiary is acquired with an acquisition cost that is less than the fair value of the underlying assets, the following steps are required:

A
  1. The balance sheet is adjusted to fair value, which creates a negative balance in the acquisition account.
  2. Identifiable intangible assets are recognized at fair value, which increases the negative balance in the acquisition account
  3. The total negative balance in the acquisition account is recorded as a gain
45
Q

Acquisition accounting, the net assets acquired are based on:

A

Fair market value.

46
Q

The fair value of finished goods and merchandise inventory are based upon:

A

Selling price less disposal costs and a reasonable profit allowance

47
Q

The fair value of raw materials should be based upon:

A

Replacement costs

48
Q

The fair value of work in process should be based upon:

A

The estimated selling prices of finished goods less the costs to complete and dispose and a reasonable profit allowance

49
Q

Parent’s consolidated stockholder’s equity will be:

A

The parent company stockholder’s equity plus the noncontrolling interest

50
Q

At date of acquisition, the consolidated equity will be equal to the:

A

The parent company’s equity plus the fair value of any non controlling interest

NOTE: the subsidiary company’s equity accounts are eliminated

51
Q

When the acquisition price exceeds the fair of net assets acquired, assets and liabilities should be presented at:

A

Fair value

52
Q

Consolidated net income is the same as parent company net income, when:

A

The equity method is used, also acquisition method

53
Q

Assets reported on the consolidated balance sheet would be:

A

The FV of subsidiary’s assets + BV of parent’s assets

54
Q

Under US GAAP, Goodwill is calculated as the:

A

Excess of the FV of the subsidiary over the FV of the subsidiary’s net assets (including the fair value of any identifiable intangible assets)

55
Q

When an investor goes from non-control to control of a subsidiary through step acquisition, the previously held equity must be adjusted to fair value, resulting in:

A

A recognition of a gain or loss be the investor in the period of the additional acquisition

56
Q

When an investor sells shares and goes from control to non control, the investor must:

A

Recognize a gain or loss from the sale of the stock and then remeasure the remaining non-consolidating interest to fair value. The gain or loss is recognized on the income statement

57
Q

Unpatented technology and in process research and development are recognized as:

A

Fair value identifiable intangible assets for acquisition method

58
Q

In an acquisition method business combination, registration and issuance costs are recorded as:

A

a direct reduction to the value of the stock issued by reducing APIC and

Direct out of pocket costs such as legal and consulting fees are expensed

59
Q

Under the IFRS partial goodwill method, NCI is calculated as:

A

FV of subsidiary net assets x NCI percentage

60
Q

Intercompany sales between parent and subsidiary is calculated by:

A

Parents revenues + subsidiary revenues - consolidated revenues

61
Q

Payables for Intercompany sales between parent and subsidiary is calculated by:

A

Parent’s A/R + subsidiary’s A/R - consolidated A/R

62
Q

Unrealized intercompany profit between parent and subsidiary is calculated by:

A

Parent’s inventory + subsidiary’s inventory - consolidated inventory

63
Q

No gain should arise from the sale or purchase of stocks between:

A

Parent and subsidiary.

It is considered a treasury stock transaction.

YOU CANNOT MAKE MONEY SELLING STOCK TO YOURSELF

64
Q

When a company owns less than 50% of the common stock of an investee corporation, the investment account can be reported under the cost of equity method, depending on whether significant influence is exercised. Receivables and payables to the investee are reported:

A

Separately on the balance sheet

With separate disclosures made in the footnotes

65
Q

Sales and cost of goods sold should be reduced by the intercompany sales? T/F?

A

True

66
Q

How to calculate current assets on the consolidated balance sheet:

A

Consolidated current assets (before eliminating entires)

  • (subtract)

unrealized profit in inventory (intercompany profit on inventory x % of inventory purchased still on hand (inventory remaining/raw materials))

67
Q

100% of all intercompany balances among members of the consolidated (subsidiary) group are eliminated? T/F?

A

True

68
Q

What happens to all intercompany billings when income statements are consolidated?

A

They are all eliminated

69
Q

Fixed asset cost is based on original cost from the outside world and remains the same on the consolidated financial statements? T/F?

A

True

70
Q

When members of a consolidated group have intercompany bond holdings, the bonds are eliminated in consolidation and the difference (gain or loss) between the discount issue price and the premium on reacquistion would be included in retained earnings

A

True

71
Q

Combined statement may be used for companies under:

A
  1. Common management

OR

  1. Commonly controlled companies
72
Q

Procedure of combined financial statements are:

A
  1. All intercompany transactions and balances among the related companies are eliminated
  2. Minority interest are treated as in consolidated financial statements
  3. Equity account are added across, not eliminated
  4. Income statement accounts are added across
73
Q

Combined financial statements may be prepared for:

A
  1. Many companies owned by one individual
  2. Many companies under common management
  3. Unconsolidated subsidiaries
74
Q

How are different fiscal periods and foreign operations treated in both combined financial statements and consolidated statements?

A

They are treated in the same manner for both combined financial statements and consolidated statements

75
Q

How should temporary losses for AFS securities (where aggregate cost exceeds aggregate market) be treated?

A

The should be credited to an asset valuation account and devoted direct to other comprehensive income

76
Q

If unrealized loss on AFS securities are temporary, then:

A
  1. Do not record loss in the income statement
  2. Record (debit) difference in other comprehensive income
  3. Record (credit) difference in a valuation (contra) account (a component of the noncurrent asset section of the balance sheet)
  4. Subsequent recoveries in market value are debuted to the valuation account and credited to other comprehensive income
77
Q

If unrealized loss on AFS securities are other than temporary, then:

A
  1. Record realized loss (debit) in the income statement

2. Credit the cost of the individual security account

CPA (15 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions