Special Purpose Frameworks (F2:M7)

Question 1

what are some common modifications made to cash basis financial statements?

Answer 1

capitalizing and depreciating fixed assets

accrual of income taxes

recording liabilities for borrowings and related interest exp

capitalizing inventory

reporting investments at FV and recognizing unrealized G/L

Question 2

formula for converting cash basis rev to accrual basis rev

Answer 2

cash basis rev
\+ending AR
(beginning AR)
(ending unearned rev)
\+beginning unearned rev
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
accrual basis rev

Question 3

formula for converting cash paid for purchases to COGS

Answer 3

cash paid for purchases
\+ending AP
(beginning AP)
(ending inventory)
\+beginning inventory
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
COGS

Question 4

formula for converting cash paid for operating expenses to accrual basis operating expenses

Answer 4

cash paid for operating expenses
\+ending accrued liabilities
(beginning accrued liabilities)
(ending prepaid expenses)
\+beginning prepaid expenses
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
accrual basis operating expenses

Question 5

what is another approach for converting from cash-basis to accrual-basis?

Answer 5

+increases in current assets
(decreases in current assets)

+decreases in current liabilities
(increases in current liabilities)