Day 21

Question 1

What is the difference between significant influence and consolidated statements?

Answer 1

Equity Method should be used if the investor can inact significant influence or they own 20% - 50%

Anything over 50% = consolidated Stmt

MCQ-07460

Question 2

When bonds are issued between interest dates how is accrued interest accounted for?

Answer 2

Added to carrying amount for the issue price

MCQ-16155

Question 3

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

Answer 3

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

APIC - increase
RE - decrease

MCQ-01523

Question 4

A firm repurchases 10 percent of it outstanding common stock. What is the effect of this Treasury stock transaction on their debt to capital ratio?

Answer 4

Debt to Total capital ratio will increase

Repurchase of CS reduces total stockholders equity as well as total capital available to the firm (aka cash)

Debt remains unchanged while Capital is reduced

MCQ-00903

Question 5

How is a change in depreciation reported?

Answer 5

It is considered both a change in method and estimate = handled by a change in estimate = PROSPECTIVELY

Cumulative Effect of change in depreciation = $0.00

MCQ-00218

Question 6

Calculate: Composite Life

Answer 6

Estimated Costs - Salvage Value = Depreciable Costs

Depreciable Cost / Life = Annual Depreciation

Depreciable Cost / Annual Depreciation = Composite Life

MCQ-05117

Question 7

How is a change in inventory methods reported?

Answer 7

Treated as a change in accounting principle and should be should be shown as an Adjustment to beginning Retained Earnings = RETROSPECTIVELY

MCQ-00225

Question 8

ABC has a finance lease for 120k and depreciates equipment at 8 years. There is a purchase option of 5k and the fair value of the equipment at the end will be 10k. What is the depreciation expense at the end of year 1?

Answer 8

120k - 10k = 110k / 8 = 13,750

MCQ-00581