Example Deck Flashcards
(9 cards)
If a debt investment is going to be held to maturity, how is it recorded on the balance sheet?
An investment in debt would be held on the balance sheet at amortized cost if it is to be held to maturity.
What is “offsetting” between two bank accounts and when is it allowed?
If you have 2 bank accounts at the same institution and there is an offsetting agreement, you can have one balance be negative as long as the other account has enough to cover the negative amount and still be positive.
How do you treat bank overdrafts on the balance sheet, and what would be the journal entry to record it?
They are treated as short-term loans and should be presented as such on the balance sheet. The entry would be a debit to the bank account in question- because the funds are available in the account, and the credit would be to a “current finance obligations” account, because you still owe the amount back to the bank.
How is an AFS security reported on the balance sheet, and how do gains or losses affect income?
An AFS security is held at fair value as a non-current asset, and its gains or losses flow into OCI.
What is the quick ratio and what is it used for?
The quick ratio is used to evaluate a company’s ability to cover its short-term obligations using its current assets, minus prepaids and inventory. So the equation is current assets - prepaids & inventory, over current liabilities. Prepaids and inventories are subtracted from current assets because they can’t be easily liquidated and used to pay off short term obligations.
What exchange rate are used to translate capital accounts of a foreign sub into the functional currency?
The historical rate.
When stock options are granted, what is the journal entry to record compensation expense? Which date is used to record compensation expense?
The debit is to compensation expense, and the credit is to APIC - stock options. Compensation expense is recorded on the date the options are granted.
Once stock options that were previously awarded are exercised, what is the journal entry and where do the amounts come from?
First cash would be debited, and the cash number is derived from the number of shares in the stock options multiplied by the share price as part of the stock options, not the market price of the shares at any given date. Then, APIC-stock options would be debited to reverse out the initial entry once the options are actually exercised, and there will be a credit to common stock and the actual APIC account.
What is the current portion of a finance lease obligation?
It would be any payment due within the next 12 months, less the interest portion
