F4

Question 1

DEbt securities on the balance sheet classified as trading or available for sale are valued how?

Answer 1

fair value

Question 2

On what statement are unrealized gains/losses on debt securities classified as trading securities recognized

Answer 2

income statement

Question 3

How are unrealized gains/losses on debt securities classified as Available for sale securities recognized

Answer 3

OCI baby

Question 4

DEbt securities on the balance sheet classified as held-to-maturity are valued how?

Answer 4

amortized cost

Question 5

List the three conditions when losses on debt securities classified as Available for sale are recognized in income on the IS, and NOT in OCI

Answer 5

when the security is sold, it becomes a trading security, or there is an OTTI decline in value to below cost (impairment)

Question 6

When a marketable security is transferred from trading to available for sale or vise versa at what cost is it being transferred

Answer 6

its transferred at Fair Value, which is the new basis.

Question 7

How do you calculate the realized gain or loss calculated for trading & equity securities when they are sold

Answer 7

Original cost +/- adjusted cost (which is the unrealized gains or losses previously recognized in NI)

Question 8

How do you calculate the realized gain or loss calculated for Available For Sale Securities when they are sold

Answer 8

Selling price +/- the original cost

Question 9

How are equity securities typically valued

Answer 9

carried at fair value through net income with unrealized gains and losses included in earnings

Question 10

Describe the practicality excepition for equity securities

Answer 10

its for securities that dont have a readily determinable FV, exceptions allow for the entity to measure them at cost less impairment, of identical or similar investments

Question 11

How are nonliquidating and liquidating dividends distributed by equity securities by the person receiveing them

Answer 11

nonliquidating dividends are recorded as dividend income

Liquidating dividends received are recorded as a return of capital

Question 12

How do you calculate year-end investment in investee reported on the BS under the equity method

Answer 12

Beginning investment in invest
ADD: Investors share of investee earnings
LESS investors share of investee dividends
LESS amortization of FV differences
=Ending investment in investee

Question 13

How do you calculate an investors equity method investment reported on the income statement

Answer 13

Investors share of investee earnings
LESS amortization of FV differences
=equity in earnings / investee income

Question 14

What are some of the criteria for consolidating subsidiaries

Answer 14

parent controls more that 50% of sub

Question 15

What is a variable interest entity

Answer 15

its a business that doesnt have investors with voting rights or lacks sufficient financial resources to support acitivites

Question 16

In aquistion accounting state the consolidating workpaper elimination entry

CARINBIG

Answer 16

Dr: Common stock - sub
Dr: APIC - sub
Dr: RE - sub
Cr: Investment in sub
Cr: Noncontrolling interest
Dr: Balance sheet adjustment to FV
Dr: Identifiable intangible assets to fair value
Dr: Goodwill

Question 17

How is noncontrolling interest as of the acquisition date calculated under GAAP (Balance Sheet)

Answer 17

Non-controlling intrerest = FV of subsidiary x NCI %

Question 18

How is noncontrolling interest on the income statement calculated

Answer 18

Subsidiary net income x Noncontrolling interest % = NCI in net income

Question 19

How is noncontrolling interest as of the acquisition date calculated under IFRS (Balance Sheet)

Answer 19

there are two methods: full goodwill or partial goodwill
Full Goodwill: FV of subsidiary x NCI %
Partial Goodwill: FV of subs net identifiable assets x NCI % or Acquistion cost - FV of net assets required

Question 20

How is goodwill calculated under GAAP

Answer 20

FV of Sub - FV of subs net assets

Question 21

What is the elimination entry for intercompany inventory transactions

Answer 21

Dr: RE
Dr: Intercompany Sales
Cr: Intercompany COGS
Cr: COGS
Cr: Ending inventory

Question 22

What is the elimination entry for intercompany bond transactions

Answer 22

Dr: Bonds PAyable
Dr: Premium (or credit discount)
Cr: Investment in affiliates bonds
Cr: gain on extinguishment of bonds

Question 23

What is the elimination entry for intercompany depreciable assets transactions

Answer 23

DR: intercompany gain on sale
Cr: Machine
Cr: Acc depr

then do elimiation of depreciation

DR: Acc depr
CR: Depreciation expense

Question 24

With what percent of ownership comes the use of the equity method

Answer 24

20 to 50 %

Question 25

Where does Trading security end up on classification on BS? and marked at what value

Answer 25

Current Asset generally, at Fair Value

Question 26

Where does AFS security end up on classification on BS? and marked at what cost

Answer 26

Current or noncurrent asset, at fair value

Question 27

Where do the unrealized gain or loss go on an AFS if it is sold? if it is still being held?

Answer 27

realized G/L on IS if sold, if not sold it goes to equity (U in PUFIER)

Question 28

How do you record an unrealized gain or loss on a trading security

Answer 28

Dr: Unrealized loss on trading security Cr: Valuation Account (fair value adjustment) To NI

Question 29

How do you record an unrealized gain or loss of AFS Security

Answer 29

Dr: Unrealized loss on trading security Cr: Valuation Account (fair value adjustment) to OCI

Question 30

How do you calculate the expected credit loss?

Answer 30

PV - Amortized Cost

Question 31

How do you record a normal nonliquidating dividend

Answer 31

Dr: Cash Cr: Dividend Income

Question 32

How do you record a liquidating dividend, meaning the dividends are greater than retained earnings

Answer 32

Dr: Cash Cr: Dividend Income Cr: Investment in Corp

Question 33

Unrealized Gains and losses on equity securities are included where

Answer 33

in earnings on the IS as they occur

Question 34

What method is used on reporting if you own 20% or less,

Answer 34

Fair Value

Question 35

What method of reporting do you use if you own LESS than 20% BUT you have significant influence??

Answer 35

you ue the Equity Method

Question 36

When using the equity method, and the investee reports income and dividends paid out in cash, what is the impact on the amount of your investment

Answer 36

if you receive cash dividends, it reduces the amount of your investment if you are recognizing investee's portion of net income, it increases the amount of your investment

Question 37

For the equity method, what is the difference between the purchase price of investment and the fair value? what is the difference between the Fair value of the investment and the Net Book Value?

Answer 37

The difference between the purchase price and FV is GOODWILL The difference between the purchase price and NBV is the premium paid on the investment

Question 38

When doing the CAR part of the conosoldated elimination entry, what are the CAR formulas?

Answer 38

Assets - Liabilities = CAR or just net assets = car

Question 39

how is ending NCI determined after the acquisition date?

Answer 39

Beginning NCI +NCI share of NI -NCI share of dividends =ending NCI

Question 40

Uner IFRS how is goodwill impairment testing done at the Cash Generating Unit Level?

Answer 40

impairment is recognized when the carrying value is greater than the recoverable amount. This impairment loss is first allocated to goodwill, and then distributed across other assets