FAR 1/5 Flashcards
(500 cards)
1
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Q001. _________________ are intended to establish the objectives and concepts that the FASB will use in developing standards of FAR
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A001. Statements of Financial Accounting Concepts
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Q002.__________ establish GAAP in financial reporting by business enterprises.
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A002. Statements on Financial Accounting Standards (SFAS)
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Q003. The meaning of “present fairly in accordance with GAAP “ and “the hierarchy of sources of GAAP” are presented in ___________
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A003. Statements on Auditing Standards (SAS)
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Q004. Investments by owners are specifically excluded from _________
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A004. Comprehensive income
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Q005. _______ _______ adjustments are not considered accounting changes.
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A005. Prior period
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Q006. An entity will be reported Discontinued operations IF 1. OR 2.
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A006. 1. it has been disposed of OR 2. Is classified as held for sale
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Q007. A component classified as held for sale is measured at the lower of ________ OR ________ less cost to sell.
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A007. it’s carrying amount OR fair value
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Q008. Under what principal Defer estimated Gains until realized Record probable estimated losses immediately
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A008. Conservatism Principle
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Q009. Sale of a fixed asset used for operations for greater than its carrying amount should be reported in the IS using the ________
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A009. Net concept, showing the total Gain as a part of continuing operations, NOT net of Income Taxes.
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Q010. Interest expense is classified as a __________ on the IS. Advertising is classified as a ____________
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A010. 1. separate line item 2. selling expense.
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Q011. The best, most current estimate of the annual _________ rate should be used to determine the income tax provision for the second quarter.
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A011. Effective tax rate
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Q012. Comprehensive income includes all changes in Equity during a period except those resulting form ______________
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A012. Owners investments and distribution to owners
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Q013. Because the note is due within the next fiscal year, it should normally be reported as a current liability. However, if either of two events occurs prior to the issuance of the financial statements, then the liability is reported as a long- term liability because it will not require the use of current assets or the creation of another current liability. The first of these events is that the note is actually __________________. The second is that the debtor signs __________ agreement with a party to refinance the note on a long-term basis when it comes due or at some time before it comes due. The other party must be capable of meeting this obligation.
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A013. 1. refinanced on a long-term basis 2. a non-cancelable
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Q014. Who pays bond issuance costs?
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A014. The company; it reduces the amount received
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Q015. This group of bonds was sold at a yield rate (8 percent) that was higher than the market rate at the time (7 percent). Buyers would not buy this bond without an especially high right of return. That indicates that the market was not comfortable in some way with the company or the structure of the bond. If the bond had been viewed as relatively safe, the company should have been able to negotiate a yield rate that was a bit lower than the __________. Interest expense to be recognized for the first year is the $86,000 initial book value times the 8 percent yield rate (or $6,880). Because the interest being paid at the end of the first year was only $6,000 (face value of $1 million times the stated rate of 6 percent). The additional interest of $880 recognized as an expense ($6,880 less $6,000) must be compounded or added to the book value of the bond. That brings the book value (the principal) from $86,000 to $86,880. Interest expense for Year Two is this $86,880 figure times 8 percent or $6,950.40.
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A015. market rate
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Q016. On January 1, Year One, Big Company offers to sell a $100,000 bond coming due in exactly 10 years. This bond pays cash interest of 2 percent at the end of each year. A buyer is found who wants to earn 5 percent interest each year. After some negotiations, Big agrees to the 5 percent effective rate. The present value of a single amount of $1 in ten years at 2 percent annual interest is .80 whereas the present value of a single amount of $1 in ten years at 5 percent annual interest is .63. The present value of an annuity of $1 in ten years at 2 percent annual interest is 8.75 whereas the present value of an annuity of $1 in ten years at 5 percent annual interest is 7.70. What is the sales price for this bond?
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A016. The set cash flows established by this bond are $2,000 per year ($100,000 times 2 percent) for ten years plus $100,000 at the end of ten years. The price of the bond will be the present value of these cash flows at the desired 5 percent annual rate. $2,000 times 7.70 is $15,400 and $100,000 times .63 is $63,000. Total present value is $78,400 ($15,400 plus $63,000). That is the amount that should be paid for these future cash flows in order to earn the equivalent of 5 percent annual interest, the negotiated rate.
17
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Q017. Two things (bonds and stock warrants) are issued here for a single amount. If both values are known, the $990,000 (the cash received by the company) is prorated between the two based on the ___________. If only one value is known, that value is used for reporting purposes and the remainder is assigned to the other item. In this problem, only the value of the stock warrant is specified.
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A017. relative values - Market value
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Q018. The loan comes due within the current year and must be shown as current unless the company can show that it has both the __________ to refinance. That intent and ability is proven by either refinancing the debt prior to the issuance of the financial statements on February 27, Year Two or obtaining a non-cancellable agreement to refinance by that same date. Basically, the company must show that there is no chance that the bond will have to be paid out of the company’s own current assets. If that is demonstrated, the bond is reported as long-term.
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A018. intent and ability
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Q019. SFAS 109 requires an enterprise to net SEPARATELY all of the deferred tax assets and liabilities classified as _________ and __________.
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A019. Current and Noncurrent
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Q020. If the decline in fair value is judged to be _________, the cost bases of the individual security shall be written down to fair value as a new cost basis and the amount of the write-down shall be included in earnings ( as a realized loss) - DECREASE IN NET INCOME
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A020. OTHER THAN TEMPORARY
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Q021. Idle machine, cash surrender value of life insurance on corporate executives, and marketable equity investments valued at FMV should be reported as _____________ on the B/S
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A021. current assets
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Q022. Current assets consist of cash and other assets reasonably expected to be realized in cash or sold or consumed in operations within _______ or an operating cycle, whicherver is longer.
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A022. One year
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Q023. A material event or transaction that is unusual in nature or occurs infrequently but not BOTH, and therefore does not meet both criteria for classification as an extraordinary item, should be reported as a separate component of __________
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A023. Income from continuing operations
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Q024. ___________ differences do not affect either interperiod or intraperiod Income Tax allocation.
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A024. Permanent
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Q025. The net unrealized loss on marketable trading securities is included in ___________
A025. Income S., not in Other comprehensive income
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Q026. CORRECTION OF AN ERROR in FS of a prior period should be accounted for and reported as a prior period adjustment and should not affect income of the __________ period.
A026. Current
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Q027. Total assets = Total Liability + Stockholder's Equity Borrowed fund to start a corporations are part of ______________
A027. Total Liability
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Q028. The amortization of a bond discount is the deference between cash interest and interest expense. Cash paid for interest is reported in operating activities. Amortization of a discount on bonds payable results in interest expense greater than cash interest. Because more expense has been deducted in computing income than the amount of cash paid for interest, the difference (captured in the change in the bond discount account) must be added to _____ to reconcile to the cash provided or used for operating activities.
A028. Income
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Q029. ___________ is a periodic interim invoicing for progress payments on L/T contracts. It is contra Assets account, netted against the construction in process assets account and recorded as either an asset (contraction costs in excess of billings) or as a liability (billings in excess of construction costs.)
A029. Billing
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Q030. The segregated account (restricted as to withdrawal or use) should be classified as __________
A030. Noncurrent asset
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Q031. The overdrawn account should be reported as ________
A031. CURRENT LIABILITY
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Q032. Inventory is accounted for at lower of ___________ or _________. ___________ is measured as Replacement cost, Net realizable value, or Net realizable value less a normal profit margin.
A032. 1 (Historical) cost or Market cost 2 Market
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Q033. A credit balance in the deferred income taxes account does not represent a payable in the usual sense in which the term "payable" is used in financial statements. The credit balance in the deferred income taxes account represents the tax ____________ recognized to-date for financial reporting purposes that is expected to be included in taxable income in future years. However, it does not represent an amount "owed" to the federal gov. at the B/S date.
A033. expense
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Q034. Consolidated statements reflect the ___________ concept.
A034. ECONOMIC ENTITY
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Q035. The amount to be assigned to inventories (acquired in an acquisition) of finished goods and merchandise is the estimated selling price less the sum of 1. costs of disposal and 2. a reasonable profit allowance for the selling effort of the acquiring corporation. The amount to be assigned to the inventory of WIP is - the estimated selling prices of finished goods less the sum of 1. costs to complete, 2. costs of disposal, and 3. a reasonable profit allowance for the completing and
A035. The general guidelines for assigning amounts to the inventories acquired
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Q036. Depreciation expense of the asset sold to subsidiary company at a GAIN (treated as unrealized gain) on a Consolidated IS should be the depreciation that would have been expansed on ________ if the equipment had not been sold
A036. Parents books
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Q037. __________ statements may be used to present the results of operations of 1. companies under common management AND 2 commonly controlled companies
A037. COMBINED STATEMENTS
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Q038. Other Comprehensive income includes revenues, expenses, gains, and losses that are included in Comprehensive income but __________. The total of Other Comprehensive income for a period must be transferred to a separate component of Equity in the B/S at the end for the accounting period.
A038. EXCLUDED from NET INCOME
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Q039. Dividends paid to ___________ would NOT be included in computation of COMPREHENSIVE INCOME
A039. STOCKHOLDERS
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Q040. _________ securities include debt securities and readily marketable equity securities that are bought and held principally for the purpose of selling them in the near term. _______ securities are recognized in the B/S at fair value. Unrealized holding G/L are included in earnings.
A040. TRADING
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Q041. __________ securities are recognized in the B/S at fair value. However, any related unrealized holding G/L are excluded from _________ and reported as __________.
A041. A-FOR-SALE : INVESTMENTS IN DEBT AND EQUITY SEC NET INCOME OTHER COMPREHENSIVE INCOME
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Q042. _____________ CONCEPT - The effect of price change on assets held and liabilities owed are recognized as "holding G/L" and included in return ON capital. The concept is applied to What income?
A042. FINANCIAL CAPITAL CONCEPT NET INCOME AND COMPEHENSIVE INCOME
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Q043. FINANCING ACTIVITEIS are associated with a company's __________ and ______________
A043. LIABILITIES AND SOCKHOLDER'S EQUITY - cash effects of transactions obtaining resources from Owners and providing them with a return on Their investment
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Q044. If LAND was held for resale and was indeed sold BEFORE issuance of the F/S, the land should be classified as ____________
A044. CURRENT ASSET
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Q045. In concept, REVENUES - increase assets rather than decrease liabilities, but a convinient shortcut is often to directly record _____________
A045. reduction of liabilities
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Q046. Calculate EQUITY if given capital stocks revenue expenses cash dividends declared
A046. revenue - expenses ______________ NI - cash dividends declared + capital stocks _________________________ EQUITY
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Q047. Articulation means that the elements of F/S are _____________
A047. FUNDAMENTALLY INTERRELATED
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Q048. Conversion of Debt to Equity should be disclosed as ___________ in the SCF.
A048. SUPPLEMENTAL INFO
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Q049. F/S should not report an amount of cash flow _____________
A049. PER SHARE
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Q050. Calculate Cash proceeds of insurance settlement, given Extraordinary loss, Cost of the asset and Accumulated depreciation. This amount is reported on SCF as ___________
A050. Cost of the asset - Accumulated depreciation - Loss ________________ Cash from "sale" INCREASE IN CF
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Q051. The recognition of the realized Loss due to other than temporary change in value of ___________ security would result in a ________________ and no effect on NET NONCURRENT ASSETS
A051. AVALABLE-FOR-SALE DECREASE IN NET INCOME
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Q052. Constant Dollar Index = Constant Dollars are dollars of equal Purchasing power
A052. Historic cost to be restated x C/Y index / Base year index
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Q053. Culculate the R/E for the year =
A053. Revenues - expenses - income tax ------------------------ NI - Dividends (cash) ________________ R/E for the C/Y
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Q054. The cost of company acquired in a Business Combination includes the _________ costs of the Business Combination. These costs will be included in the total _______ cost which will be allocated to identifiable assets.
A054. DIRECT ACQUISITION
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Q055. What type of the account is Costs in excess of billings on long-term contracts?
A055. Current asset
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Q056. What type of the account is Billings in excess of costs on long-term contracts?
A056. Liability acct.
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Q057. Available-for-Sale Sec. 2000 FMV of the stock is $1000 2001 FMV of the stock is $800 - decline in value is temporary 2002 FMV of the stock is $800 - decline in value is OTHER than temporary What should be the effect on NONCURRENT ASSETS and NET INCOME in 2002?
A057. NONCURRENT ASSETS -NO EFFECT. -- carrying value would have to be lowered for 2001 using Valuation Allowance NET INCOME - will DECREASE in 2002
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Q058. The total of Other Comprehensive income for a period must be transferred to a separate component of Equity Account _______________ in the B/S at the end for the accounting period.
A058. ACCUMULATED OTHER COMPREHENSIVE INCOME
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Q059. A single-step income statement formula =
A059. Net Income = (Revenues + Gains) – (Expenses + Losses)
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Q060. List B/S ASSET items
A060. CURRENT ASSETS - Cash and cash equivalents, Trading SEC at fair value, A/R net of allowance for ncollectable accts, Notes receivable, Merchandise inventory at lower cost or market, Prepaid expense INVESTMENTS - Available-for-sale SEC. at fair value, Held to maturity SEC, Land held for future plant site PROPERTY, PLANT AND EQUIPMENT - Land, Building, Equipment Less: Accumulated depreciation INTANGIBLE ASSETS - Good will, Patents, net of amortization OTHER ASSETS - Bond issue costs TOTAL ASSETS
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Q061. List B/S LIABILITIES items
A061. CURRENT LIABILITIES Long-term debt due within one year A/P Notes payable Interest playable Salaries payable Income tax payable Advances from customers ( unearned) Unearned rent revenue LONT-TERM LIABILITIES Bonds payable Plus: Unamortized premium on bonds OR Less: Unamortized discount on bonds Differed income tax liability Pension and postretirement liabilities
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Q062. List B/S STOCKHOLDERS EQUITY items
A062. Capital stock Paid-in capital in excess of par ------------------------------------------------------------- Total paid-in capital (net contributed by owners) Retained earnings (internally generated) Accumulated other comprehensive income (internally generated) Treasury stock ( contra equity) TOTAL STOCKHOLDERS EQUITY
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Q063. INTERIM FINANCIAL REPORTING is generally concerned with the __________ reports that PUBLIC companies _______________ TIMLINESS is emphasized over___________ Should be marked _____________ Income tax expense is estimated each quarter - use __________ tax rate
A063. Quarterly must file with SEC RELIABILITY UNAUDITED ESTIMATED AVERAGE TAX RATE
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Q064. SEGMENT REPORTING applies to __________ REQUIRED DISCLOSURES ARE (4) INTERCOMPANY TRASACTIONS _______ ELIMINATED FOR REPORTING
A064. PUBLIC COMPANIES ONLY 1. Operating segment 2. Products and Services 3. Geographic areas 4. Major customers NOT
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Q065. ҉ QUANTITATIVE THRESHOLD FOR REPORTABLE SEGMENT %??? "size" test "reporting sufficiency" test "single industry dominance" test
A065. 1. Segment meets the "size" test if its REVENE or G/L or ASSETS are 10% of total. 2. need to identify segments until at least 75% of COMBINED REVENUE is included 3. the is only ONE segment if its REVENE + G/L + ASSETS are 90% of total
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Q066. SFAS 157 provides the definition of FAIR VALUE, Establishes a frame work for measuring FV, and expands FV disclosures. FV is the price to sell asset or transfer a liability in an orderly transaction - __________ between market participants - __________ at the measurement date.
A066. Not a Fire sale buyers and sellers are INDEPENDENT
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Q067. FAIR VALUE TERMINOLOGY (8) - need to be familiar
A067. 1. FV is measured for a specific asset or liability 2. FV is a MARKET-specific measure, not entity-specific 3. FV is measured in the principal, or most advantageous market for the asset or liability 4. FV is and exit price, not and entrance price 5. FV measure should reflect all of the assumptions that market participants would use in pricing the asset 6. FV does not include transaction costs, but may include transportation costs if location is an attribute of the asset. 7. FV of an asset assumes the highest and best use of the asset 8. FV of liability should include the liability’s nonperformance risk, which is the risk that the obligation will not be fulfilled
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Q068. FAIR VALUE VALUATION TECHNIQUES 1. The MARKET APPROACH 2. The INCOME APPROACH 3. The COST APPROACH -
A068. 1. The MARKET APPROACH - uses prices and other info from Market transactions – Real Estate 2. The INCOME APPROACH – converts future amounts to a single discounted amount - – Real Estate 3. The COST APPROACH - uses the current replacement cost
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Q069. F. Statements of all prior periods presented should be RESTATED when there is a ______________
A069. "CHANGE IN ENTITY"
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Q070. It is permissible, but extremely rare, to deviate from one of the 6 PRONOUNCEMENTS if compliance would cause the financial statements to be misleading. List hierarchy of sources of GAAP.
A070. 1. B – Accounting Research Bulletins 2. O – Accounting Principles Board Opinions 3. S – FASB Statements of Financial Accounting Standards 4. S – FASB Staff Positions 5. I – FASB Interpretations 6. I – FASB Statements 133 Implementation Issue.
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Q071. SFAC # 2 – "Qualitative characteristics of accounting information” Financial info must be (7):
A071. 1. UNDERSTANDABLE to decision makers 2. RELEVANT ( timely information with predictive or feedback value) 3. RELIABLE ( verifiable, faithfully representable, and neutral) 4. COMPARABLE 5. CONSISTENT 6. MATERIAL 7. LESS COSTLY THAN THE BENEFIT PROVIDED.
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Q072. PRIMARY QUALITIES OF DECISION USEFULNESS – (2)
A072. 1. Relevance – ( Passing Feels Terrific) a) P – Predictive Value b) F – Feedback Value c) T – Timeliness 2. Reliability ( Nobody Relies on Financials unless Verified ) a) N – Neutrality – free from bias b) RF – Representational Faithfulness - info is valid c) V – Verifiability
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Q073. Representation order of the major components of an Income and RE statement ("IDEA”)
A073. 1. Reported on IS – (I) INCOME (OR LOSS) FROM CONTINUING OPERATIONS – BEFORE TAX include Operating and Non-operating activities (D) Income from DISCOUNTINUED OPERATIONS – NET OF TAX (E) EXTRAORDINARY ITEMS – NET OF TAX unusual in nature and infrequent in occurrence. 2. Reported on RE Statement (A) cumulative effect of change in ACCOUNITNG PRINCIPLE – NET OF TAX RULE #1: line items ABOVE "income form continuing operations” are shown "gross” (before tax) RULE #2: line items BELOW "income form continuing operations” are shown "NET” (after tax)
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Q074. Recognition and realization are NOT ________
A074. SYNONYMOUS
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Q075. IDE(A) Accounting changes are broadly classified as (3) 1. Changes in accounting ESTIMATE -_________ 2. Changes in accounting PRINCIPLE - GR - ______________ 3. Changes in accounting ENTITY -________________
A075. 1. Changes in accounting ESTIMATE - Prospective as Income from Continuous operation 2. Changes in accounting PRINCIPLE - GR - Retrospective 3. Changes in accounting ENTITY = RESTATE - >Retrospective
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Q076. ҉ Other Comprehensive Income - includes those items that are excluded from Net Income. (4) Comprehensive income: Net income +Other compr. income _________________________ Comprehensive income
A076. Pension minimum liability adjustments Unrealized gains and losses Foreign currency items Effective portion cash flow hedges PUFE is not reported on IS - it is direct to Equity Adjustment
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Q077. Other comprehensive income includes all changes in Equity from nonOwner sources. The components of OTHER COMPREHENSIVE INCOME are: (4)
A077. Pension minimum liability adjustments Unrealized G/L - available-for-sale securities only Foreign currency items Effective portion cash flow hedge
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Q078. Examples of items commonly considered to be cash equivalents are: Treasury bills, commercial paper, money market funds, and federal funds sold. Cash purchases and sales of those investments generally are part of the enterprise's cash management activities rather than part of its operating, investing, and financing activities, and details of those transactions need not be reported in _________
A078. A Statement of Cash flows.
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Q079. You will be able to easily remember approximately 85% of the adjustments made to the operating activities section under the INDIRECT METHOD by remembering the mnemonic CLAD
A079. Current assets and liabilities Losses and Gains Amortization and Depreciation Deferred Items
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Q080. What is basic accounting equation?
A080. Beginning Balance + Additions - Deletions = Ending Balance
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Q081. THE A/R TURNOVER RATIO=
A081. NET CREDIT SALE / AVERAGE. RECEIVABLES AVERAGE RECEIVABLES= (A/R - allowance for doubtful accounts YEAR1 + A/R - allowance for doubtful accounts YEAR2) / 2
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Q082. ROI - Return on Investment =
A082. Net income / Total Investment = Net income + Interest expense after the effect of Income tax / Liabilities + Equity
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Q083. Debt-to-Equity ratio =
A083. DEBT/EQUITY DEBT = ASSETS - CAPITAL STOCK - EQUITY
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Q084. TOTAL ASSET T/OVER=
A084. NET SALES / AVERAGE TOTAL ASSETS
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Q085. THE QUICK RATIO =
#NAME?
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Q086. AVRG COLLECTION PERIOD for A/R =
A086. 360 / A/R T/OVER AR T/OVER = NET SALE/ AVERAGE A/R
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Q087. ҉ GENERATE MULTIPLE STEP INCOME STATEMENT
A087.
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Q088. A statement of Cash F shall explain the change during the period in ____________ and its primary purpose is to provide relevant info about _________ and ____________
A088. CASH AND CASH EQUIVALENTS CASH RECEIPTS AND DISBURSEMENTS
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Q089. One of the key purposes of the statement of CF is to disclose how a business ____________ its operations.
A089. FINANCED
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Q090. Categories to Report separately under the Direct method (10)
A090. INFLOW 1 cash received from customers 2 interest received 3. dividends received 4 Other operating cash receipts such as receipt of insurance proceeds and lawsuit settlement 5 cash received from the sale of securities classified as Trading securities OUTFLOW 6 cash paid to suppliers and employees 7 interest paid 8 income taxes paid 9 cash paid to acquire securities classified as Trading sec. 10 other operating cash payments
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Q091. BOND DISCOUNT represents _____________ at the bond maturity and is amortized over the life of the bond; amortized amounts ___________ interest EXPENSE each period
A091. ADDITIONAL INTEREST TO BE PAID TO INVESTORS INCREASE
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Q092. BOND PREMIUM represents _____________ who then receive a return of this premium in the form of larger periodic payments; amortized amounts ___________ interest EXPENSE each period
A092. INTEREST PAID IN ADVANCE TO THE ISSUER BY BONDHOLDERS DECREASE
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Q093. CARRYING VALUE OF THE BOND =
A093. FACE + UNAMORTIZED PRIMIUM - UNAMORTIZED DISCOUNT OR CV + DISCOUNT AMORTIZATION FOR THE PERIOD - PRIMIUM AMORTIZATION FOR THE PERIOD
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Q094. EFFECTIVE INTEREST METHOD for the amortization of DISCOUNTS/PREMIUMS is required by GAAP INTEREST EXPENSE = INTEREST PAID = DIFFERENCE ?
A094. (I/S impact) INTEREST EXPENSE = NET CARRYING VALUE X Effective Interest Rate (B/S impact) INTEREST PAID = BOND FACE X STATED RATE DIFFERENCE = INTEREST EXPENSE less INTEREST PAID
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Q095. The purpose of the IS is to provide info about the uses of funds in the income process - _________ , the uses of funds that will never be used to earn income - __________ , the sources of funds created by those expenses - __________, and the sources of funds not associated with the earnings process - __________
A095. EXPENSES LOSSES REVENUES GAINS
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Q096. The IS is useful in determining __________, _________ for investment purposes and credit__________.
A096. PROFITABILITY VALUE WORTHINESS
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Q097. Cost is the amount actually paid for something. If COST is expensed immediately - it is ________ cost; if NOT expensed immediately - it is ________
A097. PERIOD CAPITALIZED = ASSET
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Q098. Unexpired cost is _________ because it can generate revenue in the future.
A098. ASSET
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Q099. _________ and _________ are normal reacuring operations , both separately reported at their ________ amounts
A099. REVENUES AND EXPENSES GROSS
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Q100. __________ and _________ are nonoperating income and reported at their _________ amounts.
A100. GAINS AND LOSSES NET
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Q101. COGS =
A101. BI . + GOGM/purchases - EI . _________________ COGS .
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Q102. In the SINGLE STEP IS presentation of income from continuing operations, total _______ are subtracted form total ________ .
A102. EXPENSES REVENUES
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Q103. iDea - Discontinued operations - are reported separately from continuing operations in the IS in the period in which they occur - anticipated losses NOT allowed. The loss form Discontinued operations can consist of an (3)
A103. 1 impairment loss 2 G/L form actual operations 3 G/L on disposal
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Q104. A component of a business is classified as "Held for sale" in the period in which ALL criteria are met:(6)
A104. 1. Plan to sell 2 available for immediate sale 3 active to locate a buyer 4 expected to sell within ONE year 5 is being actively marketed 6 significant changes are unlikely
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Q105. Both of the following conditions must be met in order to report income from DISCONTINUED operations :
A105. 1 ELIMINATED FROM ONGOING OPERATIONS 2 NO SIGNIFICANT CONTINUING INVOLVEMENT
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Q106. Report the results of DISCONTINUED operations in period component is DISPOSED OF or IS CLSSIFIED AS HELD FOR SALE. Types of items included : (3)
A106. 1 revenues/expenses of the component - for that period 2 G/L on Disposal - in the period of sale 3 Impairment Loss and Subsequent increase in FV SP/NRV < BV, report immediately in the period HELD FOR SALE
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Q107. The results of DISCONTINUED operations, net of ________, are reported as a separate component of IS before the _________. G/L disclosed in ______ or in ________
A107. TAX EXTRAORDINARY FACE OR NOTES
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Q108. idEa - EXTRAORDINARY ITEMS - must be _____ AND _________
A108. UNUSUAL AND INFREQUENT
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Q109. MATERIAL Unusual OR Infrequent items should be reported as a separate line item as part or income from ___________________ at ____ amount.
A109. CONTINUING OPERATIONS GROSS
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Q110. INCOME STATEMENT Normal reoccurring operations list the items for multiple step
A110. Net sales Cost of sales ----------------------------------- Gross margin Selling expense G&A expenses Depreciation Expense ----------------------------------------- Income (loss) from operations
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Q111. INCOME STATEMENT Non-operating list the items for multiple step
A111. OTHER revenues and gains: Interest Income Gain on transactions in foreign currencies OTHER expenses and losses: Interest Expense Loss on sale of fixed assets INCOME before unusual items and income tax UNUSUAL or infrequent items Gain on litigation settlement Gain on sale of available-for-sale investments INCOME before income tax
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Q112. Net sales=
A112. Net sales= Gross Sales - returns - discounts
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Q113. Inventory cost = Selling expense= G&A expenses= Non-operating =
A113.
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Q114. Examples of extraordinary items:
A114. 1. the abandonment of a plant due to an INFREQUENT earthquake. 2. An expropriation of a plant by the government. 3. A prohibition of a product line by a newly enacted law or regulation. 4. Certain gains or losses from extinguishment of long- term debt - must say unusual and infrequent.
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Q115. ҉ Examples of NONEXTRAORDINARY items: 1.2.3.4.5.
A115. 1. Gains or loss form sale or abandonment of property, plant or equipment used in the business 2. Large writedowns or writeoffs of: A/R, Inventory, Intangibles, Long-term securities 3. G/L from Foreign currency transactions of translation. 4. Losses from major strike by employees 5. Long-term debt extinguishments (not unusual and infrequent)
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Q116. DISCOUNTINUED OPERATIONS – are reported separately from continuing operations in the _________. The loss from discontinued operations can consist of an Impairment loss, a Gain/loss from actual operations, and the Gain/loss on disposal. (in the period in which they occur) (iDea)
A116. Income Statement
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Q117. CHANGE IN ACCOUNTING ESTIMATE - PROSPECTEVELY In the 3rd year of asset it estimated useful life was changed from 10 to 5. how to calc. the depreciation for current and future years?
A117. (BV- accum depreciation ) / remaining useful life using new estimate (5-2)
118
Q118. IDE(A) Accounting changes are broadly classified as (3) 1. Changes in accounting ESTIMATE - Prospective as Income from Continuous operation 2. Changes in accounting PRINCIPLE - GR - Retrospective Change from GAAP to _________ Principal may be changed only IF new principal is _________ and _________ presents the information. 3. Changes in accounting ENTITY - Retrospective
A118. Change from GAAP to GAAP preferable and more fairly
119
Q119. Prior period adjustments are not considered ______________
A119. ACCOUNTING CHANGES
120
Q120. Prior period adjustments: 1. Correction of __________ 2. new GAAP pronouncement 3. Changes from __________ method of accounting to ____________
A120. 1. ERROR 3. non-GAAP TO GAAP (from cash basis to accrual)
121
Q121. F/S prep under which of the methods include adjustments for both specific price ∆ and general price-level ∆
A121. CURRENT COST, CONSTANT DOLLAR
122
Q122. Statement of cash flow Cash receipts and cash payments are classified into three categories: 1. ___________ all transactions and other events that are not investing or financing; generally include transactions that enter into the determination of net income. These include production and delivery of goods and services, interest and dividends received, and payment of interest. 2 __________ all transactions related to the making or collecting of loans and the acquiring and disposing of debt, equity instruments , or property, plant, and equipment. 3. ___________ all transactions related to obtaining resources from owners and providing them with a return on, and a return of, their investment , and to obtaining and repaying debt.
A122. 1. OPERATING ACTIVITIES 2. INVESTMENT ACTIVITIES 3. FINANCING ACTIVITIES
123
Q123. Cash inflows are not to be netted against __________
A123. CASH OUTFLOWS
124
Q124. Examples of items commonly considered to be cash Equivalents are ________ (4). Cash purchases and sales of those investments generally are part of the enterprise's cash management activities rather than part of its operating, investing, and financial activities, and detail of those transactions need not be reported in _____________
A124. 1. Treasury bills 2. commercial paper 3. money market funds, 4 federal funds sold a Statement of cash flows.
125
Q125. Cash ________ from _________ activities generally include the following: 1. Cash receipts from sale of goods or services 2. Cash receipts from interest and dividends on investments in another enterprise 3. All other cash receipts that are not classified as either investing or financing activities.
A125. INFLOWS FROM OPERATING ACTIVITIES
126
Q126. Cash ________ classified as ____________ include the following: 1. Cash payments to acquire materials for manufacture or goods for resale 2. Cash payments to other suppliers and employees for goods and services 3. Cash payments to Gov. for taxes, duties other fees, or penalties 4. Cash payments to lenders and other creditors for interest 5 All other cash payments that are not classified as either investing or financing activities.
A126. OUTFLOWS OPERATING ACTIVITES
127
Q127. The following are types of cash ________ from _______: 1. Cash receipts form collections or sales of loans made by the enterprise and of other debt instruments that are purchased by the enterprise 2. Cash receipts form sale of equity securities of other enterprises 3. Cash receipts form the sale of PP&E and other productive assets
A127. INFLOWS INVESTING ACTIVITIES
128
Q128. 1. Cash payments for loans made by the enterprise and payments to acquire debt instruments of other entities 2. Cash payments to acquire equity instruments of other enterprises 3. Cash payments to purchase PP&E and other productive assets
A128. OUTFLOWS INVESTING ACTIVITIES
129
Q129. Cash _________ from __________ include the following: 1. Cash proceeds from issuing equity instruments 2. Cash proceeds from issuing bonds, mortgages, notes, and other short-and- long-term debt instruments
A129. INFLOW FINANCING ACTIVITIES
130
Q130. Cash _________ classified as ____________ are as following: 1. Cash payments of dividends of other distributions to owners, including outlays to reacquire the enterprise's instruments 2. Cash repayments of amounts borrowed 3. other principal cash payments to creditors who have extended long-term credit
A130. OUTFLOW FINANCING ACTIVITIES
131
Q131. Cash received from sale of equipment with accumulated depreciation for Gain =
#NAME?
132
Q132. A reconciliation of ending retained earnings to net cash flow from operations is _________ to be disclosed on the Statement of CF.
A132. NOT REQUIRED
133
Q133. The Gain on sale of the land does ___________ Investment activities. Gain =
A133. NOT affect Gain = Proceeds from Sale of FA - NBV NBV= Cost - Accumulated depreciation
134
Q134. The amortization of the bond discount is classified as Interest Expense and has been deducted in arriving at NI. Using INDIRECT method, this amortization must be __________ to NI to compute net cash provided by _________.
A134. Added Operating Activities.
135
Q135. Using direct method compute Cash paid to suppliers.
A135. COGS for the year + increase in inventory + Decrease in A/P ___________________ Cash paid to suppliers
136
Q136. Only those changes that are NOT investing ( purchase of equipment) or financing ( change in notes payable) are _________________
A136. OPERATING ACTIVITIES
137
Q137. In calculating CF from Operating act. using Indirect method, NONCASH expenses (Depreciation and Amortization) are ___________. The sale of equipment is included in CF form investing activities; the Gain on the sale of that equipment is __________ in the Operating activities section so that it will not counted in both NI and Sale of Equipment.
A137. ADDED BACK DEDUCTED NI + Depreciation Expense. (Non Cash) - G/+L ( Investment Activity) -------------------------------------- CF from Operating Activity INDIRECT METHOD
138
Q138. Indirect method - is a _________ IF used - must report the same amount of net CF form Operating activities indirectly, by adjusting NI to _________ it to net CF from Operating activities.
A138. RECONCILIATION METHOD RECONCILE
139
Q139. Under the ___________, NI is adjusted to arrive at net CF form Operating activities. In addition, supplemental disclosure of cash paid for interest and income tax is required.
A139. indirect method
140
Q140. Under the ___________, major classes of cash receipts and disbursements are presented in their gross amounts and totaled to arrive at at net CF form Operating activities.
A140. DIRECT METHOD
141
Q141. The amortization of a bond discount is the difference between ______ and __________. Because more expense has been deducted in computing income than the amount of cash paid for interest, the difference must be 2_____________ to reconcile to the cash provided to used for operating activities.
A141. CASH INTEREST AND INTEREST EXPENSE; INTEREST expense IS GREATER THAN CASH INTEREST. 2 ADDED TO INCOME
142
Q142. A discount (in sale of the bond) results when the ___________ is LESS than the _________
A142. STATED INTEREST RATE EFFECTIVE (MARKET) RATE
143
Q143. A premium results when the ______________ RATE is GREATER than the ___________RATE.
A143. STATED INTEREST RATE EFFECTIVE (MARKET) RATE
144
Q144. Only the _________ portion of the monthly lease payments would be reported as cash outflow for Financing activities in the CFS. ___________portion of the monthly lease payments would be reported as cash outflow for Operating activity in the CFS.
A144. 1. PRINCIPAL 2. INTEREST
145
Q145. The amortization of the bond discount is classified as __________ and has been deducted in arriving at ___________. Using the indirect method, this amortization must be added to _________ to compute net cash provided by _____ activities.
A145. INTEREST EXPENSE NET INCOME NET INCOME OPERATING
146
Q146. Statement of cash flow 1. OPERATING ACTIVITIES 2. INVESTMENT ACTIVITIES => you _____a LOAN and get $$$ receipts is a change in _________ inflow when - _________ outflow when _________ "_________" relationship 3. FINANCING ACTIVITIES => you get a ____ and repay it * _________on notes, bonds, mortgages * your own _________ * Pay _________ "_________" relationship
A146. Statement of cash flow 1. OPERATING ACTIVITIES 2. INVESTMENT ACTIVITIES => you MAKE a LOAN and get $$$ receipts is a change in NON- CA inflow when - SELL outflow when BUY "INVERSE" relationship 3. FINANCING ACTIVITIES => you get a LOAN and repay it * Principal on notes, bonds, mortgages * your own stock * Pay dividends "DIRECT" relationship
147
Q147. Purchasing power G/L only result from holding_________ assets/liabilities. During inflation , prices ___ resulting in a purchasing power __________
A147. MONETARY INCREASE LOSS
148
Q148. The info about the effect of changing prices would be _____________ info to the FS
A148. SUPPLEMENTARY
149
Q149. SFAS 89 defines the inflation component of the increase in current cost amount as the difference between the ________ dollar and _________ dollar measures. inflation component =
A149. NOMINAL AND CONSTANT increase in NOMINAL $ LESS increase in CONSTANT $ --------------------------------------------- = inflation component
150
Q150. A summary __________ should be the first disclosure in the notes to the FS. Examples basis of consolidation depreciation methods amortization of intangible inventory pricing accounting for research and development costs translation of foreign currencies recognition of profits on long-term construction-type contracts.
A150. of significant accounting policies
151
Q151. In the period of rising general price levels, wages payable would result in a purchasing power ___________ refundable deposits with suppliers would result in purchasing power _________.
A151. GAIN LOSS
152
Q152. ________ security - reported in the net income of the current period and accumulated in a valuation allowance ________ security - reported as a separate (negative) component of S/Equity and accumulated in a valuation allowance, which may be debit or credit balance
A152. TRADING AVAILABLE FOR SALE
153
Q153. SFAS 89 describes current cost/constant dollar accounting as method of accounting based on measures of current cost or lower recoverable amounts in units of currency, each of which has the same general purchasing power. These statements include adjustments for both specific _________ change and general _________ change.
A153. PRICE PRICE-LEVEL
154
Q154. COGS on a __________ BASIS may be computed by: multiplying the number of ___________ by the average _________of units during the year
A154. CURRENT number of units sold x average current cost of units during the year ------------------------------------------ COGS on a CURRENT BASIS
155
Q155. When _________ indexes are used to adjust major expense items (depreciation COGS) the result is restated amounts that approximate ____________ COSTS for those items.
A155. SPECIFIC CURRENT
156
Q156. Info which becomes known after the B/S date, but before the F/S are issued, should be _________
A156. DISCLOSED
157
Q157. __________ CONTINGENCIES should NOT be reflected in the accounts (accrued) but the adequate __________ should be made in Notes to the F/S _________ CONTINGENCY would be accrued.
A157. GAIN DISCLOSURE LOSS
158
Q158. __________ is the process of formally recording or incorporating an item into the FS of an entity as an asset, liability, revenue, expense, or the like
A158. RECOGNITION
159
Q159. __________CONCEPT the effects of price change on assets held and liabilities owed are recognized as "holding G/L" and included in return on capital
A159. FINANCIAL CAPITAL
160
Q160. the Board issues a Statement or Interpretation by simple _________ vote.
A160. MAJORITY
161
Q161. Both income tax-basis and GAAP -basis FS recognize all the financial activities of a company's business. However, it is the _________ of this recognition that differs between the two methods.
A161. TIMING
162
Q162. The estimated current value of an investment that constitute a LARGE part of person's total assets should be shown as _________ amount as _______
A162. ONE AN INVESTMENT
163
Q163. The estimated current value of an investment life insurance is the CASH VALUE of the policy less the amount of _______
A163. LOANS AGAINST IT.
164
Q164. NET WORTH =
A164. Estimated value of assets - Estimated value of liabilities - Tax on difference between estimated values and tax basis _________________________ Net worth Tax on difference between estimated values and tax basis = Difference in assets less difference in liabilities x Tax Rate
165
Q165. The estimated income taxes should be presented between _________ and _________ in the statement of financial condition.
A165. LIABILITIES AND NET WORTH
166
Q166. Personal FS should present assets at their ________ values and Liabilities at their _________ amounts.
A166. Estimated Current Estimated Current
167
Q167. The modified cash basis of accounting is a combination of the _________ basis and the ________ basis.
A167. CASH AND ACCRUAL
168
Q168. Cash basis income is (vs accrued basis) 1. Higher when 2 Lower when
A168. 1. AP (increase) ; AR (decrease) 2. AP (decrease) ; AR(increase) direct relationship with AP
169
Q169. A set of Personal FS usually includes a statement of __________ and a statement of __________
A169. FINANCIAL CONDITION AND NET WORTH
170
Q170. The _________ is the most important factor shown by comparative FS analysis. It is usually expressed in terms of a base year, thus allowing the manager to observe the __________ of the accounts.
A170. TREND direction
171
Q171. _________ analysis, _________ analysis , and _________ analysis are tools for FS analysis.
A171. RATIO analysis TREND analysis COMPARATIVE STATEMENT analysis
172
Q172. In FS analysis, the expressing of all FS figures as a % of base-year figures is called :
A172. HORIZONTAL COMMON SIZE ANALYSIS
173
Q173. _________ analysis is the method of FS analysis that computes component % changes.
A173. VERTICAL
174
Q174. _______ stock is common stock which has been repurchases by the company and held in its treasury to be resold when the company needs money. Firm ASSETS and EQUITY is ________ by the amount of the purchase.
A174. TREASURY REDUCED
175
Q175. Cash basis net revenue =
A175. NET REV FROM CASH SALE + CASH COLLECTED FROM CREDIT SALES ____________________________ Cash basis net revenue CASH COLLECTED FROM CREDIT SALES = net credit sales + decrease in A/R
176
Q176. ҉ Those segments that meet at least one of the tests represent REPORTABLE SEGMENTS. The test are:
A176. 10% of REVENUE ( 10% or more of the combined rev, internal and external, of all operating segments) 10% of PROFIT or LOSS 10% of ASSETS
177
Q177. How do you record an asset purchased on a deferred payment plan?
A177. At it's cash equivalent price, if that's unavailable, imputed interest rate should be used and PV of payments.
178
Q178. How do you record an asset purchased by issuance of securities?
A178. FV or FV of the securities issued, whichever is more clear.
179
Q179. What are 3 assets qualifying for interest capitalization?
A179. 1. Assets constructed or produced for self-use on a repetitive basis. 2. Assets acquired for self use through arrangements requiring down payments or progress payments. 3. Assets constructed or produced as discrete projects for sale or lease.
180
Q180. What's the formula for weighted average rate?
A180. Total Interest / Total Principal
181
Q181. Is interest cost capitalized part of the cost of acquiring the asset & written off over the estimated useful life of the asset?
A181. Yes
182
Q182. How do you record an asset by self construction?
A182. By all directly related costs: DM, DL & additional overhead incurred
183
Q183. What is a revenue expenditure?
A183. Expenditures that benefit only the current period are charged to expense as incurred.
184
Q184. How are assets to be recorded?
A184. At acquisition cost, which includes all costs reasonably necessary to bring it to the location and to make it ready for its intended use.
185
Q185. How would the entity paying boot record new asset? Is there any gain recognized?
A185. No Gain recognized. Record the asset received at the amount of boot paid plus the recorded amount of the asset surrendered.
186
Q186. Formula for portion of BV sold when receiving boot?
A186. BV of old asset x (boot/(boot + BV of new asset)
187
Q187. When an exchange with boot indicates a loss, do you recognize the whole loss or just a portion?
A187. Whole loss!
188
Q188. When you're the recipient of boot, how is your gain calculated?
A188. Realize a gain to the extent the monetary (boot) receipt exceeds a proportionate share of the recorded amount of the asset surrendered.
189
Q189. T or F G & L's in general for nonmonetary transactions should be based on FV's? Either asset surrendered or asset received, whichever is more clearly determinable?
A189. True
190
Q190. When are the 3 times nonmonetary exchanges should be based on recorded amounts?
A190. 1. Can't tell either FV 2. Trans is an exchange of a product or property held for sale in the normal course of business for a prod or prop to be sold in the same line of business to facilitate sales to customers. 3. Trans lacks comm substance
191
Q191. How is a nonreciprocal transfer recorded?
A191. At FV, G or L should be recognized on the disposition of the asset.
192
Q192. How are donated assets recorded?
A192. At FV along with any incidental costs incurred. When received from government entity , no inc is recognized, off setting CR is to an OE acct. Additional-PIC-Donated Assets
193
Q193. What's the diff btw Group & Composite depreciation?
A193. 1 Group-Assets have similar service lives, no G or L's recognized, CR asset DR ad for same amount less any proceeds received in disposition. 2. Composite-have a wider range of service lives. Determined by calculating the annual depreciation expense for each asset, adding them up, and putting as a % of total cost of assets.
194
Q194. What are the 3 methods of fractional year depreciation?
A194. 1 Depreciation for one year in the year of acquisition & none in year of disp. 2 Half year depreciation in year of acquisition & disp. 3 Proportional Depreciation
195
Q195. Formula for Sum of the years digits depreciation?
A195. HC-SV x Fraction for year
196
Q196. When reclassifying an asset, do you use BV or FV as new amount?
A196. Going from Held For Sale to Held & Used reclass will be lower of: FV at date that asset is reclassified or BV before being classified as held for sale, adjust for any depreciation (amortization) that would have been recognized had the asset been originally held & used.
197
Q197. What's the formula for DDB depreciation?
A197. 2 / EUL x (HC-AD) or (BV)
198
Q198. What's the formula for variable charge depreciation?
A198. Depreciation expense = HC - SV / Total Expected Output or usage x current output or usage
199
Q199. What are the 3 categories of impaired assets?
A199. 1 Held for sale 2 Assets Held for use 3 Disposals other than by sale
200
Q200. Journal entries : 1. to collect royalties - B/S only 2. to recognized earned royalties - I/S impact
A200. DR Cash CR Unearned Royalties 2 DR Unearned Royalties CR Earned Royalties
201
Q201. ORGANIZATIONAL EXPENSES are ______________ as an intangible asset; they are_____________immediately.
A201. NOT CAPITALIZED EXPENSED
202
Q202. When testing a fixed asset or and intangible asset with a FINITE LIFE for impairment 1. Determine the impairment - use __________ 2. Amount of impairment - use
A202. 1. Undiscounted future net CF 2. fair value (FV) or discounted (PV) future CF
203
Q203. When testing a fixed asset or and intangible asset with a INDEFINITE LIFE for impairment perform __________ test. Amount of impairment =
A203. ONE-STEP Carrying Value - FAIR VALUE
204
Q204. The impairment loss is reported as a component of ___________
A204. INCOME STATEMENT FORM CONTNUING OPERATION
205
Q205. B/S presentation of DEFERRED GROSS PROFIT DEFERRED GROSS PROFIT is _____________
A205. A/R less DEFERRED GROSS PROFIT ----------------------------------------------- balance is a CONTRA RECEIVABLE
206
Q206. You will be able to easily remember approximately 85% of the adjustments made to the operating activities section under the INDIRECT METHOD by remembering the mnemonic CLAD
A206. Current assets and liabilities Losses and Gains Amortization (BONDS) and Depreciation Deferred Items + CA(decrease) - CA (increase) - CL (decrease) + CL (increase) + Losses/ - Gains + Amortization (BONDS) and Depreciation
207
Q207. COGS = given Sales and GMR
A207. GMR = (SALES - COGS) / SALES = SALE/SALES - COGS/SALES =1- COGS/SALES => COGS = SALES X (1- GMR)
208
Q208. GMR=
A208. SALES - COGS -------------------------- SALES
209
Q209. Dollar-value LIFO inventory =
A209. end of PY INVENTORY + CY layer x PRICE INDEX PRICE INDEX = INVENTORY at CY COST / INVENTORY at PY COST
210
Q210. IF Replacement cost is < Market ceiling but > Market floor => to calculate End Inventory?
A210. EI = # units x REPLACEMENT COSTS
211
Q211. ROA - return on assets=
A211. NET INCOME/ AVERAGE ASSETS AVERAGE ASSETS = .5 X (BEGINIG ASSETS+ ENDING ASSETS)
212
Q212. DEFERRED GROSS PROFIT =
A212. DEFFERRED REVENUE ( installment receivables) X GP rate GP rate= (sale - COGS) / sale
213
Q213. SALES before sales Tax =
A213. sales revenue / (1 + tax rate)
214
Q214. If the WARRANTS are detachable, the proceeds from the bonds issue must be allocated between the bonds and the warrants (under STOCKHOLODER'S EQUITY) on the basis of ____________ Stock warrants outstanding is reported under S/H's Equity and will be tranferred into _______ when warrants are _______ .
A214. FAIR MARKET VALUES J/E DR Cash - Face x MRate CR Stock warrants outstanding (bonds outstanding x # of warrants per bond x Market price per warrant) CR Bond payable - FV DISCOUNT DR/ PREMIUM CR - plug APIC when warrants are exercised.
215
Q215. ACCOUNTING FOR INSTALLMENT SALES FORMULAS 1. Gross profit = 2. Gross profit % = 3. Earned Revenue = 4. Deferred Revenue =
A215. 1. Sale - COGS 2. Gross profit / Sale 3. Cash collections x Gross Profit % 4. Installment receivable x Gross Profit %
216
Q216. Carrying value of note receivable =
A216. ANNUAL PAYMENT X PV of ORDINARY ANNUITY FACTOR
217
Q217. Present Value of a N/P =
A217. MATURITY AMOUNT x PV factor MATURITY AMOUNT = Principal + Interest INTEREST = Principal x % x # of periods
218
Q218. The Interest income reflect the Effective interest rate applied to the ____________ received. Credit Interest Income =
A218. NET PROCEEDS = Net proceeds x % x periods
219
Q219. Impairment loss on long-lived assets should be recognized when _________
A219. THE CARRYING AMOUNT EXCEEDS THE undiscounted FUTURE CASH FLOWS
220
Q220. How to calculate the UNITS-OF-PRODUCTION Depreciation ?
A220. COST less SALVAGE V / EXPECTED UNITS OF PRODUCTION X UNITS MANUFACTURED THIS YEAR
221
Q221. SFAS 115 Investments: 1. Trading, 2. Available-for-Sale Debt Securities 3. Held-to-Maturity Debt Securities Reported on B/S as ___________ securities at______ value, unrealized G/L reported on __________ , type of Cash Flow__________
A221. 1. as CURRENT ASSETS, FAIR VALUE, INCOME Statement, OPERATING 2. CURRENT or NONCURRENT, FAIR VALUE, Other Comprehensive Income ( PUFE), INVESTING 3. CURRENT or NONCURRENT, AMORTIZED COST, NONE, INVESTING
222
Q222. The investor receiving stock rights must allocate a portion of the purchase price of the investment that "carried" the rights. STOCK RIGHTS will be reported on the B/S as ____________ (how to calc.) Issuance of warrants - ____________ Warrants are exercised - _______ is increased, no effect on ________ Stock RIGHT - gives you a right to purchase additional stock in accordance with terms of the instrument. Stock WARRANT - evidence of the ownership of stock rights.
A222. = COST OF THE STOCK ACQUIRED × ( STOCK RIGHT MARKET VALUE / (STOCK MV+ STOCK RIGHT MARKET VALUE)) Issuance of warrants - MEMO Warrants are exercised - APIC is increased, no effect on NI
223
Q223. Future Value of a SINGLE DEPOSIT after # period =
A223. 1/ PRESENT VALUE OF $1 for that period times $$$$ deposited
224
Q224. INTEREST ON THE NOTE is classified as ___________; this is NOT part of _____________ of the LONG-TERM debt. Only ___________ portion is.
A224. INTEREST PAYABLE CURRENT MATURITIES PRINCIPLE
225
Q225. Deferred ( Unearned) Revenue ( a liability) is created at the time ____________ PAYABLES are recognized when ______ is delivered
A225. CASH IS RECEIVED ORDER
226
Q226. When an entity is classified as HELD-for-SALE , the unit must be written down to the __________ , so a _______ loss shall be recognized for the initial write- down at the _______ date . G/L from operations are recognized in the period __________ G/L ON SALE of a segment is not recognized until ____________
A226. FV impairment loss, DECISION DATE IN WHICH THEY OCCUR the sale actually TAKES PLACE
227
Q227. Book value per C/S=
A227. Common shareholders' Equity ______________________________ Common shares outstanding
228
Q228. Common shareholders' Equity=
A228. Total S/Holders Eq (Assets -Liabilities) - Preferred stocks outstanding ( at greater call or par) - Cumulative preferred dividend in Arrears _________________________ Common shareholders' Equity Book value per C/S= Common shareholders' Equity/ Common shares outstanding
229
Q229. SUBSCRIPTION OF STOCK is recorded as
A229. Contra Equity, No Total Equity Change
230
Q230. Revenue received in advance is recorded as _____________
A230. LIABILITY
231
Q231. Patent is amortized over the shorter of its ___________ or ____________. What method should be used?
A231. ESTIMATED LIFE or REMAINING LEGAL LIFE Straight line
232
Q232. LEGAL FEES to obtain Intangible assets are ___________
A232. CAPITALIZED
233
Q233. Calculation of Goodwill 1. purchase of assets 2. purchase of equity Costs associated with maintaining Goodwill are ___________
A233. 1. Cost - tangible assets - identifiable intangible assets 2. Stock price - FMV of the net assets purchased EXPENSED
234
Q234. R&D costs are __________ as General rule Materials, equipment and facilities are __________ if they have alternate _____________
A234. EXPENSED CAPITALIZED FUTURE USES
235
Q235. IMPAIRMENT The carrying amounts of Intangibles (GW) and Fixed assets held for use and to be disposed of need to be reviewed _____________ or __________ indicate that the carrying amount may not be recoverable.
A235. AT LEAST ANNUALLY WHENEVER EVENTS OR CHANGES
236
Q236. The COMPLETED-CONTRACT METHOD recognizes income only __________
A236. ON COMPLITION OF THE CONTRACT
237
Q237. The COMPLETED-CONTRACT METHOD ____________ ACCOUNTS (type) 1 A/R 2 Cost of uncompleted contracts in EXCESS of billings 3 Billings on uncomleted contacts in EXCESS of cost
A237. 1 and 2 - Current assets 3 - Current liability
238
Q238. Payment made at the beginning of a period is what type of annuity?
A238. ANNUITY IN ADVANCE
239
Q239. What type of the annuity is payable at the end of each period.
A239. ORIGINAL ANNUITY
240
Q240. What type of the annuity is payable at the BEGINNING of each period.
A240. ANNUITY DUE
241
Q241. When an account is written off, BOTH A/R and Allowance for uncollectible accounts are _________
A241. DECREASED
242
Q242. 1. Make a journal entry to recognize periodic uncollectible accounts expense and provide allowance 2. To write off uncollectible account
A242. 1 Bad debt expense Dr ____ Allowance for uncollectible accounts CR 2 Allowance for uncollectible accounts DR _______ Accounts Receivable CR
243
Q243. Current receivables acquired as a result of Customary trade terms are normally reported at ____________ value Long-term receivables are reported at their ______ value.
A243. FACE VALUE PRESENT VALUE
244
Q244. The effective interest rate is based on the ________ rate.
A244. Original CONTRACTUAL RATE
245
Q245. The interest income reflects the EFFECTIVE INTEREST RATE applied to the ___________ received.
A245. NET PROCEEDS
246
Q246. Rent revenue is recognized on a _________ basis, regardless of the payment schedule Rent RECEIVABLE =
A246. 1. STRAIGHT-LINE 2. Rent Revenue less Cash received
247
Q247. Goods out on Consignment remain the property of the ________and must be included on the consignor's BS at _________
A247. Consignor COST
248
Q248. _________ risk occurs when the amount of an accounting loss exceeds the amount of the associated asset or liability recorded on the BS.
A248. OFF-BALANCE SHEET RISK
249
Q249. The lower of cost or market approach requires comparison of the "designated market" with cost. __________ is replacement cost as long as it is lower than the net realizable value of the inventory and higher than the net realizable value of the inventory reduced by a normal profit margin.
A249. The designated market = Replacement cost
250
Q250. Under the PERIODIC METHOD, the ending inventory is priced at the ___________ prices during the year.
A250. EARLIER
251
Q251. In order for replacement cost to be reported as the lower of cost or market, REPLACEMENT COST would have to 1 and 2.
A251. 1. be lower than original cost 2 to fall below net realizable value minus a normal profit margin
252
Q252. The FIFO Perpetual inventory method will produce _________ ending inventory as the FIFO Periodic method.
A252. THE SAME
253
Q253. __________inventory system calculates COGS as the difference between cost of goods available for sale and ending inventory. This system does not maintain records indication what the amount of __________ inventory SHOULD BE.
A253. PERIODIC INVENTORY SYSTEM ENDING
254
Q254. The advanced commissions are simply a prepayment of future commissions expense. It should be charged to prepaid commissions and then to SELLING expense, NOT to ________ costs
A254. INVENTORY
255
Q255. "Market " upper limit = "Market " lower limit = If REPLACEMENT COST is less than market lower limit -
A255. = NET REALIZABLE VALUE = selling price - processing costs = NET REALIZABLE VALUE - NORMAL PROFIT MARGIN -> Market= the lower limit; now Inventory is valued at LOWER Market or Cost
256
Q256. In the period of rising prices, changing from FIFO to LIFO will cause ending inventory to ___________ COGS to ______________ Net Income to ____________
A256. DECREASE INCREASE DECREASE
257
Q257. The overstatement of ENDING inventory results in an __________ of COGS => ___________ of Gross Profit ___________ of NI
A257. UNDERSTATEMENT OVERSTATEMENT UNDERSTATEMENT
258
Q258. INDEX for Dollar-value LIFO at current year =
A258. CY INVENTORY at current year cost / CY INVENTORY at base-year cost BASE YEAR - is the year in which Dollar-value LIFO is adopted
259
Q259. The LOWER of COST OR MARKET rule will not apply if: 1,2
A259. 1 The subsequent sales price of an end product is not affected by its market value OR 2 The company has a firm price contract
260
Q260. Under GAAP, _________ value is the median of an inventory item's replacement cost, its market ceiling, and its market floor.
A260. MARKET
261
Q261. ________ cost is the cost to purchase these items of inventory as of the valuation date.
A261. REPLACEMENT
262
Q262. The EQUITY METHOD is a special accounting treatment for investments in Equity Securities used ONLY when the investor : 1___________, 2(consolidate???)_________ Dividends received from the investee __________ of the investment.
A262. 1. can exert significant influence OR control over the investee ( usually 20% - 50% of ownership) 2. does NOT consolidate the F/S of the Subsidiary 3. REDUCE the carrying amount
263
Q263. The SEC requires reporting public Corporations to use EQUITY METHOD for all investee corporations owned ___________ or more. OR If below required %, but exist the ability to ___________
A263. 20% EXERCISE SIGNIFICANT INFLUENCE
264
Q264. Under the EQUITY METHOD : 1. Investment at acquisition = 2. Investment = 3. Investment Revenue = 4. The cash dividends are Not included in the INVESTOR'S INCOME, but rather they __________ under the Equity method.
A264. 1 = COST 2 = COST + Share of earnings - Share of Dividends - Adjustment to after-acquisition income of investee 3 = Share of earnings - Adjustment to income of investee 4. Reduce the investment
265
Q265. A sale of a Security from any category results in a Realized G/L and is reported on the I/S. Record JE. 1. Trading 2. A-for-sale
A265. 1. DR Cash CR Trading Sec CR Realized Gain (IDEA) 2. DR Cash DR Unrealized Gain on A-for-Sale Security (PUFE) CR A-for-sale Sec CR Realized Gain (IDEA)
266
Q266. What amount should be reported on the B/S related to BOND SINKING FUND REQUIREMENTS, given : Bond sinking fund PY balance Admin. cost Interest Revenue Dividends on Investment Carrying amount of bonds payable Additional Investment CY
A266. Bond sinking fund PY balance + Interest Revenue + Dividends on Investment + Additional Investment CY - Admin. cost ------------------------------------------------- Bond Sinking Fund Balance CY
267
Q267. The transfer of a security between categories shall be accounted for at __________ 2. transfer FROM the TRADING - affect on earnings? 3. transfer INTO the TRADING - affect on earnings?
A267. 1. FV 2. NO AFFECT 3. the Unrealized holding G/L shall be recognized in earnings immediately
268
Q268. When an investee has outstanding Cumulative Preferred stock, and investor should compute its share of earnings (losses) after deducting the investee's -----------------------------, whether or not such dividends are declared
A268. preferred dividends
269
Q269. A Co. using the Equity Method to account for an invesment received stock dividend. Its REVENUE ______________
A269. NO CHANGE
270
Q270. Equity Method reporting of investment If the FV of assets was > than BV at the purchase date -> record Investment income
A270. % x Investee's income less (% x excess $$$ of FV over BV) over the life of the asset
271
Q271. Good Will =
A271. Purchase price less (FV of assets - FV of liabilities) __________________ GW
272
Q272. SFAS 159 list items that are NOT eligible for the FV ELECTION
A272. An INVESTMENT and/or INTEREST which are required to CONSOLIDATE Employers' and plans' obligations for pension benefits, postretirement benefits Financial assets/liabilities under LEASES DEPOSIT LIABILITIES withdrawable on demand Financial instruments that are classified as a COMPONENT OF Shareholder's Equity
273
Q273. SFAS 159 list items that are eligible for the FV ELECTION
A273. Financial assets and liabilities A firm commitment that would otherwise not be recognized ( forward purchase contract) A written loan commitment The rights and obligations under an insurance contract that is not a financial instrument, but can be settled by paying a third party to provide those goods or services The rights and obligations under a warranty, but can be settled by paying a third party to provide those goods or services
274
Q274. SFAS 2 Accounting for Research and Development Costs, provides that research and development costs be ___________ Cost of registering the patent should be ____________ over the __________
A274. expensed when incurred CAPITALIZED AND AMORTIZED over the ECONOMIC LIFE
275
Q275. Costs incurred to develop software for INTERNAL use are ____________ after the _____________ development stage is reached
A275. CAPITALIZED APPLICATION
276
Q276. The annual amortization of the SOFTWARE COSTS shall be the greater of the amount computed using 1. 2.
A276. 1. the sale ratio 2. the straight-line amortization = 1/ life of asset
277
Q277. Impairment of GW is a 2step process:
A277. 1. compare: a) year-end FV of asset b) carrying amount including GW IF (b) > (a) => go to step 2; otherwise NO IMPAIRMENT Step 2: a) calc. implied FV of GW b) carrying amount of GW IF (b) > (a) =>IMPAIREMENT = (b) - (a) NOTE: loss cannot exceed the recorded GW
278
Q278. Dividends in ARREARS are NOT ______________ until actually DECLARED. Thus, ___________ need to be made in the notes or on the face of the B/S
A278. AN ACCRUED LIABILITY DISCLOSURE
279
Q279. A SHORT-TERM obligation should be excluded from Current liabilities if: after the date of B/S but before that B/S is issued, a Long-term obligation or Equity security have been issued for the purpose of ______________
A279. REFINANCING THE SHORT-TERM OBLIGATION ON A LONG-TERM BASIS
280
Q280. FICA is paid by _____________ and is = Fed tax is paid by ________ and is included in ___________
A280. EMPLOYER = % X GROSS WAGES EMPLOYEE GROSS WAGES
281
Q281. Deferred Gain on LEASEBACK Capital lease =
A281. SALES PRICE - CARRYING AMOUNT
282
Q282. GROSS MARGIN is also known as __________
A282. gross profit
283
Q283. Record AJE for dividends received in excess of earnings subsequent to the date of investment and are recorded as reduction of cost of the investment. This is __________ method of accounting for the investments.
A283. DR Cash CR Dividend income CR investment in CO COST
284
Q284. Under COST METHOD the cash dividends received are reported as ___________ Under EQUTY METHOD the cash dividends received are reported as ___________
A284. DIVIDEND INCOME REDUCTION TO INVESTMENT ACCOUNT
285
Q285. Deferred income tax liabilities that will reverse are ___________ liabilities
A285. NONCURRENT
286
Q286. Creditor losses on a restructuring are calculated based on ____________ Debtor's gains are calculated based on ______________
A286. PRESENT VALUES UNDISCOUNTED FUTURE CASH PAYMENTS INCLUDING INTEREST
287
Q287. A SERVICING asset or liability shall be amortized in proportion to and over the period of ____________-
A287. ESTIMATED NET SERVICING INCOME or NET SERVICING LOSS
288
Q288. Face value of the bond = 1,000,000 Discount = 150,000 Yield/Market rate = 12%, Stated rate = 8% Calculate : 1.Carrying amount at issue date or Purchase price 2. Amortization of DISCOUNT using Straight-line and 3. Amortization using Effective interest rate. 4. Carrying amount at Year-end
A288. 1.Carrying amount at issue date or Purchase price = Face - discount 2.Amortization of discount using Straight-line = discount / years to maturity 3.Amortization of discount using Effective interest = Yield rate x Carrying amount less Stated rate x Face value 4a.Carrying amount at Year-end using Straight-line = Carrying amount at issue date + SL amortization of a DISCOUNT ( - SL amortization of a PREMIUM) 4b.Carrying amount at Year-end using Effective interest = Carrying amount at issue date + EI amortization of a DISCOUNT ( - EI amortization of a PREMIUM)
289
Q289. To determine the issue price of a bond , the cash flow from the bond should be discounted at the ___________ rate. The cash flows include the principal repayment and interest payments calculated at ___________ rate. 3. The net proceeds= _______________
A289. 1. YIELD or MARKET RATE 2. STATED RATE 3. ISSUE PRICE LESS THE COST TO ISSUE THE BONDS
290
Q290. CONVERSION OF DEBT TO EQUITY Using the book value method, the carrying value of the debt ( bonds) is removed and is replaced by Stockholder Equity in exactly the same total amount Record the JE:
A290. Bonds payable DR Premium on bonds DR/ Discount on bonds CR Common stock ( par x # of shares) CR Additional paid-in capital CR
291
Q291. Term bonds are bonds which are scheduled to be outstanding for ____________
A291. fixed period or TERM
292
Q292. A transfer of financial assets in which the transferor surrenders control over those financial assets, shall be accounted for as a sale to the extent that consideration other than ____________ in the transferred assets is received in exchange.
A292. BENEFICIAL INTERESTS
293
Q293. INTEREST EXPENSE at EFFECTIVE INTEREST RATE for 2 months=
A293. Carrying value of the bonds x Effective interest rate x Time period
294
Q294. Debentures are ____________
A294. UNSECURED BONDS
295
Q295. The amount of cash received by a BONDHOLDER (INVESTOR) at regular interest payment intervals throughout the life of the bonds will always be at ________ rate applied to the __________ of the bond.
A295. STATED RATE FACE AMOUNT OF THE BOND.
296
Q296. DEFEASANCE is a privision found in some debt agreements whereby the contract is ___________
A296. NULLIFIED if specified acts are performed
297
Q297. ARO is ______________. SFAS 143 requires the initial ARO liability to be recorded at its _______ and is amortized. JE Cr__Dr?
A297. Asset Retirement Obligation PRESENT VALUE Dr ASSET __Cr LIABILITY
298
Q298. The ENTIRE _______ and __________ for warranty are recognized in the year in which the warranted product ____________ The warranty expenditures incurred in the year result in a reduction of the _____________
A298. LIABILITY AND EXPENSE IS SOLD ESTIMATED WARRANTY LIABILITY J/E is Warranty expense DR Estimated warranty liability CR Tor record the warranty expenditures: Estimated warranty liability DR Cash CR
299
Q299. Under EQUITY METHOD in accounting for the investment, the DIVIDENDS received are ___________, they are treated as a form of _____________
A299. NOT INCOME RETURN OF INVESTMENT
300
Q300. The contract to purchase a fixed amount of merchandise from the supplier at a 10% discount should be shown as a ___________ for the amount of the 10% discount on the fixed amount.
A300. DEFFERED CHARGE (prepaid purchase)
301
Q301. If the Fair value of the asset approximated the balance due on the NOTE, neither the Debtor not the Creditor records _______ or ________ on the settlement of the debt. However, the debtor MUST record _____ on the DISPOSAL of the asset.
A301. GAIN or LOSS G/L
302
Q302. Face value of the bond X ( Stated Rate - Market Rate) ----------------------------------------- ????
A302. bonds Discount or Premium
303
Q303. The associated asset Retirement costs are ________ as part of the carrying amount of the long-lived asset. The obligations associated with the Retirement at the end of life should be recorded as _______ JE.
A303. CAPITALIZED DR ASSET -----CR LIABILITY
304
Q304. ________ liabilities also include long-term obligations that are or will be CALLABLE by the creditor because the debtor has __________a covenant in debt agreement.
A304. CURRENT violated
305
Q305. Employer's payroll tax LIABILITY __________ amounts withheld from employee pay. The balance at the bank for payment should _________ amounts withheld from employee pay.
A305. do not include INCLUDE
306
Q306. RE-ISSUANCE OF THE TREASURY STOCK has no affect on ________, EXCEPT if reacquisition cost is > than original issue price
A306. R/E
307
Q307. Book value per C/S=
A307. Common shareholders' Equity ____________________________ Common shares outstanding
308
Q308. Common shareholders' Equity=
A308. Total S/Holders Eq (Assets -Liabilities) - Preferred stocks outstanding ( at greater call or par) - Cumulative preferred dividend in Arrears _________________________ Common shareholders' Equity
309
Q309. The reacquisition of outstanding shares at a price less than their book value per share causes the book value per share of the remaining outstanding shares to _____________
A309. INCREASE
310
Q310. _____________ is an increase in equity ( net assets) in excess of par or stated value arising from transactions involving the enterprise's own stock. It is part of ______________, but not part of _______________
A310. APIC S/H's EQUITY, but not R/Earnings
311
Q311. JE for Reacquisition of C/S using COST method JE for Reacquisition of C/S using PAR VALUE method
A311. DR TREASURY SHARES --------- CR CASH DR TREASURY SHARES at par value DR APIC for # share acquired X (original price - par value) DR R/E plug _________ CR CASH
312
Q312. Under the partnership agreement, each partner has an _______ initial capital balance accounted for under the ________ method.
A312. EQUAL GOOD WILL
313
Q313. Statement of R/E How to calc. R/E?
A313. CY Net Income + Beginning R/E - Dividend Declared +/- ideA _________________ R/E A counting principal change
314
Q314. If the WARRANTS are detachable, the proceeds from the bonds issue must be allocated between the bonds and the warrants (under STOCKHOLODER'S EQUITY) on the basis of ____________ Stock warrants outstanding is reported under S/H's Equity and will be transferred into _______ when warrants are _______ .
A314. FAIR MARKET VALUES J/E DR Cash - Face x MRate CR Stock warrants outstanding (bonds outstanding x # of warrants per bond x Market price per warrant) CR Bond payable - FV DISCOUNT DR/ PREMIUM CR - plug APIC when warrants are exercised.
315
Q315. The excess of the subscription price over the stated value of the NO PAR common stock should be recorded as APIC when the subscription is ____________
A315. RECORDED
316
Q316. Stock dividends are accounted for by reclassifying a portion of ______as contributed capital. They do not reduce assets or increase liabilities. Therefore, total stockholders Equity is ___________--
A316. R/E % stock dividend at FMV NOT CHANGED
317
Q317. Restructuring of the Debt using Cash and C/S Calc. Gain on restructuring Calc. change in S/H Equity
A317. $$$$ of debt - Cash paid - C/S at FMV ____________ Gain on restructuring Gain + C/S at FMV __________________________________ Change in S/H Equity of the debtor
318
Q318. LIQUIDATING DIVIDENDS are a return __________ rather than a return _____ investment The liquidating dividend is that portion of the cash dividend that ___________ the balance in R/E
A318. OF THE INVESTMENT ON THE EXCEEDS
319
Q319. J/E to record the declaration of the stock dividend
A319. R/E ( shares outstanding x $ per share on that date x % dividend) DR COMMON STOCK DIVIDEND ( shares outstanding x $ par value x % dividend) CR APIC ( difference) CR
320
Q320. R/E is reduced and Dividend liability is recorded on the date of dividend ___________
A320. DECLARATION
321
Q321. The entry under the par value method _________ APIC
A321. REDUCES
322
Q322. SALAVAGE value is not used in calculating ___________ using ________ method of depreciation. BUT the asset cannot be depreciated below __________
A322. DEPRECIATION EXPENSE DOUBLE-DECLINING METHOD SALVAGE VALUE
323
Q323. The ROYALTIES should be recognized as revenue in the period ___________
A323. EARNED
324
Q324. the Gain/Loss from the settlement of the lawsuit would be properly included in ________________
A324. INCOME FROM CONTINUING OPERATIONS
325
Q325. For a LESSEE (me) the last month's rent is capitalized as _________ and expensed the last month of the lease term. The refundable SECURITY DEPOSIT IS___________
A325. PREPAID RENT AN ASSET
326
Q326. The proceeds from a life insurance policy held by Corp. on the offecer LESS the ____________ should be reported by Corp as a GAIN REVENUE
A326. Carrying amount (CASH SURRENDER VALUE)
327
Q327. Sales should be adjusted for the expected ___________ ONLY as an allowance __________ sales
A327. RETURNS REDUCING
328
Q328. Under the cost method, dividends are recognized as Income when ___________
A328. RECEIVED
329
Q329. Cash revenue =
A329. Cr sale + Cash sale - discounts + A/R decrease - A/R increase
330
Q330. Depletion per unit = Depletion in the C/Y =
A330. Capitalized cost / Total estimated units economically recoverable Depletion per unit x units extracted in C/Y
331
Q331. DEFFERED GROSS PROFIT =
A331. Cash to be collected x Gross Profit Rate
332
Q332. The cash surrender value of a whole-life insurance policy represents an amount that __________________________ = to If the company is both the OWNER and BENEFICIARY of the policy, the cash surrender value is an ______________ to the Co.
A332. can be recovered if the policy is canceled. ASSET = Annual premium less Expense
333
Q333. How to calc. INTEREST INCOME on the NO % N/P for $$$
A333. INTEREST INCOME= PV OF $$$ x Current Interest Rate
334
Q334. Rate of Return on assets
A334. Net income / Average assets
335
Q335. A COMPLETED-CONTRACT METHOD is method of accounting for lont-term contracts under which Income is recognized only in ______________ COSTS are recorded as ASSETS or LIAB
A335. THE YEAR OF COMPLITION COST (BILLINGS) _______________________________ ASSET or (LIABILITY)
336
Q336. Under the Completed- contract method The Profit is ________ The Loss is __________ on the F/S
A336. Not reported RECOGNIZED IMMEDIATLY TOTAL COST (CONTRAC PRICE) _________________ GAIN / (LOSS)
337
Q337. COMPOSITE (dissimilar assets) and GROUP ( simmilar assets ) methods of depreciation are based on __________ type of Depreciation
A337. S/L
338
Q338. How to calc profit/loss on PERCENTAGE-OF-COMPLITION METHOD?
A338. % COMPLETED = TOTAL COST/ ESTIMATED COSTS X CONTRACT PRICE (CY COSTS) __________________ GROSS PROFIT if LOSS - the entire amount is recognized
339
Q339. Gross profit rate =
A339. (Sale - Cost) / Sale
340
Q340. JE by DEBTOR on liquidation of debt though transfer of asset
A340. DR NOTE PAYABLE DR LOSS on transfer ( FMV less CV of asset) --------- CR ASSET at CV _____ CR Extraordinary gain - restructure of debt (N/P less FMV of asset)
341
Q341. Transportation to consignee is ( included/excluded from) ___________
A341. included in COGS
342
Q342. % of completion Year 3 income =
A342. (Total cost incurred to date / total estimated cost) x GP less Income recognized in prior years
343
Q343. Under the cost method, dividends are recorded as income (revenue) when the dividends is
A343. DECLARED
344
Q344. The liquidating dividend is recorded as ________________
A344. return OF INVESTMENT it is NOT income
345
Q345. What's a plan asset actual return?
A345. This component of net periodic pension cost reduces the pension cost for the period. It is based on the FV of plan assets at the beginning & end of the period, adjust for contributions & benefits paid.
346
Q346. What's interest cost?
A346. The increase in the PBO due to the passage of time. The interest rate to be used in the calculation is the rate at which the pension benefit could be effectively settled. (assumed disc rate)
347
Q347. What's G or L's on Plan Assets?
A347. The diff btw the actual return on assets during the period & the expected return on assets for the period.
348
Q348. What's service cost?
A348. The actuarial PV of benefits attributed by the pension benefit formula to the employee's service during the period.
349
Q349. What's prior service cost amortization?
A349. This is the spreading of the cost of retroactive benefits generated by a plan amendment that granted increased benefits based on service rendered in prior periods.
350
Q350. What's the purpose in defined benefit plan reporting?
A350. To provide a measure of pension cost that reflects the terms of the underlying plan & recognizes the compensation cost of an employees pension benefits over the employees approximate service period.
351
Q351. What's actuarial present value?
A351. The value, as of a specified date, of an amount or series of amounts payable or receivable thereafter, with each amount adjusted to reflect 2 things. 1. The time value of money 2. The probability of payment btw the specified date & the expected date of payment.
352
Q352. What is Attribution? Attribution period starts _________and ends _________; NOT when __________, when__________.
A352. The process of assigning benefits or costs to periods of employee service. Attribution period starts FROM THE DATE OF HIRE and ends AT FULL ELIGIBILITY DATE; NOT when RETIRED, when PAID.
353
Q353. What is Attribution?
A353. The process of assigning benefits or costs to periods of employee service. From date of HIRE to FULL ELIGIBILITY date
354
Q354. What is an annuity contract?
A354. A contract in which an insurance company unconditionally undertakes a legal obligation to provide specified pension benefits to specific individuals in return for a fixed consideration of premium.
355
Q355. What's a contributory plan?
A355. A pension plan under which employees contribute part of the cost. In some contributory plans, employees wishing to be covered must contribute, in other contributory plans, participants contributions result in increased benefits.
356
Q356. What are assumptions?
A356. Estimates of the occurrence of future events affecting pension costs, such as mortality, withdrawal, disablement & retirement, changes in compensation & national pension benefits, & discount rates to reflect the time value of money.
357
Q357. What is amortization?
A357. Systematic recognition in net pension cost over several periods of amounts previously recognized in OCI, that is, prior service costs or credits, G or L's, and any transition asset or obligation existing at the date of initial application of these standards.
358
Q358. What's an accumulated benefit obligation? ABO Use __________ salaries
A358. The actuarial PV of benefits (whether vested or not) attributed by the pension benefit formula to employee services rendered before a specified date and based on employee services & amp; compensation prior to that date. CURRENT AND PAST
359
Q359. What are retroactive benefits?
A359. Benefits granted in a plan amendment (or initiation) that are attributed by the pension benefit formula to employee services rendered in periods prior to the amendment.
360
Q360. What are Plan Assets?
A360. Assets (usually stocks, bonds, & other investments) that have been segregated & restricted (usually in a trust) to provide benefits. Plan assets include amounts contributed by the employer (and amounts by employees if contr plan ) & amounts earned from investing the contributions, less benefits paid.
361
Q361. What's the market relate value of plan assets?
A361. A balance used to calculate the expected return on plan assets. Market related value can be either FV or a calculated value that recognizes changes in FV in a systematic & rational manner not over more than 5 years.
362
Q362. What's the expected return on plan assets?
A362. An amount calculated as a basis for determining the extent of delayed recognition of the effects of changes in the FV of assets. The expected return on plan assets is determined based on the expected long-term rate of return on plan assets and the market-related value of plan assets.
363
Q363. What's a Projected Benefit Obligation? Use only _________ compensation salaries.
A363. The actuarial PV as of a date of all benefits attributed by the pension benefit formula to employee service rendered prior to that date. FUTURE
364
Q364. What's a Projected Benefit Obligation?
A364. The actuarial PV as of a date of all benefits attributed by the pension benefit formula to employee service rendered prior to that date.
365
Q365. What is a prior service cost?
A365. The cost of retroactive benefits granted in a plan amendment.
366
Q366. What's a funding policy?
A366. The program regarding the amounts & timing of contributions by the employer, participants, & any other sources, to provide the benefits a pension plan specifies.
367
Q367. What's a pension benefit formula?
A367. The basis for determining payments to which participants may be entitled under a pension plan. Pension benefit formulas usually refer to the employees service or compensation or both.
368
Q368. What is a defined benefit pension plan?
A368. A plan that defines an amount of pension benefits to be provided, usually as a function of one or more factors such as age, years of service, or compensation.
369
Q369. What is meant by offsetting liabilities & assets?
A369. The employers balance sheet reflects as a net amount the recognized values of assets contributed to a plan & the liabilities for pensions recognized as net pension cost of past periods.
370
Q370. What are benefits?
A370. Participant benefits are determined by: the amounts contributed to the participants accounts; returns earned on investments of contributions; & allocations of forfeitures of other participants benefits.
371
Q371. What is meant by delaying recognition of certain events?
A371. Changes in the pension obligation and changes in the value of assets set aside to meet those obligations are not recognized as they occur. They are systematically & gradually recognized over subsequent periods.
372
Q372. What is Net Pension Cost?
A372. NPC is the contribution called for by the plan for the period in which the individual renders services. If the plan calls for contributions for periods after the individual has rendered services, the cost should be accrued during the employees service period.
373
Q373. What is a defined contribution plan?
A373. Plans in which the terms specify how contributions to the individual participant accounts are to be determined. *Not the benefits to be received*
374
Q374. What is meant by reporting net cost?
A374. The net cost aggregates at least 3 items that might be reported separately for any other part of an entity's operations. 3 parts 1. Compensation Cost 2. Interest Cost resulting from deferring payment 3. Return from investing the assets
375
Q375. What are the 3 fundamental aspects that shape financial reporting in the application of accrual accounting to pensions?
A375. 1. Delaying recognition of certain events. 2. Reporting net cost 3. Offsetting Liabilities & Assets
376
Q376. What is an Unfunded Projected Benefit Obligation?
A376. The excess of the projected benefit obligation over the FV of plan assets.
377
Q377. What is the net periodic pension cost?
A377. The amount recognized in an employers f/s as the cost of a pension plan for a period.
378
Q378. What are the Net Periodic Cost components? (SIPPA)
A378. Service Cost, Interest Cost, Plan assets actual return, prior service cost, Actuarial G or L's
379
Q379. What's a vested benefit obligation?
A379. The actuarial PV of vested benefits.
380
Q380. The study on NON-FOR-PROFIT accounting focuses on several key issues 1 Classification of net Asset as (3 items) 2 Revenue RECOGNITION concepts related to unconditional 3 Distinguishing b/n restricted ________ and conditional _________ 4 Distinguishing b/n restricted ________ and the absence of ______________
A380. 1 UNRESTRICTED, TEMP. RESTRICTED, PERM. RETRICTED "PUT" 2. PLEDGES AND SUPPORT 3. REVENUE AND PLEDGES 4. REVENUE AND VARIANCE POWER
381
Q381. NON-FOR -PROFIT B/S is called ____________
A381. Statements of Financial Position
382
Q382. NON-FOR -PROFIT I/S is called ____________
A382. Statements of Activities
383
Q383. COMPONENTS of Statements of Financial Position are:
A383. ASSETS LIABILITIES NET ASSETS ( equity)
384
Q384. Internal board designated funds are considered ___________
A384. UNrestricted
385
Q385. NON-FOR -PROFIT "PUT" their assets in 3 categories
A385. PERMANENTLY restricted UNrestricted TEMPORARILY restricted
386
Q386. Net assets that are NOT RESTRICTED BY DONORS OF GRANTORS are reported as ___________
A386. UNrestricted
387
Q387. Pledges receivable are reported __________ uncollectible pledges.
A387. NET OF ESTIMATED
388
Q388. HEALTH CARE ORG. on the I/S if there is and item 1. NET ASSETS RELEASED FROM RESTRICTIONS - net impact on I/S ________ 2.NET ASSETS RELEASED FROM RESTRICTIONS used for operations -- net impact on I/S ________
A388. 1. 0 2. addition to revenue
389
Q389. Joint costs should be _________ b/n functions
A389. ALLOCATED
390
Q390. NON-FOR -PROFIT I/S SFAS req. that all Expenses are reported in the ________ category
A390. UNRESTRICTED
391
Q391. Contributions of UNRESTRICTED revenue later earmarked (board designated) for Contruction or purchase of long- lived Assets are classified as _________ on Statement of CF
A391. OPERATING
392
Q392. NON-FOR-PROFIT reporting CF statement has 3 classifications (same as FASB)
A392. OPERATING activities FANANCING activities INVESTING activities
393
Q393. NON-FOR-PROFIT reporting 1OPERATING activities 2FANANCING activities 3INVESTING activities
A393. 1 unrestricted resources, contributions, program income and interest/div income 2. borrowing and disbursement of RESTRICTED CONTRIBUTIONS ( purchase of long-lived assets) 3. proceeds from sale of art work, investment in equipment
394
Q394. NON-FOR-PROFIT reporting Raising $$ though borrowing is _______ activity Using $$$ to purchase Fixed assets is _______ activity
A394. 1. Financing 2. Investing
395
Q395. Unconditional pledges are __________ and may be either recognized as restricted or unrestricted. Conditional pledges are still subject to ___________ and are __________ as Revenue, but rather as __________
A395. ASSURED OF COLLECTIION IMPORTANT CONTINGENCIES NOT RECORDED, but LIABILITY
396
Q396. DONATED SERVICES should be reported as __________ and expensed at __________ if the services meet criteria _______ mnemonics
A396. CONTRIB. REV. at FV SOME
397
Q397. Contrib. of Services are recognized SOME of the time
A397. Specialized skills are req. Org. needs this Measurable Easily at FV
398
Q398. Expenses associated w/ finding Volunteers are classified as
A398. FUND-RAISING EXPENSE.
399
Q399. HEALTH CARE ORG. Revenues are classified by sources as (3)
A399. PATIENT SERVICE REV OTHER OPERATION REV NON-OPER REV and G/L
400
Q400. PATIENT SERVICE REV formula =
A400. Gross PATIENT SERVICE REV * _________________________ PATIENT SERVICE REV *DEDUCTIONS are adjustments and policy discounts
401
Q401. membership Development activities are SEPARATE from Fundraising activities when members receive ___________
A401. benefits
402
Q402. When restrictions are met on Restricted assets, they are shown as ______________ on the STATEMENT OF ACTIVITY ( I/S)
A402. Net assets released from restrictions, an increase in Unrestricted net assets
403
Q403. When $$$ are donated to NPO and the Principal of those funds cannot be EXPENDED ( used) those funds are _____________
A403. PERMANENTLY RESTRICTED
404
Q404. What's the diff btw net inc & comprehensive inc?
A404. Comprehensive is an expanded version of income that includes 4 types of gains & losses.
405
Q405. What are the 4 types of gains or losses that are included in comprehensive income?
A405. 1. Changes in market value of securities avail for sale 2. Gains, losses, & amendment costs for pensions and other postretirement plans. 3. Hedge transaction 4. Gains / losses from foreign currency exchange rates
406
Q406. What's a discontinued operation?
A406. Sale or disposal of a component of the entity.
407
Q407. Define extraordinary items & presentations?
A407. 1. Mat'l events 2. Unusual in nature 3. Infrequent in nature 4. Reported net of related taxes
408
Q408. What does EPS show?
A408. The amount of income earned by a company expressed on a per share basis.
409
Q409. What's the basic EPS formula?
A409. NI less preferred div / weighted average number of common shares outstanding for the time period
410
Q410. What is diluted EPS?
A410. Reflects the potential dilution that could occur for companies that have certain securities outstanding that are convertible into common shares or stock options that could create additional common shares if the options were exercised.
411
Q411. EPS should be reported separately for?
A411. 1. Income from continuing operations 2. Separately reported items 3. Net Income
412
Q412. What are the 2 methods to deal with when uncertainties about collectability exist & rev recognition is delayed.
A412. 1. Installment Sales Method 2. Cost Recovery Method
413
Q413. How does the Installment Sales Method work?
A413. It recognizes the gross profit by applying the gross profit percentage on the sale to the amount of cash actually collected.
414
Q414. How does the Cost Recovery Method work?
A414. Profit is not recognized until the seller has recovered all of the costs of the goods sold.
415
Q415. What is the receivables turnover ratio?
A415. Net Sales / Average Accounts Receivable
416
Q416. Whenever a ratio divides an inc statement bal by a balance sheet balance the denominator is always what?
A416. The average for the year
417
Q417. What is the average collection period ratio?
A417. 365 / receivables turnover ratio
418
Q418. What does the average collection period ratio tell us?
A418. An approximation of the number of days the average accts receivable balance is outstanding.
419
Q419. What is the inventory turnover ratio?
A419. COGS / Average Inventory
420
Q420. What is the average day's in inventory ratio?
A420. 365 / inventory ratio
421
Q421. What is the asset turnover ratio?
A421. Net Sales / Average Total Assets
422
Q422. What's the purpose of the asset turnover ratio?
A422. The ratio measures how efficiently a company utilizes all of its assets to generate revenue.
423
Q423. What is the Profit Margin on sales ratio?
A423. Net Income / Net Sales
424
Q424. What is the return on total assets ratio?
A424. Net Income / Average Total Assets
425
Q425. What's the purpose of the return on total assets ratio?
A425. Measures how well assets have been employed.
426
Q426. What is the return on equity ratio?
A426. Net Income / Average Shareholders Equity
427
Q427. What's the purpose of the return on equity ratio?
A427. Measures the ability of management to generate net income from the resources owners provide.
428
Q428. What is a liability?
A428. A liability represents OUTSIDER CLAIMS TO a firm's assets or are ENFORCEABLE CLAIMS FOR services to be rendered by the firm.
429
Q429. What are current liabilities measure at?
A429. The nominal amount necessary to extinguish the claim
430
Q430. What are noncurrent liabilities measure at?
A430. PV
431
Q431. The valuation of noncurrent liabilities represents a significant departure from the valuation basis used for most other accounts in the balance sheet. T or F
A431. True
432
Q432. Taken from FASB's conceptual framework, the definition of a liability includes what three key elements?
A432. a. Liabilities represent probable Future sacrifices of economic benefits. b. Liabilities are Obligations to transfer assets or provide services in the future. c. Liabilities are the Result of past transactions or events.
433
Q433. Is it necessary for the identity of the creditor,or the exact amount that will be paid, or the due date of the liability for it to be recognized in the accounts?
A433. No
434
Q434. How are liabilities presented on the balance sheet?
A434. In increasing order of maturity. Current liabilities presented first.
435
Q435. What is a Current Liability?
A435. DUE IN THE COMING YEAR or the operating cycle of the business, whichever is longer AND IS AN OBLIGATION TO BE MET BY the transfer of a current asset or the creation of another current liability.
436
Q436. What are Long-term Liabilities?
A436. Defined by exclusion. Those liabilities that do not meet the criteria of a current liability.
437
Q437. How is a serial bond liability classified?
A437. The amount due the following year is classified as a current liability in the balance sheet for the current year and is labeled: current maturities of long-term debt. The remaining portion is a noncurrent liability.
438
Q438. What is a Callable on Demand liability?
A438. This means that the debtor (borrower) must pay the debt if the creditor demands it to be paid.
439
Q439. How is a callable on demand liability classified?
A439. Current liability classification is required: If the liability is due on demand within one year of the balance sheet date, even though liquidation may not be expected. If the liability is due on demand because of a violation by the debtor of the terms of the debt agreement
440
Q440. Why is a liability callable on demand classified as current even if the due date is beyond one year from the balance sheet date?
A440. Because the debtor cannot control the payment date
441
Q441. How are long-term monetary liabilities initially recognized?
A441. At the PV of future cash flows.
442
Q442. What is the discount rate used to calculate PV of long-term monetary liabilities?
A442. The market rate on the date the liability was created
443
Q443. After the initial incurrence of a liability, how is the liability valued on the balance sheet?
A443. At the PV of remaining future cash flows
444
Q444. What is the discount rate used to determine the PV of remaining cash flows of a liability after the initial incurrence?
A444. The discount rate used for this determination is the market rate of interest on the date the liability was created.
445
Q445. What is the difference between the valuation at initial incurrence of the debt, and the valuation on later balance sheets, is the number of remaining cash flows and periods for computing the present value.
A445. The number of remaining cash flows and periods for computing the present value.
446
Q446. How is periodic Interest expense measured for liabilities?
A446. The product of: Beginning Bal for the pd and the market rate of interest on the date the liabilities was created
447
Q447. Interest expense may be different than cash interest payable. T or F
A447. True
448
Q448. What is a nonmonetary liability?
A448. One payable in services or non-monetary assets.
449
Q449. What are nonmonetary liabilities valued at on the balance sheet?
A449. At the market value of RESOURCES RECEIVED for both current and noncurrent liabilities.
450
Q450. What are current liabilities valued at?
A450. At the face amount or the amount due at maturity
451
Q451. What is the reason for current liabilities being measured at face amount or amount due rather than PV?
A451. Materiality. That is, the difference between the amount due at maturity and present value of future cash flows is immaterial.
452
Q452. Name the four definitely determinable liabilities.
A452. 1. Accounts Payable 2. Notes Payable Interest Bearing/Non- interest Bearing 3. Dividends Payable
453
Q453. Name the five liabilities typically related to adjusting entries.
A453. 1. Payroll Taxes 2. Property Taxes 3. Compensated Liabilities 4. Deferred Revenues 5. Sales Taxes
454
Q454. What are definitely determinable liabilities?
A454. Not dependent on some future event. The amount is determined by a current event or past transaction or event.
455
Q455. What is an accounts payable?
A455. Also called trade payables. Amounts owed to suppliers that provide goods or services to the company.
456
Q456. What is the time period for a typical accounts payable?
A456. 30 days Sometimes can be 45 or 60 days
457
Q457. When are accounts payable recognized on the balance sheet?
A457. At the time of purchase or the time services are rendered. For purchased merchandise, recognize at the time it's included in the buyer's inventory.
458
Q458. When should merchandise purchased be included in the company's inventory and recognized on the balance sheet?
A458. Depends on how products were shipped. If shipped FOB shipping pt - then recognize on the date it reached the shipping pt. If shipped FOB destination, then recognize on date it reached buyer's destination.
459
Q459. What distinguishes a notes payable from an accounts payable?
A459. For a notes payable, 1. The time period is extended 2. Notes have an interest element
460
Q460. What method should be used to amortize premiums and discounts for notes payable?
A460. Effective Interest method
461
Q461. What is an interest-bearing note payable?
A461. One in which the interest element is explicitly state.
462
Q462. What are long-term interest bearing notes are recorded at?
A462. The PV of cash flows, using the market rate of interest as the discount rate.
463
Q463. If the stated interest rate and the market interest rate are the same, what is true about the present value of future cash flows?
A463. It is equal to the face amount of the note.
464
Q464. If the stated interest rate and the market rate of interest are not equal, the present value of the future cash flows is not equal to the face amount of the note and a discount will be recorded. T or F
A464. True
465
Q465. How is the PV of future cash flows calculated?
A465. Face Amount x PVIF $1, no. pds, interest + Cash Interest Payment x PVIF ord ann or add due
466
Q466. How are cash interest payments calculated?
A466. Stated rate x Total Interest
467
Q467. What is the journal entry to record the initial incurrence of an interest bearing note?
A467. Debit: Asset or Expense Debit: Disc on NP Credit: Note Payable Note: The asset or expense is recorded at the PV of all future payments.
468
Q468. Under the gross method, notes payable is recorded at what amount?
A468. The face value
469
Q469. Under the gross method, discount on NP is recorded at what amount?
A469. Diff between Face Value and PV
470
Q470. What does an ordinary annuity mean?
A470. Interest payments are made at the end of the year
471
Q471. What is an annuity due?
A471. Interest payments start being made at the beginning of the year.
472
Q472. When there is an ordinary annuity, what is the journal entry for interest payments?
A472. Debit: Interest Expense Credit: Disc on NP Credit: Cash
473
Q473. What is the journal entry for interest payment of an annuity due?
A473. Debit: Interest Expense Debit: Premium Credit: Cash
474
Q474. Compare the journal entries for interest payments with a disc and premium.
A474. Cash for both entries are the same. The difference is in the amount charged to interest expense. A disc has more amount charged to interest expense because it was sold lower than the face amount and the thus cost of selling it at a lower amount is reflected in a higher interest expense. Whereas a premium charges less to interest expense because the note sold at a price higher than face value.
475
Q475. For the SL method, how are interest payments calculated?
A475. Tot interest amount x # months in pd/total # months
476
Q476. What is a non-interest bearing note?
A476. The interest element is not explicitly stated but rather is included in the face amount of the note.
477
Q477. Are there cash interest payments for throughout the note for non-interest bearing notes?
A477. No
478
Q478. What amount does the issuer (borrower) of the note receive in a non-interest bearing note?
A478. The PV of the note, not the face value.
479
Q479. What is the initial journal entry for recording a non-interest bearing note?
A479. Debit: Cash Debit: Disc NP Credit: NP Note: The borrower receives less than the face amount but has to pay back the entire face amount, which includes interest.
480
Q480. If the market interest rate is unknown, how is it calculated?
A480. PV/Face Amount. Then take that amount and look it up in the PV tables.
481
Q481. When is different about using the net method rather than the gross method?
A481. At the initial recording of the note, the asset and payable are recorded at the PV of the note. At interest payment dates: Debit: Interest Expense Credit: NP For a disc, NP is directly increased for the total interest payment amount rather than crediting Disc on NP.
482
Q482. How does amortization of a disc affect interest expense?
A482. Increases interest expense
483
Q483. How does amortization of a premium affect interest expense?
A483. Decreases interest expense
484
Q484. How do dividends affect retained earnings?
A484. All dividends reduce retained earnings and can be a distribution of earnings.
485
Q485. Do all dividends involve a distribution of assets?
A485. No
486
Q486. What dividends require recognition of a liability?
A486. Those dividends involving a distribution of assets
487
Q487. When does a liability occur for a dividend?
A487. When a dividend, that is a distribution of an asset, is declared.
488
Q488. What are the three relevant dates pertaining to dividends payable?
A488. Declaration Date Date of Record Payment Date
489
Q489. What is the declaration date in relation to dividends payable?
A489. The date the board of directors declares the dividend
490
Q490. What is the date of record in relation to dividends payable?
A490. A cut-off date. The shareholders of record on this date will receive the dividends.
491
Q491. What is the payment date in relation to dividends payable?
A491. The date the dividends are paid to shareholders.
492
Q492. What types of dividends are there?
A492. Cash Property Stock
493
Q493. Is there a journal entry needed on the Date of Record?
A493. No
494
Q494. What are the journal entries for recognizing and paying a cash dividend?
A494. At Declaration Date: Debt: RE Credit: Div Pay At Payment Date: Debt: Div Pay Credit: Cash
495
Q495. What are the journal entries for recognizing and paying a property dividend?
A495. At Declaration Date: Debt: RE Credit: Div Pay Debit: Asset Loss/Gain Asset * On the declaration date, the asset (property dividend) is written up or down to MV from BV. At Payment Date: Debt: Div Pay Credit: Asset
496
Q496. For a property dividend, what will be the net reduction in RE?
A496. Adjusted BV. The MV of the asset at the date of declaration.
497
Q497. What is the most common type property dividend distributed?
A497. Investment in securities of other companies
498
Q498. What is the value the property dividend is initially recorded at?
A498. The market value at declaration date.
499
Q499. Explain the net effect of property dividends on RE.
A499. RE is reduced by the MV of the asset distributed, but the gain or loss decreases or increases RE to a net amount equaling BV.
500
Q500. What is a stock dividend?
A500. A distribution of the issuing company's shares to its shareholders in proportion to each investor's existing holdings.
