FAR

Question 1

Discount on bonds payable reported as what on balance sheet

Answer 1

A debit balance liability

Question 2

Percent completion method

To calculate total costs you…

Answer 2

Total profit x (actual costs in the period of question/total costs)

Add costs incurred to date plus costs estimated to complete

Question 3

Change in accounting estimate affects these periods

Change in accounting principle does this:

Answer 3

Current and future

Shown as an adjustment to beginning balance of retained earnings on the retained earnings statement

Question 4

If there is a change in accounting estimate and it is inseparable from a change in accounting principle, you treat it as:

Answer 4

A change in estimate, which means a change prospectively as a component of income from
Continuing operations

Question 5

For changes in accounting principle (like weighted average to LIFO), adjust retained earnings how

Answer 5

By the difference as of the end of the prior year/beginning of this year amount

Question 6

Changes in accounting estimates affects which periods

Answer 6

Current and future. Does not affect prior periods nor will require any adjustment to retained earnings.

Question 7

If inventory is understated, what effect does that have on net income?

Answer 7

Net income will be understated also.

Question 8

OCI items include:

Answer 8

changes in funded status of a pension plan, unrealized gains/losses on AFS debt securities, foreign currency items, instrument specific credit risk, and effective portion of cash flow hedges

Question 9

Subsequent event period for a non-filer is the period at which:

If the entity is a filer, this changes the above by adding the additional criterion of:

Answer 9

The financial statement have been created in US GAAP compliant fashion AND all necessary approvals have been obtained

The subsequent event period extends to the point at which the financial statements have been ‘widely distributed’ to financial statement users in a GAAP compliant format (but they don’t have to disclose this date)

Question 10

When there is no principal market for a financial asset, the fair value measurement is:

Answer 10

The price in the most advantageous market AKA the highest price. Note: Include the transaction costs in determining which market is the most advantageous.

Question 11

The principal market for a fair value question is the market that:

Answer 11

Has the highest volume of activity, as long as the market participant has access to that particular market

Question 12

The 3 criteria to know when to report on a business segment

Answer 12

10% or greater or:

1) identifiable assets
2) operating profit (of all segments not having an operating loss)
3) combined revenue

Question 13

When determining business segment profit and loss, do you include ‘general expenses’ or ‘expenses not traceable to any one division’ kind of stuff?

Answer 13

No

Question 14

This is the form to file when there is a major corporate event

Answer 14

8k

Question 15

This regulation from the US Securities and Exchange commission contains the regulations for financial statement presentation and disclosure requirements:

Answer 15

Regulation S-X (SEC brings the SEX)

Question 16

SEC filing form 3 contains

Answer 16

Information regarding the filer’s ownership of the business’s securities

Question 17

The enhancing qualitative characteristics in SFAC number 8 of the conceptual framework for financial reporting are:

Answer 17

comparability, verifiability, timeliness, understandability

Question 18

Cumulative effect from a change in accounting principle is shown as

Answer 18

an adjustment to beginning retained earnings

Question 19

Large accelerated filers have (x) days to file their 10-Q after the end of the quarter and small filers have (y) days

Answer 19

40 for large, 45 for small

Question 20

To convert cash to accrual accounts:
Liabilities add what balance:
Assets add what balance

Answer 20

Liabilities: Add Beginning balance
Assets: Add ending balance

Question 21

The conversion of cash basis revenue (aka cash receipts from customers) to accrual basis includes:

Answer 21

1) add ending accounts receivable
2) subtract beginning accounts receivable
3) subtract ending unearned revenue
4) add beginning unearned revenue

Question 22

For adjustments from cash basis to non cash basis, remember if you’re working expenses or revenues to adjust the signs on your beginning asset and liability balances

Answer 22

just a standalone fact

Question 23

To calculate expenses on accrual basis, or any part of the equation, the equation is

Answer 23

Beginning balance + payments made - additional expense amounts = ending balance

Question 24

Debt ratio is calculated as:

Answer 24

Total liabilities/total assets

Question 25

A/R Turnover is calculated as:

Answer 25

end of year sales divided by AVERAGE a/r

Question 26

OCI includes:

Answer 26

1) changes in the funded status of a pension plan 2 unrealized gains and losses on available-for-sale debt securities 3) foreign currency items 4) instrument-specific credit risk 5) the effective portion of cash flow hedges

Question 27

For something to be classified as a financing arrangement:

Answer 27

The repurchase price should be greater than purchase price and expected market value

Question 28

For financial information to be relevant, it must:

Answer 28

Have predictive value, confirming value, and be material

Question 29

Inventory turnover is defined as:

Answer 29

COGS/Avg. Inventory 'ENDING INVENTORY DIVIDED BY COST OF GOODS SOLD PER DAY'

Question 30

Working Capital is defined as:

Answer 30

Current assets - current liabilities

Question 31

Days in Inventory is defined as:

Answer 31

Ending Inventory/(COGS/365)

Question 32

Asset Turnover is defined as:

Answer 32

Sales/avg. total assets

Question 33

Dupont return on assets is defined as:

Answer 33

net income/average total assets

Question 34

Return on equity is calculated as:

Answer 34

(Net income-preferred dividends)/average equity

Question 35

Calculation metrics for COGS, purchases, and all that stuff:

Answer 35

Beginning inventory+purchases = goods available for sale | Goods available for sales-ending inventory = COGS

Question 36

Times interest earned =

Answer 36

(net income + interest expense)/interest expense

Question 37

Quick ration =

Answer 37

cash+net receivables+marketable securities/current liabilities

Question 38

Net profit margin is calculated as:

Answer 38

net income/net sales

Question 39

For problems with salary allowances and distribution percentages, follow these steps:

Answer 39

Subtract the sum of the salary allowances from the net income. Multiply the difference by the pre-determined sharing percentages. Subtract that amount from the salary allowance for each partner respectively based on their predetermined sharing percentage.

Question 40

For capital account problems, subtract the sold price from the book price. Allocate that amount proportionately to the partners based on their profit/losses share percentage, and subtract any loan amount

Answer 40

no answer card here

Question 41

The reporting sufficiency test uses what type of revenue to calculate the threshold and sufficiency amounts

Answer 41

External revenue only

Question 42

For cash and cash equivalents, maturities have to be with 90 days of what to be considered cash (assuming that is the company's stated policy)

Answer 42

90 days of the origination date

Question 43

A write off under the allowance method of maintaining uncollectable accounts does what to net income, a/r, and the allowance

Answer 43

decrease a/r with a credit and decrease the allowance with a debit, no impact to net income

Question 44

For inventory/cogs problems, you add _____ and subtract _____ amounts to calculate amount COGS is over or understated (this is a very specific example, but just use as a reference for other similar problems)

Answer 44

add beginning inventory understatement and substract ending inventory overstatement

Question 45

For lower of cost or market, market value is middle value of cost, net realizable value (ceiling), and net realizable value minus normal profit margin (floor). How are these calculated?

Answer 45

``` Cost = the cost of the item, aka replacement cost Ceiling = selling price minus any costs to sell Floor = ceiling minus profit margin. profit margin is calculated as selling price times (1-profit margin). Take the middle of these 3 to compare to cost ```

Question 46

For the 'market' in lower of cost or market, it's the middle value of what three: (this is a duplicate card)

Answer 46

``` replacement cost (just a given number) NRV (ceiling) = sales value minus any costs to get it ready for sale Floor = NRV minus normal profit margin ```

Question 47

In nonmonetary exchanges with commercial substance, the steps are:

Answer 47

If there is fair value, record the fair value of the received item, eliminate the asset on the books with a credit and accum dep with a debit, and credit a loss or debit a gain for whatever the difference is to balance the entry

Question 48

the value of a loss on an involuntary conversion is equal to

Answer 48

the carrying value plus any costs to associated with the transaction

Question 49

Costs to be expenses for computer software are included from which date window:

Answer 49

Date technological feasibility is established to date the product is released for sale

Question 50

You recognize gain in a transaction that lacks commercial substance by:

Answer 50

taking the amount of cash received and dividing by the total value receiving (cash plus fv of new object) and multiplying that percentage by fv of old object minus bv of old object

Question 51

The lower of cost or net realizable value is used to cost all inventory that is not costed using:

Answer 51

LIFO or retail costing method

Question 52

Unrealized holding gains in AFSDS are reported where?

Answer 52

In other comprehensive income WHEN Fair value is below present value of expected cash flow AND present value is below amortized cost

Question 53

Equity securities are reported at:

Answer 53

FVTNI (not sure why they made an acronym for this). IT means fair value through net income.

Question 54

Based on the CECL model, a HTMDS would record a loss when:

Answer 54

Amortized cost is above present value of principal and interest expected to be collected, and record a loss that is the difference of these two numbers

Question 55

Under the equity method, undervalued asset amortization does what to the financial statements? How about a cash dividend?

Answer 55

Undervalued asset amortization: decreases investment account on balance sheet and equity investment revenue on income statement Cash dividend just reduces investment account on balance sheet, and increases cash

Question 56

Cash, new truck, gain, old truck

Answer 56

gain is % of consideration received, new truck bv is a plug to make journal entry work

Question 57

To calculate non controlling interest, do this:

Answer 57

take amount paid for the portion of the business bought, calculate fair value of entire sub. Subtract 1-purchased percentage, and multiply by the fair value of the entire sub

Question 58

In acquisition method, to determine goodwill:

Answer 58

Take total fv and subtract bv of acquiree as calculated in the purchase transaction. Then subtract any excess of fv over bv from individual assets, or fv of anything that has to be added to the balance sheet of the acquiree to make it's book value equal its fair value

Question 59

Deferred income tax payable is reported as: (current or non current)

Answer 59

non current

Question 60

working capital = and working capital turnover =

Answer 60

current assets minus current liabilities and sales/average working capital

Question 61

To calculate depreciation expense to be removed from intercompany transaction, you:

Answer 61

take new carrying value (the value the asset was just purchased at) and subtract the previous owner's carrying value, and divided by the remaining useful life of the equipment 72-48 = 24. 24/3 = 8. 8 is the amount eliminated

Question 62

For intercompany transactions, take total balance sheet item asked for and reduce by what to get consolidated financial information:

Answer 62

unrealized profit on sale. so if b sold c 240k, but 60 was left unsold by c, then the profit b would realized from sale to c is unrealized and removed from consolidated amount. 60/240 x (whatever gross profit was) = amount to be removed

Question 63

To adjust a yearly change to a HTM debt security (held at amortized cost) your journal entry looks like

Answer 63

for a debit debit cash for the face value x interest rate of bond reduce the discount with a debit Credit interest revenue for the difference

Question 64

For consolidating entry at year end, CAR IN BIG

Answer 64

Eliminate - common stock APIC Retained Earnings Investment in sub noncontrolling interest B - adjusting the subs accounts to fair value, because n acquisition subs are adjusted to fair value I - Intangibles G - Goodwill for the plug to make the whole journal entry work

Question 65

For available for sale debt securities: Expected credit loss = (and what are my journal entries) Remainder of loss = (and what are those journal entries)

Answer 65

present value of future payments - amortized cost aka book value (Debit credit loss, credit allowance for credit loss) Difference between fair value and amortized cost, minus the difference from above (if a loss, debit unrealized loss, credit valuation account)

Question 66

To increase the carrying value of a bond issued at a discount:

Answer 66

multiply the issued cost times the market rate multiply the face amount times the face rate The difference is how much you'd increase the carrying value over a year, aka 'amortizing the discount'

Question 67

If you issue bonds, then buy them back when they're quoted on the market at 106, but you're carrying them at 105, how is this recorded on the balance sheet?

Answer 67

A loss from continuing operations

Question 68

Book a transaction as a financing arrangement when:

Answer 68

repurchase price is greater than the other two prices

Question 69

when calculating the issue price of a bond, how do you calculate if you have face value, coupon rate, and market interest rate?

Answer 69

take the present value of the interest payments (based on face value and coupon rate) discounted at the market interest rate + the present value of the face value at the market interest rate

Question 70

To calculate the lease liability you use what numbers in terms of the balance sheet amount vs and implicit rate

Answer 70

take the current lease liability and multiply by the implicit rate to the lease. subtract that from the actual lease payment that occurs. This remainder reduces the lease liability

Question 71

Fair value hedge gains/losses are recorded in the: Cash flow hedge gains/losses are recorded in the:

Answer 71

Income Statement (to the extent they are effective) Statement of comprehensive income

Question 72

report losses from discontinues operations HOW: (net of tax or not net of tax)

Answer 72

Net of tax

Question 73

for foreign currency translation, measure assets/liabilities at BLANK measure income at BLANK

Answer 73

point in time spot rate average exchange rate

Question 74

remeasurement gain to the income statement translation gains to the what

Answer 74

other comprehensive income

Question 75

income tax asset increases in the current year, income tax expense does what

Answer 75

decreases

Question 76

For the installment sales problems, add accrual total, subtract installment sales total and multiply by what:

Answer 76

the tax rate that is effective as of the balance sheet day in question

Question 77

Examples of financing section of statement of cash flows activities:

Answer 77

``` Proceeds from issuance of long term debt Purchase of treasury stock Issuing/selling company stock getting a loan issuing bonds paying dividends ```

Question 78

Examples of investing section of statement of cash flows activities:

Answer 78

``` Proceeds from sales of available for sale securities making loans (don't confuse with taking out a loan to receive cash) purchase/sale of investments or long-term assets ```

Question 79

Examples of operating section of statement of cash flows activities:

Answer 79

Dividends received from investments Interest income/expense cash paid/received for business purposes

Question 80

dollar gets stronger versus other currency for A/R, you have a (gain or loss?)

Answer 80

gain

Question 81

Just remember these are current resources and modified accrual, the others are economic resources and accrual:

Answer 81

``` general spesh rev debt serv cap proj permanent ```

Question 82

The journal entry for when a budget is adopted is (assuming a surplus)

Answer 82

Debit estimated revenue Credit appropriations control Credit budgetary control for the surplus

Question 83

call option premium is an amount (above or below selling price)

Answer 83

above

Question 84

fiduciary funds follow which format of assets, liabilities and net position

Answer 84

(assets + DO) - (liabilities + DI) = net position

Question 85

In foreign currency translation gains and losses: remeasurement gains/losses are reported in: 1 - translation gains/losses are reported in: 2 -

Answer 85

1 - net income 2 - other comprehensive income

Question 86

translation - is reported where remeasurement - is reported where

Answer 86

OCI income statement

Question 87

when do you amortize leased property over the economic life of the asset

Answer 87

when there is a written purchase option or when the lessee takes ownership at the end of the lease

Question 88

in equity method, (and 90% sure of this, not 100% sure)

Answer 88

dividends reduce investment in s, income is reported as income from investment (at percentage of ownership)

Question 89

If a company distributed dividends other than cash, how is it recorded if carrying value is above market value

Answer 89

the difference should be a reduction in income from continuing operations

Question 90

in a tax by quarter tax calculation problem, these are the steps

Answer 90

sum year to date income and multiply by expected tax rate, then subtract income tax expense previously recorded

Question 91

put option means you can do what and when would an option be 'in the money' accordingly

Answer 91

buy a stock at a certain price when stock is below the put option price (duh)

Question 92

upon adoption of a budget, this is the journal entry:

Answer 92

Debit estimated revenues Credit appropriations and debit or credit budgetary control for the difference

Question 93

In the statement of cash flows, you do what to the amortization of a bond discount

Answer 93

it's an addition to net income

Question 94

use blended criteria of presentation WHEN:

Answer 94

when the boards are substantially the same people

Question 95

futures contracts are made through a what

Answer 95

a clearinghouse