FAR Flashcards
(151 cards)
1
Q
fWhat does a change in estimate affect?
A
Only current and subsequent periods. DOES NOT AFFECT RE OR PRIOR PERIODS
2
Q
What does an accounting change of principle affect?
A
Shown net of tax on the RE statement
3
Q
When is restating prior years financial statements required?
A
Only when comparative financial statements are shown for prior period adjustments of discovered errors, changes in entity or changes in accounting principle.
4
Q
What does it mean to agree upon forward rate?
A
It means that it is the foreign price is locked in and does not change.
5
Q
What is included in revenues for a single step income statement?
A
Sales of goods, services and rentals.
6
Q
What is included in Comprehensive Income?
A
Any changes to stockholders other than owner investments and distributions to owners.
7
Q
Where are gains reported that are unusual and infrequent?
A
Income from continuing operations.
8
Q
Where is unrealized gains for availablie-for-sale securities reported?
A
Other Comprehensive Income (OCI)
9
Q
Where does Income from Discontinued Operations fall on the IS?
A
After Income from Continuing Operations after tax.
10
Q
What is the “held for sale” criteria
A
- Management commits to a plan to sell
- the component is immediately avaiable for sale in current condition
- active program to locate a buyer has been initiated
- The sale of the component is probable and the sale is expenceted to be completed within one year
- The sale of the component is being actively marktered.
- It is unlikely that significant change to the plan to sell will be made or that the plan will be withdrawn.
11
Q
What is included in other comprehensive income (OCI)?
A
Pension Adjustments, unrealized gains (losses) on available-for-sale debt securities and hedges, foreign currency items, and instrumen-specific credit risk.
12
Q
How to calculate the loss from discontinued operations before sold?
A
Losses from the activity plus the impairment loss.
13
Q
When are stock dividends & stock splits treated?
A
As if it had occurred at the beginning of the year.
14
Q
When is a 10-Q required to file for an accelerated filer?
A
40 days after the end of the period.
15
Q
Is treasury stock included in basic EPS calculations?
A
Yes
16
Q
Are dividends in arrears reported on the balance sheet?
A
No, they are disclosed. Dividends are a liability until they are declared.
17
Q
How do you allocate “issue proceeds” of a basket purchase or sale of convertible preferred stock?
A
Based on relative fair market values.
18
Q
Under the cost method, do treasury stock transactions affect retained earnings?
A
Only if the resale of the stock was higher than the acquisition price.
19
Q
What happens when reaquired shares are reissued at a lower price?
A
It will decrease the APIC until $0 and then decrease RE.
20
Q
When are convertible securities included in the computation of diluted EPS?
A
Only when they are dilutive. If they are anti-dilutive, ignore.
21
Q
Are unrealized losses for on tradingn securities part of comprehensive income?
A
Yes, but it is already included in Net Income. Other comprehensive income is PUFI
22
Q
When distributing property as a dividend, what two things will happen?
A
A gain/loss will occur and it will decrease RE
23
Q
What is the value of the common stock when issued?
A
Amount of shares x the stated value. Anything additional is APIC
24
Q
What is a liquidating dividend?
A
It is the difference between the cash dividend declared and RE. Only when the dividend is greater than the RE.
25
What happens to stockholders' equity for a stock dividend less than 20-25%?
Nothing, it transfers the FMV of the stock dividend at the time of declaration from RE to capital stock and pain-in capital.
26
How do stock dividends affect RE?
They don't, all they do is increase the amount of shares.
27
What is the difference between common stock outstanding and common stock issued?
Common stock outstanding is what is owned by shareholders. Common stock issued is common stock outstanding plus treasury stock.
28
How can OCI be reported on the statements?
Either net of tax or before related taxes
29
When is income tax calculated
After Income from continuiong operations has been calculated
30
Formula for Book Value per common share
Common stockholder's equity/common shares outstanding
31
How to calculate common shares outstanding
Total Shares issued less treasury shares
32
How should the effect of a change in accounting principle that is inseparable from the effect of a change in accounting estimate recorded?
As a component of income from continuing operations. When the two are inseparabel, it creates a change in estimate.
33
Formula to determine how to calculate the percentage of completion?
Total cost to date/total estimated cost of contract
34
Is a bond sinking fund part of current assets?
NO
35
How are the compents of OCI reported tax wise?
Either net of tax or reported before tax basis with an aggregate amount reported after these items
36
What is Fair Value?
Price that would be sold for between market participants in the principal market
37
How to convert from Cash Basis to Accrual Basis accounting?
Add ending accounts receivable
Subtract beginning accounts receivable
Subtract ending unearned (or deferred) revenue
Add beginning unearned (or deferred) revenue.
38
Is OCI part of Net Income?
No, it is part of comprehensive income.
39
How are dividends allocated between participating preferred stock and common stock?
Participating preferred stock receive their dividends after common stock have received their portion of the dividends.
40
Are contingent shares that are dilutive included in basic EPS
Yes, only on the date that all conditions are met.
41
Is basic earnings per share included on the face of the income statement?
Yes it is but only for publicly traded companies.
42
What is the formula for inventory turnover?
COGS/Average Inventory
43
What is the formula for Net Profit Margin
Net Income / Net Sales
44
What is the formula for Days Sales in Accounts Receivable?
Ending AR / (Sales/365)
45
What is the formula for AR turnover?
Sales(Net) / Average AR (Net)
46
What happens when the dividend is in the form of an asset?
Distributed at FMV at the date of dclaration.
47
What is in the numerator when calculating basic EPS?
Net Income minus preferred dividends
48
What is considered Cash Equivilant?
Anything with original maturities of 90 days or less.
49
What is factoring without recourse?
A sales transaction.
50
What is the current expected credit loss (CECLL?
Method used to match expenses with revenues and to record proper carrying amounts for AR.
51
What type of asset account is Allowance for Credit Losses?
A contra asset account. It has a credit balance on the asset side of the balance sheet.
52
How to calculate credit loss expense
Begin balance plus estimated credit losses less adjustments to credit losses less estimated allwance for credit losses per aging, once you have that amount then add to estimated credit loasses.
53
When reconciling to the bank statement, what are a few of the things that you can do to reconcile?
Account for the checks outstanding, deposits in transit and errors made by company.
54
Do you include shipping costs in inventory?
Yes, costs associated with bringing the goods to the buyer are counted as inventory for the buyer.
55
When it comes to inventory, what is freight considered? Expense or Inventory?
It is considered part of inventory.
56
What is included in manufactured inventory?
Raw materials, direct labor and factory overhead.
57
What is lower of cost or net realizable value?
It is when you take the lower of the cost of the inventory or net realizable value.
58
How do you calculate neat realizable value(NRV)?
Selling price less estimated cost of disposal.
59
What is the most advantageous inventory method to retain the most cash in the business?
LIFO - because when the prices are increasing, the inventory will be higher and will reduce taxable income more than any other method.
60
Do stock dividends decrease RE?
NO IT DOES NOT
61
How do you calculate dollar-value LIFO inventory?
PY at dollar-value LIFO plus the conversion factor(inventory at CY cost/inventor at base year cost)
62
During construction, how do you calculate the interest that can be capitalized?
It is based on the weighted average amount of the expenses up to that point. It is like calculating WACSO. The amount that can be potentially capitalized is limited to the interest on the loan.
63
How long is the life of the land improvements when leased?
Either the life of the improvements or the length of the lease, whichever is shorter.
64
What modifications to buildings or production lines can be capitalized?
Anything that improves efficiency or benefits over several periods can be capitalized.
65
How do you calculate the interest if no debt is exactly tied to the construction of the asset?
You take the weighted average interest rate.
66
How do you calculate 200 percent declining balance depreciation?
Straight-line times 200%
67
How do you calculate depletion?
Purchase price + development costs + restoration costs - salvage value. Once you have totaled that you divide by estimated removable ore. Then you multiple that amount by the amount of ore sold during the year.
68
Can you reverse an impairment loss on an asset?
No, unless the asset is held for disposal.
69
How do you calculate composite life?
Depreciable cost / annual depreciation
70
How many years do you look at for balance sheet items when there is a change in accounting principle?
Just the prior year
71
How many years do you look at for the income statement items when there is a change in accounting principle?
All years
72
What intangible asset is subject to the recoverability test when testing for impairment?
A patent
73
When calculating WACSO, how are stock dividends treated?
As if they were at the beginning of the period.
74
How do you allocate proceeds the difference between warranty of an item and the actual item?
You take the cost of the warranty and the cost of the item and take a percentage of it.
75
When calculating weighted average of COGS, what do you factor in?
The inventory for the entire period
76
Is OCI net of tax or before tax?
It is typically before tax. If the question does not indicate otherwise, assume before tax.
77
Are loans and debts that a company have included in the disclosures?
Yes
78
How is debt classified when it will be refinanced?
As long-term transaction
79
If a company is going to refinance and make a payment prior to the refinance, how should that be classified?
The amount that is paid prior to the refinance is shown as current liability.
80
Is a deferred income tax liability a current liability?
NO
81
Are stock dividends or stock splits considered income to the recipient?
NO
82
How do you calculate LIFO Perpetual?
How you know it to be. The normal way
83
How do you calculate LIFO Periodic?
The amount of unites at the end the month x the oldest cost.
84
If a gain contingency is probable and estimatble in a range of possible payments, what amount do you use in the disclosure?
The lowest amount.
85
Are probable gain contingencies recorded before they are awarded?
NO
86
If a loss contingencies has been given a range and a specific amount which do you choose?
The specific amount.
87
When a loan is less than 1 year, how is it recorded on the BS?
The amount that it was given
88
Where is the cumulative effect of an accounting change shown?
ON the balance sheet as part of retained earnings
89
Are the tax benefits of OCI dislosed?
YES
90
What consists of the fair value of an asset?
Includes transportation costs. NOT TRANSACTION COSTS
91
Are stock options included in Basic EPS?
No, they are dilutive
91
How do you determine the market price of a bond?
PV of the principal is added to the present value of all interest payments using the market interest rate.
92
What is the stated interest rate used for?
To calculate the interest payment
93
What type of bonds mature in installments?
Serial bonds, they are bonds that are pre-numbered and the issuer can call and redeem a portion by serial number.
94
What is a debenture bond?
Unsecured bonds
95
What are term bonds?
bonds that have a single fixed maturity date.
96
What are variable rate bonds?
have interest rates that change.
97
When bonds are issued with detachable stock warrants, how much is allocated to the bonds?
The total issuance - warrants at FV
98
How is a bond shown on a balance sheet?
Net of the unamortized discount.
99
When a bond is issued, what is the price of the bond?
PV of future principle payments plus PV of the future periodic payments.
100
What costs are capitalized with assets?
Anything that is incurred to acquire and make it ready for use
101
What is another way to say market cost?
Net Realizable Value less Normal Profit Margin
102
Is there a requirement to appropriate RE?
No, it is not a requirement. RE can be set aside for future purposes by classifying it as appropriated.
103
How is the interest payable calculated for a bond issued at a premium?
Face Value of the bond at the beginning of the period times the contractual interest rate.
104
What is the formula to calculate interest expense on a bond issued at a premium?
Carrying value of the bonds at the beginning of the period times the effective interest rates.
105
Interest expense of bond
CV x Mkt %
106
Cash Payment of bond
FV x Cpn %
107
Is interest expense more or less when a bond is issued at a discount?
More
108
Is interest expense more or less when a bond is issued at a premium?
less
109
When is an Asset Retirement Obligation (ARO) recognized?
When it is purchased
110
If the ARO ends up being more than what it originally was, how is the excess recognized?
As an expense in the year of retirement
111
What happens to assets when they are transferred in a troubled debt restructuring?
They are adjusted to fair value and an ordinary gain or loss is recorded.
112
How do variable lease payments affect cash flow from operations?
Negatively
113
What are the requirements for a finance lease?
1. Transfers ownership at the end of the lease
2. Contains a written purchase option that the lessee is reasonably certain to excercise.
PV of the beginning lease term of the min lease payments equals or exceeds fair value of the leased property. Generally 90%.
4. Major part of the estimated economic life (75%)
5. The asset is specialized such taht there is no alternative use to the lessor.
114
How are dividends recorded under the fair value method when it is in excess of investors share of undistributed earnings?
It should be recorded as income and the excess as a return on capital
115
When is a financial instrument labeled held-to-maturity?
When it is stated that they do not plan to sell.
116
What labels a financial instrument as Trading Securities?
If it is intended to be sold within the next 12 months
117
What labels a financial instrument as Available-for-sale securities?
If it is stated that it will be sold anytime after 12 months
118
how are trading securities reported?
At fair value
119
How are intercompany loans/receivables treated?
Must be eliminated. 100% of all intercompany balances among members of the consolidated group are eliminated.
120
How do you calculated consolidated Equity?
Parents equity account plus noncontrolling interest amount
121
How is APIC calculated in partnerships that become incorporated?
FV of the assets - liabilities - common stock
122
When a partner contributes to a new partnership, what is the contribution for someone that contributes property to it?
The fair value of the property
123
How are treasury stocks reported on the balance sheet?
As a reduction to equity
124
How is the stock reported under the cost method?
Total number of shares issued at par value. It will have a separate equity adjustment for treasury stock.
125
What method is used when an investor owns 20% or less of a stock?
The fair value method - income and dividends do not affect the balance sheet. Dividends count as income.
126
How do you calculate income from cash to accrual?
Cash Income
127
What is required to be disclosed in the statment of cash flow under the indirect method?
Cash paid for interest and income taxes
128
When there is a loss on a project that will take multiple years, how does that loss get reported?
The loss is reported in full in the year it started the project.
129
How are changes in accounting principle reported in the year that it occurs?
Net of tax as an adjustment to beginning RE in the earliest year presented
130
What does depreciation use in its calucaltion?
The asset at Fair Market Value
131
What is the price that an intangible asset should be recorded on the BS?
At cost
132
Does basic EPS include the subtraction of preferred dividends from Net Income?
Yes
133
If a long-term or short-term debt securities is going to be held to maturity, how should each asset be reported?
Both at Carrying amount
134
What requires the application of intraperiod income tax allocation?
Items on the inocme statement that are shown net of income tax.
135
What methods allow you to decrease the investment account for liquidating dividends?
Fair Value Method and Equity Method
136
When using lower of cost or market, how do you calculate market price?
It is the NRV less profit margin
137
Where is the amortization of a bond included in cash flow statements?
Operating activityes under the indirect method
138
When rights are issued, what is the affect that it has on common stock and APIC?
It does not since they were only issued. If they are exercised them both increase.
139
What reports are not for profits required to issue?
1. Stmt of Financial POsition
2. Stmt of activities
3. Stmt of cash flows
140
What are funcitoinal classifications of expenses for a NFP?
Costs as program and support services
141
In a statement of cash flows for NFP, where is interest expense reported?
In a supplemental disclosure of cash flow infomraiton
142
How are services recorded as contributions?
If they create or enhance nonfinancial assets or require specialized skills.
143
How are DTA's and DTL's reported on the balance sheet?
As non-current asset or liability
144
What type of accounting is governmanetal funds?
Current Financial resources measurement focus and modified accrual basis
145
What type of accounting is Proprietary and Fiducuart Funds using?
Economic Resources Measurement focus and accrual basis of accounting
146
What is included in governmental funds?
General, Permanent and Capital Projects
147
What are custodial and trust funds realted to
Fiduciart Funds
148
Whare are enterprise funds related to?
Proprietary funds
149
What are permanent funds used for?
When the gifts received are legally restructed to the extent income (not principal) may be used for the purposes supporting the programs
150
