Flashcards in FAR Deck (207)
If there is commercial substance to an exchange, the exchange is measured at:
Fair Value. The gain is equal to the old asset's fair value and it's book value. If the fair value was 30 and its book value is 25, the gain is 5.
How does retail inventory method establish lower of cost or market valuation for ending inventory?
By excluding net markdowns from the cost to retail ratio.
Can consolidated financial statements be prepared from a business combination that was accounted for using the acquisition method OR the pooling of interests method?
Yes to both. The pooling of interest method CANNOT be used anymore for business combinations, combinations that happened before that still need to be consolidated.
Does a foreign sub using the local currency as its functional currency has their financials translated or remeasured?
Does a foreign sub using US dollars as its functional currency has their financials translated or remeasured?
Under translation, common stock is translated at the what exchange rate?
The historic exchange rate.
500 shares of 6%, $100 par callable preferred stock are called at $101. The shares were issued at $103 per share. What is the journal entry to record the retirement?
DR preferred stock for 50,000
DR PIC-preferred for 1,500
CR PIC retirement of preferred for 1,000
CR Cash for 50,500
current assets - current liabilities
(cash + net receivables)
Acc Rec turnover:
Sales/ avg net receivables
COGS/ avg inventory
Times interest earned:
EBIT/ interest expense
Return on total assets:
(net income + after-tax interest expense)/ avg total assets
Return on equity:
Net income / avg owners equity
Dividend payout ratio
Common dividends / net income
What are the 2 primary qualitative characteristics?
Relevance and Faithful representation
2 components of relevance:
Predictive value and confirmatory value
3 components of Faithful Representation
Completeness, neutrality, and free from material error
What are the 4 enhancing characteristics?
Comparability, verifiability, timeliness, and understandability
Times interest earned is:
income before interest and income tax over interest expense
What is a central characteristic of a joint venture?
Shared control. None of the participating parties are likely to have unilateral control of the joint venture.
What is the defensive-interval ratio?
The ratio of quick assets to daily operating expenditures. The ratio is showing the length of time in days that the firm can operate with its present liquid resources- so it's a liquidity measure.
Inventory turnover ratio:
COGS/ avg inventory for the period
Where are G/L on remeasurment and translation booked?
Remeasurement is on the income statement, translation go in an equity account. Remeasurement is when the foreign sub's currency is the US dollar. It's translation if the sub's currency is the local foreign currency.
Receivables turnover ratio:
Net sales / avg net accounts receivable
What statements are usually included in personal financial statements?
A statement of financial condition and a statement of changes in net worth.
If a donation is conditional, how should it be accounted for?
As a refundable advance.
For donation of specialized services to a nonprofit, at what value should they be recognized?
For a NP, are contributions spread over a few years restricted or non restricted?
The contribution in the current year is non restricted(unless it comes with an actual restriction), and the contributions for future years are recognized at present value and are RESTRICTED.