FAR Deck 2 Flashcards
(58 cards)
How is bond liability calculated?
Net bond liability ( Face Amount +/- Bond discount or premium minus (-) bond issue costs.
Guidelines for electing fair value option (FVO)
-Decision is final and irrevocable until next election date.
-Election may applied to individual items not entire class of financial instruments
How is equipment purchased by note payable recorded on statement of cashflow?
-Noncash transaction, that will not be included within statement of cashflow.
-Only disclosure is required.
How is financial investments are measured under the Fair Value Option (FVO)?
-Unrealized gains and losses are recognized on income statement.
-Dividend income is recognized as income.
Lease liability fundamentals
-Summation of PV of lease payments.
-Lease liability is decreased by the cash lease payment minus the allocable interest expense.
Why would a entity elect LIFO under an inflationary environment?
-Lowest ending inventory value
-Highest COGS expense
-Lowest gross profit that will reduce taxable income, more cash is preserved.
How is Account Receivable net carry value is calculated?
-Gross Account Receivable minus(-) amounts deemed uncollectible.
-Allowance for credit losses per books is not used, because it is unadjusted balance.
How to calculate intra-entity payable from a intra-entity sales between subsidiary with parent company?
-Step 1: From consolidated statement, combine the parent and subsidiary account receivable.
-Step 2: Take the Consolidated A/R - Step 1 to undo the eliminated accounts payable (A/R).
How does NFP report expenses reporting?
-By Functional expenses and Natural expense classification
Under percentage completion profit calculation
Profit is the current completion % times the contract profit.
Equity method goodwill calculation:
Step1: Fair Value of Assets times Ownership %= Investor share of FV Asset
Step2: Cash minus Investor % in Asset = Goodwill
Interim period tax expense calculation
Step 1: Add Q1 and Q2 pre-tax income = year-to-date income
Step 2: Take Q2 effective tax rate (most current) times year-to-date income= Total Tax Expense
Step 3: Total Tax Expense minus Previous Q1 tax expense= Income tax expense for Q2.
Sample of calculating Weighted Average Common Stock involving stock split
1-Jan 1 initial stock 100,00 X 12 /12 X 1.05=105,000
2-Apr 1 Issuance Stock 30,000 X 9/12 X 1.05=23,625
3-June 1 Issuance Stock 36,000 X 7/12 X 1.05= 22,050
4-*July 5% Stock Dividend see above 1.05 reflection
5-Sept/1 Treasury Purchase (35,000) X 4/12 = (11,667)
Total 139,008
How does Stock Split and Stock Dividend impact Retained Earnings?
-Cash and Stock Dividend requires available Retained Earnings. That will impact future ability to pay dividends. Stock dividends is a reclassification of retained earnings into common stock.
-Stock split does not impact Retain Earnings at all.
What qualifies as Current liability?
1- Portion of Obligations due within 12 months
2-Obligations callable by Creditor in event of debt covenant violations. Exception is when Creditor waives right to demand repayment.
How should Note Payable be recorded on Statement of financial position when no stated interest % is provided?
1-The market value of the note.
2- Fair value of goods/services received for the Note Payable.
3- If FV of goods is less than the Note’s face amount, a discount % is applied.
Times-Interest-Earned Ratio
“Earnings before interest expense” divided by “Interest Expense”
**Ability to cover interest expense.
How is functional currency translated?
Take the average currency rate
LIFO or Retail Inventory Method Or LCM Method
Pick the lower value.
Compare current cost to the middle value of the following 3:
1-(Ceiling) NRV= Selling price minus cost completion/disposal
2-Replacement cost
3-(Floor) NRV minus normal profit
Lower of Cost or NRV FIFO Method
Pick the lower of Actual cost or NRV.
NRV= Selling Price minus completion cost/ Disposal cost.
Bond concept, what is recorded as current liabilities on the BS?
-Coupon payment minus the Interest Expense= reduction of bond liability
-! IE is not a liability, it is treated as a periodic expense
-Inventory value Lost In Q1 is $50
-Inventory value Gain in Q3 is $60
How is it recorded on each quarter interim statement?
Q1 and Q3= $0
Justification, market temporary decline that will be recovered later on. Plus, Recoveries allowed up to original amount, no additional gains allowed.
What is discussed in MD&A ?
-Disclose material information impacting future results.
-Disclosure involving commitments and events that affect the business operations and liquidity.
-Discuss the 3 following topics, liquidity , capital resources, and results from operations. It emphasis on forward looking approach.
-! Does not contain discuss EPS, Market & Product matters, and are not technical analysis.
Is 3rd party party fees a part of the contract transaction price?
No, contract price includes consideration involving goods and services. City sales tax are 3rd party fees that is not included in the contract price.
