FAR important Flashcards
(225 cards)
1
Q
Double declining balance method
A
Double strait line depreciation. Ignore salvage value
2
Q
JE Stock dividends
A
DR Retained earnings (FV)
CR Common stock (FV)
CR Additional paid in Capital
3
Q
Intrinsic value-increase gain.
A
=Mkt Price-Strike Price
4
Q
Time value. Decrease-loss
A
=Mkt-Intrinsic
5
Q
Bank Rec .Calculate cash disbursement per books
A
Bank statement Disbursement
-Outstanding checks from prior month Rank Rec
+Outstanding checks current month (recorded in books but not cleared a bank)
6
Q
SEC reporting 10K 60-75-90 audited FS 10 Q-40-40-45 non audited 8K-events Forms 3,4,5 insiders >10% Regulation SX BS3-Other3 audited
A
The Bigger you are the more money you have to file fast
More than 700 MM Large Accelerated
Between 700MM and 75MM Accelerated
Less than 75MM
7
Q
Diluted EPS. Use Treasure Sock method for options and warrants.
A
Net Income-Preferred Dividends+-Saved Preferred Dividends+ Saved Interest Expense NET OF TAX/(WACSO+Shares issued on convertible stock+shares issued on convertible bonds)
8
Q
Divutive - Unti Dilutive (Increase/Decrease Numerator). Calculate separately for each component. DO NOT INCLUDE ANTY DILUTED COMPONENT TO Diluted EPS calculation
A
Diluted EPS less than EPS basic Bonds (What has bigger effect, savings or # of new shares)
- Options/warrants diluted in Strike Price>Avg. Price. Use Treasury stock buy back
- Preferred stock and bonds diluted if Basic EPS getting less with added new shares
9
Q
Diluted EPS (no good news)
A
Additional shares issued
Options and warrants in the money
10
Q
Anti-diluted. Compare each component with Basic EPS. If less, than it is diluted
A
- Bonds (Savings on interest net of tax/convereted from bonds shares)
- Preferred stock convertible (Dividends/Additional shares)
11
Q
What is Unrealized gain/loss AFS securities on statement of Comprehensive income
A
(Cost- Mkt year 1)-Mkt year 2
12
Q
What is Unrealized gain/loss AFS securities reported as accumulated other comprehensive income
A
Cost -Mkt year 2
13
Q
Equity method (>20% owned significant influence). Calculate INVESTMENT in subsidiary. Watch the dates, 1/2 if bought in the middle of the year
A
Purchased price
+% of ownership*Net Income
-%DIVIDENDS
14
Q
Credit loss for AFS securities because of expected credit loss
A
Credit loss=(Cost-PV). It is recognized in IS not in OCI in the amount not exceed (Cost-FV). No additional loss will be recognized in OCI because AFS securities can be sold at FV
15
Q
INCOME FROM INVESTMENT UNDER EQUITY METHOD. Watch the dates, 1/2 if bought in the middle of the year
A
% OF NET INCOME (1/2 if bought in July)
Dividends-not a factor for Income under equity method
16
Q
Not included in Revenues
A
Loss from operations of component
Gain on disposal of component
17
Q
Loss of disposal a segment
A
Operating loss+(FV-Selling Price)*70% Tax
18
Q
Recalculate Net Income from Cash to accrual basis net income:
A
Net Income (Cash basis) \+Increase in AR -Decrease in Prepaid Expenses \+Unearned Revenue \+Decrease in AP (more cash was paid for prior period expenses)
19
Q
Days in inventory ratio
A
Ending Inventory/ (COGS/365)
20
Q
Subsequent event for SEC filer
A
Till the distribution/issuance date
21
Q
Consolidated segment report customers
A
if 10% of TOTAL revenue
22
Q
10-Q file date
A
Accelerated-40 days
Non accelerated -45 days
23
Q
Major customer
A
Sales more than 10% of all sales
24
Q
Working Capital Turnover
A
Sales/Average Working Capital (Cur Assets-Current Liabilities)
25
Reportable segment rule segment revenue is 10% of Combined Revenue of all segments
10% of ALL (Combined) Profit
or 10% of ALL Loss or 10% of Assets
Separate profit into one column and loss in another one
26
FV of equipment is NOT measured
by Net Realizable Value approach
27
IF company files with SEC
No disclosure of date of subsequent event in the notes is necessary
28
If company not files with SEC
Disclosure of date of subsequent event in the notes when approval received and FS is available for sale
29
Large accelerated filer files 10-K (more than $700MM)
within 60 days
30
Additional paid in capital
Difference (FV on Net assets (Assets-Liabilites) -Par value of common stock issued)
31
Prepaid expenses in Accrual accounting are not expenses. Benefits were not received yet
If prepaid Expenses increased in the end of the year- Substract for operating expense accrual basis
32
Salvage value Deducted!
Cost-Salvage value! Except for Double declining method
33
If disaster (hail)is frequent
NO DISCLOSURE in notes required
34
If equipment going to be disposed in 3 months
Measure it by NRV in BS
35
Capital balance accounted under goodwill method
FV of one partner-Cash of another partner=Total capital, allocate goodwill excess proportionally
36
If nonmonetary transaction has commercial substance, Gain on exchange recognized under GAAP:
FV-BV of asset given (Cost-AD)
37
Gain loss in exchange with commercial substance
FV of acquired asset-Book value of the asset given up
38
In case of permanent impairment
Loss is added to accumulated depriciation
39
How to calculate COGS
```
Beg Inventory
+Purchases
COGAFS
-Ending Inventory
_____________
COGS
```
40
Debt to Asset Ratio
Total Liabilities/Total Assets
41
Days in Inventory (Conversion Period)
Ending Inventory/(COGS/365)
42
Working Capital Turnover
Sales/ Avg Working Capital (Current Assets-Current Liabilities for 2 years)/2
43
Fixed asset sold voluntarily or involuntarily
Loses never calculated proportionally, only gains
If FV excess book value-always gain
Gain/Loss recognized as a part of continuing operations (proceeds/compensation-caring amount)
44
Nonmonetary Exchange Transactions
1. Commercial substance-FV of asset given
| 2. Lack of commercial substance-reported amount of asset given/surrendered
45
Nonmonetary Exchange Transactions with lack of commercial substance
0 gain/loss recognized
-Gain recorded only if boot was received but not paid
-If FV of old asset given is more than caring value-no loss recognized
If no boot was received. no gain recognized
Book value of the asset received:
DR AD
DR New Truck (Plug)
CR Cash paid
CR Old truck
46
Sum of the year digits method: 3 years
Fixed Asset Cost-$12,000,
Salvage Value-$3,000
Calculated Depreciation in 3 year
Sum-of-the-years-digits: 3 + 2 + 1 = 6. Third year = 1/6 x $9,000 = $1,500.
47
Depletion cost
Depletion base-similar to amortization base
Depletion is similar to amortization
The depletion base equals the purchase price + the development costs +the estimated restoration costs-the expected salvage value /Depletion per ton;($Depletion Base/ # tons). Depletion per ton × 60,000 tons sold.
48
Segment test
In order to be a reportable segment, an individual segment must meet the 10 percent size test. The test is applied to revenues, reported profit (loss), and assets, and any segment that meets the 10 percent threshold in any of these categories will be reported separately. !!For the greater of combined profits or combined losses !!
49
net cash provided by operating activities
t. $151,400 net cash provided by operating activities, as follows:
Net income
150,000
Increase in A/R
(6,000)
Increase in allowance
200
Decrease in prepaid
4,200
Increase in A/P
3,000
151,400
50
Pension gain/loss for OCI calculation
Expected return (Beginning of the year assets*%)- Actual return
```
Actual return:
Beginning FV of assets
+Contributions
- Benefits Paid
+Actual Return
___________________
Ending FV of plant assets
```
51
The dividends paid to the noncontrolling shareholders (5,000 × .25 = 1,250) would decrease their noncontrolling interest under the equity method.
Eliminating Entry:
Debit (Dr) Credit (Cr)
Investment in Kidd
3,750
Noncontrolling interest
1,250
Dividends paid/retained earnings
5,000
52
Bond purchased year 1 and sold in year 2. At what amount AFS reported in BS?
Discount is not amortized on short-term investments. Price + change in FV.
53
Calculate total revenue from investment under equity method (more than 20%,less than 50%)
Preferred dividends+Equity in earnings
1. Preferred stock dividends. Total*%rate*of ownership=Dividends received
2. Net income-Paid preferred dividends=Net income available for common shareholders * % of ownership
54
To calculate goodwill impairment under GAAP: Compare Carrying amount vs FV of the reporting unit. If Carriyng >FV it' is an impairment loss. Loss The loss will be equal to the difference between the Carrying amount and the fair value, not to exceed the amount of goodwill currently reflected on the balance sheet.
Good will impairment loss=
| Carrying amount-FV amount. Loss doesn't exceed Good will amount.
55
How to calculate gain in acquisition method
- Common stock (BV Assets-BV LIABILITIES))
- APIC
- Retained Earnings
* Investment in SUB
* Non controlling interest
- BS Adjustments ASSETS (FV Assets-FV BV assets)
- Intangible assets recognized
* Gain (difference)
56
Impairment Fixed Assets IFRS
1. Excess CV- Recoverable amount
Recoverable amount-greater from 2:
- FV-cost to sell or
- Value in Use (PV of future CF)
57
How to calculate gain in acquisition method
```
Common stock (BV Assets-BV Liabilities)
APIC
Retained Earnings
*Investment in SUB
*Non controlling interest
BS Adjustments
Intangible assets recognized
Gain (difference)
```
58
Non monetary exchange
If Cash (boot) is received. Because the cash is less than 10% of the total consideration, a proportional amount of the gain is recognized.
59
Times Interest Earned
(Income before Tax +add back interest Expense)/Interest Expense
60
Calculate Expense related to Software Cost
1. Amortization Cost +
| 2. Impairment Loss Carrying Value (Cost -Amortization)-FV (Future Gross Rev-Future Cost to dispose)
61
amount capitalized as the cost of the equipment
The amount capitalized as the cost of the equipment should include all amounts necessary to purchase the equipment, bring the equipment to the location and condition as necessary for its intended use. These costs will include the cash paid for the down payment, the present value of the note payable, the shipping charges, and the installation charges
62
In an exchange lacking commercial substance (projected future cash flows are not materially different), gains are only recognized when cash is received. If cash received is less than 25% of the total consideration received, then a gain is recognized in proportion to the cash received.
Gain: FV given-BV given)*cash/FV
DR Cash
DR Inventory new (plug)
CR Inventory old
CR Gain
63
In any exchange, all realized losses are fully recognized in accordance with the principle of conservatism.
All realized losses are fully recognized regardless of the boot exchanged.
64
Return on assets
Net income after tax/Avg total assets
65
Uncollectible/Bad Debt Expense
```
Beginning Balance
+Recoveries
+Expense (X)
-Write off
Ending Balance
```
66
Operating Cash flow
Cash Flow from operations/Total Current Liabilitties
67
Calculate current portion of provision for income tax
current portion of income taxes payable, which is simply 30% (current rate) of taxable income
68
Calculate current portion of provision for income tax
current portion of income taxes payable, which is simply 30% of taxable income
69
Finance lease
Variable lease payments not included in the lease liability are treated as cash outflows from operations and will therefore have a negative impact on bottom-line cash flow from operations.
70
Special revenue fund.
uses current financial resources measurement focus
71
Proprietary funds (which include both enterprise and internal service funds [SE]
use the economic resources measurement focus (similar to commercial accounting)
72
What amount s/b reported as cash
check is not disbursed as of December 31, Year 1, it should be added back to the checkbook balance
73
Major customer-10% of Revenue.
| DONT MIX UP WITH REPORTING SEGMENT (10% rev, profit, assets)
A customer is considered to be a major customer if sales to the customer are at least 10% of total revenue, not 10% of combined assets.
74
Bank reconciliation from Bank statement to books
Cash balance per bank
+Deposit in transit
-Outstanding checks
+/- Bank errors
75
Bank reconciliation from Books to Bank
```
Balance per book
-Service charge
-NSF
+Interest income
+/- Errors on company side
```
76
% of completion method
* Net Current Asset -if the sum of cumulative costs incurred +cumulative GP recognized exceeds cumulative billings, excess is reported as a current asset.
* Net Current liability recognized-if cumulative billings exceeds
77
Dollar-value LIFO inventory cost
1. Annual Index =End of year 2 inventory cost/Base year 2 inventory cost
Base year Inventory Cost +Increment
78
Net cash receipts from bond issuance
Sales price + Accrued Interest- Issuance cost
| DR Cash
79
Non monetary transaction with commercial substance.What amount should be reported as an investment?
FV of truck surrender. Transaction is accounted for FV of of asset received or surendered. Whichever is more evident.
80
What amount of inventory was lost in the flood if sales is 250.000 and GP % on sales is 40%=GOGS is 60% of Sales
Inventory = Beg inventory + Purchases - Sales reduced to a cost basis
Inventory = $35,000 + $200,000 - ($250,000 x (1-.40)) = $235,000 - $150,000 = $85,000
Inventory lost in the flood = $85,000 - $30,000 = $55,000
81
Cash basis Accounting vs Accrual Basis of Accounting. In Cash basis of Accounting, net decrease of AR and AP will understates income:
Cash basis:
AR decrease=more mash were collected-Income would grow
Accrued Expenses decrease -cash was paid to decrease AP, it was for prior period and it reduces income, bit in accrual basis of accounting it would be less expenses and income would grow
82
Impairment loss recognized under GAAP when
Carrying value is MORE THAN FAIR VALUE
| The carrying amount is not recoverable
83
Revenue Recognition
The 500 desks not shipped were "set aside" and therefore belong to the buyer even though they were not yet shipped.
84
Principal vs Most Adventures Market
Principal-greatest volume
| Adventures (Price-Transaction cost)
85
Good will method of accepting new partner
New partner % is a base. His contribution/his % interest
86
Selling Price of the bond
SUM of PV of principal (face*PV factor use MKT Rate)+ interest (payment*annuity rate MKT rate)
87
Loss on bond conversion
Mkt value of the stock issued - BV of the bonds before conversion
88
The higher the implied interest rate
The lower the PV of the Note and the higher is the discount amount
89
Bond issuance JE
Bond liability reported on BS=
FV - both discounts
DR Cash $955
DR (Discount=Discount on issuance
+Issue cost) $45
CR Bond Liability $1,000
90
Calculate interest payable from date
When bonds dated/
91
Issue price of bonds
Face value-Warrants
92
If bond cares Detachable warrant
Total bond issuance price s/b allocated b/w bond and warrants
93
Research and development cost
Expense all under GAAP except:
1. If cost will be reimbursed by other company
2. Cost for long lived assets with alternative use
94
Comprehensive income:
Net income+ OCI (PUFIER)
| Do not double count income/loss on Trading securities since it is already included in Net Income
95
For calculating allowance for uncollectible accounts balance
Do not Sum Beg +Ending balances into calculation
96
Dividends paid by SUB are not included in total amount of paid dividends. Total paid dividends= Dividends paid by Parent
The dividends paid to the noncontrolling shareholders (5,000 × .25 = 1,250) would decrease their noncontrolling interest under the equity method.
Eliminating Entry:
Debit (Dr) Credit (Cr)
Investment in Kidd
3,750
Noncontrolling interest
1,250
Dividends paid/retained earnings
5,0
97
Liquidating dividends. liquidating dividends reduce the carrying amount of the investment account under FV and equity method
Dividends in excess of investor's share of investee's earnings
98
Cash dividends from common stock investment
Under the fair value method, receipt of a dividend is recorded as income and does not affect the investment account.
Under the equity method, receipt of a dividend is recorded as a decrease in the investment account.
99
Equity method used to account for investment
What affects Investment income:
- change in mkt value-NO (Changes in the market value of investee's common stock are not considered income to the parent under the equity method.)
- cash dividends form investee-NO (reduction in the carrying amount of the investment on the balance sheet of the investor.)
100
APIC for business combination In an acquisition method
```
DR Legal Expense
DR Investment
CR Cash (legal+Registration)
CR Common stock
CR Apic redused for registration cost
```
- registration and issuance costs- a direct reduction APIC
| - legal and consulting fees - expensed
101
Aqiusition
When using the acquisition method, 100% of the subsidiary equity accounts are eliminated in consolidation.
102
Equity method used if there is significant influence
Beginning
Add Net income*%
Substract dividends
Ending balance investment in SUB
103
Under equity method which of the following affects investor's reported investment income
Undervalued asset amortization affects both the investment account (an asset) and the investment income account (a revenue), while cash dividends affect the investment account but not the investment income account.
104
BE careful in Equity method:
Portion common stock dividend will reduce Anchor's investment in Main on the balance sheet and will not be reported as dividend income on the income statement!
Notes:
Income from an investee is recognized only from date of purchase.
The dividends received reduce the investment account, but do not affect the income.
- IF they ask for what should be reported as an investment (in BS) use BASE
- IF they ask what should be included in IS as a result of an investment- take only % of earnings
105
Equity method
The excess of an asset's fair value over its book value is amortized over the life of the asset.
106
Equity method in the middle of the year.
When significant influence is acquired, the equity method is adopted from that date and going forward. Retroactive adjustments are not required. Forget all what was before significant influence
107
Bond liability amount
Discount or premium on the sale of bonds as well as the bond issuance costs are included in the carrying value of the bonds on the balance sheet.
$990,000 bond liability at 6/30 less $35,000 of bond issuance costs equals $955,000 net bond liability.
108
Gain/Loss on bond retirement
FV
+ Unamortized bond premium
-Cash paid
109
Carrying value of the bond in the balance sheet
Purchase Price
- Accrued interest
- Amortization of bond premium (remaining amortization*15/75)
110
total tax expense for the period
Current Income Tax
+Tax Liability increased
-Tax Asset increased
111
If Lessee classified lease as Finance
Lessor should classify it Finance as well
112
For lease use
IMPLICIT RATE
113
Deferred income tax liabilities
- Increase in prepaid insurance-Prepaid insurance would be deducted for tax purposes in the year in which it was paid, but the expense belongs to other period. Pay less tax now, but more in next year.
- Increase in rent receivable. Income earned but not received in cash, Tax will be paid in next year.
114
Translation to the functional currency
```
Capital accounts (Stock and APIC)- historical exchange rates.
IS accounts-weighted average
BS Accounts-Year end exchange rate
```
and liabilities.
115
Deferred tax liability.
If Tax depreciation exceeds book depreciation*Rate next year
116
What tax rates to use for deferred tax assets and liabilities
he tax rate used to compute the DTA or DTL should be the enacted tax rate for the year the temporary difference is expected to reverse.
117
DTA and DTL
All deferred tax liabilities and assets must be offset (netted) and presented as one amount (a net non-current asset or a net non-current liability)
118
Year end rate vs historical rate
When the translation method is used, all assets and liabilities are translated to the reporting currency using the current (year-end) exchange rate, while common stock and additional paid-in capital are translated using historical exchange rates.
119
Current tax liability vs current tax expense
$300 current income tax expense (taxable income of $1,000 × 30%).
Lability-deduct permanent and temporary differences
120
Income tax expense
1. Tax Return Income*Tax rate=Tax payable
2. Temporary difference=(DTA 2 year*10%unrealized)-DTA 1 year
3. Tax payable-reduced DTA
121
Income tax expense
Income tax expense—current
+Income tax expense—deferred
-Income tax benefit—deferred
Total income tax expense
122
Profit for lessor
PV of of the selling price - Cost
123
Total amount of interest revenue
1. CF for 1 year=FV/annuity factor
2. Total CF for *# of years
3. Interest =CF-FV
124
Lease liability
IMPLICIT RATE!
125
Net gain to be reported in OCI on Pension
Expected return on plan assets-actual return on plan assets
1.Expected return=Beg FV× Expected rate of return
2.Actual return:
Beg FV
+Contributions
-Benefits paid
+Plug (Actual return on plan assets)
End fair value of plan assets
126
Attribution period for pension
Date of hire -full eligibility date.
127
Current asset construction in progress
Cumulative cost+GP-Billing
128
Goodwill to original partners
1. Start with new member %, calculate total capital, e.g 1/3 2/3. Calculate total new
2. Calculate actual capital
3. Difference=goodwill
129
IFRS carrying value of the bond
Price (premium/discount)-BOND ISSUE COST
130
PERMANENT DIFFERENCES IN TAX
Pretax income
-Municipal bond (not taxable)
+Life insurance premium there company is beneficiary (non deductible add back)
131
Return on equity
Net income-Preferred dividends/Avg. Total Equity
132
Governmental activities net position is computed
Fund Balance
+Capital asset
-AD
-N
133
Income under equity method
Ignore dividends
134
Asset Retirement obligation
DR Asset Retirement cost (PV)
| CR Asset Retirement obligation
135
Interest coverage ratio
EBIT/Interest Expense
136
Income under FV method (less than 20%)
DR Cash
| CR Dividend revenue
137
Income under equity method (more than 20%)
```
DR investment (minus %Dividends paid) in Balance Sheet!
CR Investee income (income statement)
```
138
Service cost component of net periodic cost measured using
PBObligations
| Service cost-increase in PBO for current year service
139
City adopts cash basis budget. What basis s/b used in budgetary comparison?
Cash.
140
Goodwill US GAAP
FV (Price Paid for SUB)-FV net assets MKT price
141
Bon issue price
Is SUM of PV of maturity value(PV of 1$*$1,000 at YIELD)+(Interest payment Annuity $1,000*6%*PV PV of interest annuity at YIELD)
142
Hospital Revenue
Patient service
- Minus Charity Care
- Contractual adjustments (difference rev-fees negotiated with third party)
DO NOT INCLUDE PROVISION FOR BAD DEBT
143
Land and other real estate by endowments in government permanent fund
FAIR VALUE!
144
Loss on disposal of land
Total cash cost-(Original Note amount-Principal paid exclude interest)
145
Attribution period PBO (pension)
From date of hire till full eligibility date
146
Statement of CF
Conversion of debt to equity should be disclosed as supplemental information in the statement of cash flows.
147
Major government funds
Major funds: includes qualification as to revenues, expenditures/expenses, assets, or liabilities that are at least 10 percent of the associated total for ALL governmental OR enterprise AND at least 5 percent of the total of the associated totals for ALL governmental AND enterprise funds.
148
IFRS fixed asset the same as GAAP
Freight capitalized
Interest in expensed.
Interest is capitalized only if asset self-constructed
149
Total net periodic pension cost
- Service cost
- Interest cost=Beg PBO*discount%
- Return on Plan Assets=Beg FV Assets
- Amortization of Prior Service Cost (Unrecognized Prior Service Cost/Remaining service Life)
- G (Amortization of gains/losses)
- Amortization of transition asset (Net Transition asset/years of remaining service life)
150
Company investment in it's own stock is treasury stock
Exclude from total Equity
151
Warranty expense
All cost recognized as expense in 1 year
152
Taxable income=Pretax-Municipal bonds+ Insurance where company benef
Effective tax rate = Income tax expense / Pretax income
153
Whenever income is recognized in the financial statement before it is reported as taxable income, a deferred tax liability should be reported
Even though a loss was recognized in Year 2, Accordingly, a deferred liability will still exist at the end of Year 2
154
Lessor profit on sale for finance sale type lease
PV of payments-Carrying cost
155
Depreciation (amortization) lease expense. for finance lease
(PV of payments-Salvage value)/useful life
156
WACSO calculation. Weight each change separately.
Stock split and stock dividend must be treated as though it occurred at the beginning of the year. Count conversion of preferred shares.
157
Non monetary exchange with boot received
DR Cash
DR New truck (plug)
CR Gain in exchange (Cash/FV of new truck)
CR Old Truck (net value)
158
Consolidated stockholders' equity
Parent Equity+Non controlling interest+NCI share of net income*-NC Share of dividends
```
NC Share of Net Income=
Retained Earnings Beginning
+Net Income (Plug)
-Dividends
_____________
Ending Retained Earnings
```
159
When information regarding external customer of a segment s/b disclosed?
More than 10% of TOTAL ENTERPRISE revenue
160
Company should report a liability related to the plan
The unfunded projected benefit obligation
161
Calculate ending retained earnings
Ending retained earnings = Unadjusted Retained earnings − Cash dividends − Property dividends. Do not include excess of proceeds of treasury stock sold. Treasury stock affects retained earnings only if the shares are sold below cost and the difference exceeds any additional paid-in capital from treasury stock.
162
Non for profit interrelated organization
Are both able to influence the operating and financial decisions + ongoing interest in net asset of the other
163
Equipment accounted in governmental fund and government wide FS
In governmental fund- expenses, no effect on assets
| In government wide FS-reduction of the accrued liability in
164
If boot paid >25% of total consideration (FV+cash) in non monetary exchange
Commercial substance. Monetary exchange. Recognize gain
165
CF Statement
Conversion of debt to equity should be disclosed as supplemental information in the statement of cash flows.
166
Preferred stock fully participated
Common shares treated the same way as preferred
1. Calculate dividends for pref and common (same %)
2. The remaining dividends split proportionally
167
Large stock dividends (.20-25% of outstanding stock)
Small stock dividends-PV mkt price
Record at par value
168
Total Net periodic pension cost
Service cost
-Gain
+Amortization of unrecognized prior service cost
+Annual interest on pension obligation
169
Components of net periodic pension cost (net pension expense) SIR AGE
DR Pension Expense
DR Net pension Cost
CR Pension Liability
CR OCI
```
-Service cost
+Interest cost
-Return on plan assets
+Amortization of prior service cost
-Gains and losses
+Amortization of Existing unrecognized net obligation or unrecognized net asset at implementation
```
170
Funded pension status
FV of plan assets-PBO (overfunded-non-current asset/underfunded liability)
171
What amount s/b reported in OCI related to pension cost. DR OCI if Assets and Gain because all decrease expense. CR if obligation and loss
Unrecognized prior service cost
Unrecognized transition obligation
-Unrecognized net gain/+loss
ALL net of TAX *(1-%)
172
Recognition of prior service cost
Increase in Net periodic cost before tax
173
Consolidated financial statements
Sum up for subs if more than 50% ownership
174
Defer tax liability
Whenever income is recognized in the financial statement before it is reported as taxable income, a deferred tax liability should be reported.
175
Equity method income earned from inverstment
Net income*% owned
| -minus %amortization plant, inventory (FV more than BV)
176
Accountability
Paramount objective of government financial reporting
177
What amount of bond premium s/b amortized in gov fund?
Bond premium/discount is not amortized in its governmental funds
178
Non monetary exchange with commercial substance
if a nonmonetary exchange has commercial substance, the transaction is accounted for using the fair value of the asset surrendered or received,
179
For purposes of government-wide financial statements, internal service funds
Gov activities in gov wide FS
180
Cash basis understates Revenue by decrease
AR-A net decrease in A/R means cash collected exceeds revenue recognized on the accrual basis. This would mean higher cash basis income than accrual basis income.
Accrued Expenses-A net decrease in Accrued Expenses means cash paid to reduce Accrued Expenses was more than the accrual basis expense recorded. This would mean a higher expense under the cash basis than under the accrual basis. This yields a "yes" for Accrued Expenses.
181
Sell art to buy art
Investing activities
182
Proceeds from general obligation bonds which are to be used to finance the construction
Capital projects fund
183
Financial statements prepared in accordance with the provisions of GASB 34 will include
include a comparison of the government's budgeted and actual performance
184
R&D cost
Capitalize:
Equipment with future used
Cost to be reimbursed
Expense the rest
185
Exchange rates
AR gain if sell abroad in US -cheaper RUB -AP loss if RUB decrease-bought in $
186
Stock dividends and stock splits are not considered income to the recipient
they reallocate the investment account balance
187
JE Stock compensation for employees
1. Grant Date-Nothing
2. DR Compensation Expense
CR APIC Stock options
3. Option Exercised:
DR Cash
DR APIC Stock options reverse
CR Common stock
CR APIC Common stock
188
Income Tax
Future deductible amount-apply rate
| Deferred Tax asset/liability- tax rate has been applied already
189
Deferred Tax Liabilities (Pay later)
| Expense first
Depreciation Expense Greater for Tax
| Goodwill amortization
190
Deferred Tax Liabilities (Pay later)
| Revenue later
Prepaid Expenses
| Installment sales, contractual
191
Deferred Tax Asset (Pay now, save later)
| Expense later
Warranty Expense
| Bad debt Expense
192
Deferred Tax Asset (Pay now, save later)
| Revenue first
Unearned rent
| Unearned interest
193
Gov accounting. Noncapital financing:
Operating :sales of goods and services, interfund reimbursements, etc.
Capital and related financing activity: acquisition, construction or improvement of capital assets
Investing activities: cash receipts and disbursements associated with the purchase and sale of equity or debt securities
* Proceeds or payments related to borrowing not attributable to the acquisition, construction or improvement of capital assets.
* Cash receipts or payments related to grants or subsidies not attributable to capital purposes.
* Property taxes not designated for capital purposes.
* Cash paid to other funds (other than for interfund services).
194
Total proceeds from bond issuance
Issue price 80.94+accrued interest
195
Cash paid to suppliers
COGS
-Decrease in inventory
+Increase AP
196
To write off AR
DR Allowance
| CR AR No Effect on Net Income, No effect on Assets
197
To collect AR previously written off
No effect AR
Allowance increased
```
1. Restore written off AR
DR AR
CR Allowance
2. Cash collected
DR Cash
CR AR
```
198
F.O.B. destination means that title passes when received by the buyer, and that packaging, shipping, and handling are costs of the seller, NOT included to COGS
F.O.B. shipping point means that title passes when the goods leave the seller's location and that shipping is a cost of the buyer. Included in COGS
199
equity method
under the equity method undervalued asset amortization will decrease the investor's reported investment income, but cash dividends received will only affect the balance sheet investment account.
200
FV and Carrying Value of financial instruments
Both must be disclosed
201
Warranty cost recognized
When machine are sold
202
Note payable reported in BS
Principal-payment of principal + accrued interest
203
Exchange rate was One dollar to 20 euro
Increased to 21 euro. $ getting stronger, euro getting weaker. Gain recognized
204
the current portion of income tax expense is the amount payable to IRS.
Taxable income*%
205
Compensation cost for restricted share plans i
Total compensation cost = Market price of the share on date of grant
206
Defined benefit pension plan reported only
on income statement and BS
207
100% Stock Dividend-stock split
5% stock dividend is a true stock dividend, as opposed to a stock split effected in the form of a dividend. The fair market value of the stock dividend at declaration date is capitalized (transferred) from retained earnings to capital stock and paid-in capital.
DR Retained Earnings
CR APIC
208
Cash paid to suppliers under direct method
COGS-decrease in inventory + decrease in AP (more cash paid)
209
Net income from cash to accrual
| Dividends not included
Operating activities
- Depreciation
- Goodwill impairment
210
From accrual to cash from operating activities if Net income given
DON'T INCLUDE NONTRADE NOTES PAYABLE
```
Net Income
+Depreciation
-Gain on sale
-Increase in AR
-Increase in prepaid expenses
+Increase in AP
```
211
From Net Income to cash
-Increase AR-bad less cash received
+Decrease in prepaid-good more cash saved
+Increase in AP cash saved
212
If term of note receivable doesn't exceed 1 year
Recorded at face amount
213
Lease
Lessee-Finance, Lessor-always finance
214
General government fund revenue
Transfers form other funds not a revenue, other financial sources
Taxes+ licenses and fees+ Intergov rev
215
Total consolidated stockholders equity if less than 100% acquired
Common stock
APIC
Retained earnings
+NCI:
NCI:
Price
+Share of net income after dividends
&Share of dividends
216
Allowance for uncollectible accounts squize
Allowance for Uncollectible Accounts
Beginning balance 12-31-Year 1
$90,000
Add: Bad debt expense
16,000
Subtotal
106,000
Less: Actual bad debt write-off
(6,000)
← squeeze
Ending balance 12-31-Year 2
$100,000
217
Allowance for uncollectible accounts squize
Allowance for Uncollectible Accounts
Beginning balance 12-31-Year 1
$90,000
Add: Bad debt expense
16,000
Subtotal
106,000
Less: Actual bad debt write-off
(6,000)
← squeeze
Ending balance 12-31-Year 2
$100,000
218
Calculate profit/loss on extinguishment of bond
FV
-Unamortized portion of discount
-Unamortized bond issuance cost
Net carrying Value
Purchase price- Net Carrying value
219
Increase in stockholders equity
"gain" (assuming no income tax effects) and the issuance of new stock increase stockholders' equity
220
Impairment of loan
PV of renegotiated note (reduced # of years the same % for principal, reduced % for interest)-Face value-Accrued interest for years before renegotiation
221
Current liabilities Note Payble
Principal amount to be paid in next year
| + Accrued interest at Dec 31
222
Recognition of a discount on the note receivable
Non-interest bearing note
223
Realized/Unrealized gain/loss on common stock sail
1. Change in FV vs Price (unrealized loss/gain) charger to IS
2. FV-brokerage fee&tax=Realized loss/gain
224
Goodwill
Goodwill = Fair value of subsidiary - Fair value of subsidiary's net assets
225
Cash paid to suppliers direct method
COGS+(change in inventory if decrease-)+(change in AP keep the initial sign)
