FAR Memorization Flashcards
(13 cards)
What are the 6 items in the summary of significant accounting policies?
1) Revenue recognition policies
2) Inventory costing system
3) depreciation method
4) Long-term contract accounting
5) Criteria for classification of investments
6) Basis of consolidation
Process for consolidated financial statements
1) Record account balances of separate entities on the consolidating worksheet
2) Record adjusting entries
3) Record eliminating entries
4) Complete consolidating worksheet
5) Prepare formal consolidated FS from worksheet
Steps to report a business combination
1) Combine assets and liabilities
2) Eliminate parent investment account and subsidiary equity
3) Eliminate intercompany transactions
What are the 4 major financing activities for the CF statement?
1) Issuance of common and preferred stock
2) Treasury stock transactions
3) Dividend payments
4) Borrowing and repaying debt (principal payments)
What are the 4 major financing activities for the CF statement?
1) Collection of principal on loans made by entity
2) Acquisition and disposal of long-term assets
3) Proceeds from corporate-owned life insurance policies
4) Major repairs (capitalized to PPE)
During a period of rising prices what effect on purchasing power do monetary items have for the following
Assets
Liabilities
Nonmonetary Items
Assets - decrease
Liabilities - increase
Nonmonetary items - no effect
What are the 7 costs included in inventory?
1) Acquisition cost (net of trade discounts)
2) Warehousing cost
3) Insurance, repacking
4) Freight in (paid by buyer) FOB shipping point, destination is a selling cost for the supplier
5) Transportation of consigned goods
6) Costs to bring to saleable condition
7) Normal spoilage
How are the weighted average and moving average costing methods treated (perpetual or periodic)?
weighted average - Periodic (end of the period)
moving average - perpetual (Avg cost of units at time of each sale)
How do you calculate ending inventory under the retail inventory method?
1) Find the Goods available for sale
Beginning inventory + purchases + freight in + net markups = goods available for sale
2) calculate Goods available for sale percentage
GAFS at cost / GAFS at retail
3) Calculate ending inventory at retail
GAFS - net markdowns - losses and employee discounts - sales at retail
4) multiply ending inventory at retail by goods available for sale percentage
What is the template to use for dollar value LIFO questions?
Picture this horizontal not vertical.
End Inv @ current cost
Price index
End inv @ base cost
Layer @ base cost
layer @ current cost
What 4 criteria must be in a contract in order for it to be a contract?
1) Parties are committed to perform
2) Contract rights and payment terms are identifiable
3) Contract has commercial substance
4) Collection is probable
What are the three types of marketable debt securities, how are each reported on the balance sheet, and where are holding gains and losses reported?
Trading - FV - net income
Available for sale - FV - comprehensive income
Held-to-maturity - amortized cost - N/A
How are trading, available for sale, and held to maturity securities affected by the fair value method?
Trading - no effect
AFS - unrealized gains are reported in NI instead of comprehensive income
HTM - carrying value is adjusted to FV on each BS date with increase/decrease recognized as a component of net income
