Gleim Flashcards
(165 cards)
1
Q
impairment loss IFRS doesnt compare ?
A
impairment loss IFRS doesnt compare carry amount vs miscounted CF;;
2
Q
wut r the limitation of financial reporting
A
use historical cost to measure asset/lia; use estimate; exclusion of some economic resources
3
Q
impairment loss of asset group
A
1) carry amount vs sum of undiscount CF; 2) carry amount vs fair value
4
Q
when to use units of production
A
use unit of production when asset service potential decline with use
5
Q
an entity dispose of nonmonetary asset in a nonreciprocal transfer G/L recorded at when?
A
G/L recorded when it transfer to another entity and a shareholder ;; recorded at FV of asset transfered
6
Q
lacked CS, paid cash < 25% , new book = ?
A
new book = carry value of old + cash paid
7
Q
under direct write of method, write off entry?
A
Dr bad debt exp, Cr A/R
8
Q
DEPS with income from continuing ops and loss from discontinue ops ?
A
income / (C/S + noncummulative converted to C/S)
inc - loss from discontinue / ((C/S + noncummulative converted to C/S)
9
Q
risk of accounting loss vs off B/S risk
A
risk accounting loss = AR - allowance
off B/S risk = account loss cant exceed amount recog as asset (Ex: recourse obligation on receivable sold)
10
Q
trade account receivable doesnt include wut?
A
trade AR doesnt inclue cash sale, doesnt inclue note receivalbe
11
Q
if equipment is permanently impaired and that 70k recovered over the useful life
A
the 70k will be the new base
12
Q
wut is the maturity amount for noninterest bearing note receivable ?
A
the maturity of a non-interest bearing note receivable is its face amount
13
Q
infrequently occurring gain, net income, find comprehensive income ?
A
infrequently occurring gain already included in net income so do not add it when calculating comprehensive income
14
Q
sold equipment for noninterest bearing note find G/L ?
A
compare cost vs present value of note
15
Q
suffer loss on customer bankruptcy after B/S date before issuance date, recog ? dis ?
A
no recognition, disclose only
16
Q
equity method, after date of acquisition, wut happen to investment account of investor ?
A
investment account increase/decreae by share of earning/loss of investee, decrease by its share of cash dividend received from investee
17
Q
cash surrender value ?
A
cash surrender value = annual premium x year - total insurance expense
cash surrender value = is non current asset
18
Q
when to use accelerated method ?
A
use accelerated method when asset is subject to rapid obsolescense
19
Q
carry amount of bond vs unamortized dis vs unamortized pre vs unamortized issue cost
A
carry amount - unamortized dis + unamortized premium - unamortized issue cost
20
Q
how to recog decommission lia (ARO) ?
A
the change in lia is recog in PnL , actual cost incurred vs carry amount of lia
21
Q
issue by government unit bond ?
A
rev bond
22
Q
wut bond pay interest only at maturity ?
A
deep discount bond (zero coupon bond) provide capital appreciation , not periodic interest income
23
Q
amount of interest expense gonna be higher in wut bond ? yr 1 or yr 2?
A
interest will be higher in year 2 as discount is amortized , because carry amount of bond increase , lead to higher interest rate
24
Q
find stated interest rate on bond under effective interest method ?
A
stated interest rate = cash paid / face amount ;; if semi, get cash paid x2
25
find effective interest rate ?
effective interest rate = interest exp / bond carry amount
26
estimated cost of inventory ? find COGS ?
estimated cost of inventory = ending inventory
find COGS = 1) find sale , use AR T account, sale= begin AR + ending AR - collected
2) rate of markup cost is 50% , COGS = sale / 150%
27
moving average method
moving average only work in PERPEPTUAL
| new weighted average computed after every purchase
28
fair value of FIFO inventory and land exceed their carry cost, how does it affect equity in earnings for the year under equity method ?
inventory excess = decrease in NI
land excess = no effect NI
adjustment for acquisition differentials (inventory , property, plant, equipment ) when assets depreciated or sold
29
under wut inventory method that it can affect NI with last minute purchase that can alter COGS ?
under LIFO
30
MD&A pertain to what ?
MD&A pertain to liquidity, capital resource, and result of expansion
31
find dollar value LIFO ?
1) find index price, 2) get layer change of base year * by index . 3) add this number to previous year dollar value LIFO
32
selling price of unsold gold on consignment of 130% cost and not included in ending inventory ?
this should not be included in AR , subtract off AR . Instead add this to inventory , 13k/130%
33
adjusting entry from average cost to LIFO ?
Dr COGS, Cr LIFO reserve;; LIFO reserve: allowance that adj inventory balance ( if LIFO affect is 55k , and account has 35k credi bal ;; must be credit 20k)
34
wut is realization concept ?
realization concept: 1) sale of asset for cash or claims for cash , 2) depreciated equipment was sold in exchange for a note receivable
35
when cost is failing, which one increase profit ?
when cost is failling, a change from FIO to weight average inventory increase profit
36
gross profit margin = 40% , what is COGS ?
gross profit margin 40% of net sale , COGS = 60% of net sale
37
a previously recog impairment loss may not be reserved under ?
previously recog impairment loss can NOT be reserved under GAAP;; if it held for sale, it can be reserved but gain is limited to previous write down
38
in a involuntary conversion, the determination of loss is based on ?
the loss will be based on = carry amount + removal/clean up cost
39
3yr1 issued 20 yr bond at discount ; 9yr6 bond quoted at 106 when excercise right to retire bonds at 105. Loss or gain on this ?
loss cuzz bond issued at discount and then retire early for more than carry amount
40
Owe 1.2 mil , paid 400k cash, also issue 80k share, $1 par at $1.25
what is trouble debt restructuring G/L JE ? find net increase in total equity ?
```
Dr lia 1.2mil
Cr Cash 400k
Cr C/S 80k
Cr APID 20k
Cr gain 700k
Increase in FV = 80+20+700
```
41
6yr1 issued 500k, 10% 15yr bond , pay semi bond , issue cost 6k, SL to amortize. 6yr 6 retire half of bond at 98, wut is G/L on retirement of debt ?
its semi , x2, 6yr1 to 6yr6 = 5 yrx 2= 10 ;; 10/15x = 10/30 , then * by 6000 , amortized = 2k, unamortized = 6-2=4k ;; carry amount = 500k +4k = 504k ;; then divide by 2 = 252k
42
defined benefit pension plan rule under IFRS ?
1) interest : recog in I/S
| 2) remeasurement of plan asset: recog in OCI , never reclass to PnL
43
wut is bearer instrument ?
bear instrument = coupon bond ; whoever present interest coupon is entitle to payment
44
disclosures of defined benefit pension plan ?
1) funded status of plan and amount recog in B/S
2) net periodic pension cost recog
3) recon of begin and ending bal of oligation
45
IFRS re-measurement of plan asset rule ?
IFRS : remeasurement of define benefit obligation recog in OCI, never reclass to PnL
Begin Fv + contribution - benefit paid + interest income on plan asset (=begin plan asset*discount rate) + remeasurement of plan asset = ending FV
46
if premium on bond payable is not amortize , wut is the effect of on interest exp and effect on stockholder equity ?
interest expense and carry amount of bond DECREASE each period when amortizing a premium ,
if premium is not amortize, interest = overstated, stockholder equity= understated
47
know loan payment at each end of year, find amount allocated to interest ?
1) get payment * present value
| 2) then * rate
48
carry amount of bond at initial , carry amount of bond at year end , SL ?
carry amount at issuance date= proceeds - interest accrued - issuance cost
carry amount at year end = face - unamor dis + unamor premium - unamor issue cost
SL = # * (months remaining in yer / total months )
discount amount = interest exp - interest payable (=cash amount)
49
wut is PBO ?
PBO = present value of benefit accrued to date based on FUTURE compensation level
APBO = based on current compensation level
50
how to find lia for pension benefit ?
1) find funded status of plan FV at year end = begin + return
2) find projected benefit obligation = service cost + interest + prior service cost
2) - 1) = lia
51
exchange of nonmonetary asset that facilitate sale to customer ?
based on carry amount of asset given up
if boot received < 25% ,1) potential gain = FV asset given up - carry value of asset given up
2) gain amount = (1) * cash/(FV asset received + cash)
52
what is the effect of unrealized gain on trading securities in tax ? DTL or DTA ?
trading , will be in IS , book income > tax income , tax less this year, tax more next year ,, DTL
53
wut is subsequent event ?
both provide evidence about conditions exist on BS and did not exist on BS
54
defer income tax expense = ?
defer income tax expense = net change of DTL and DTA ;; increase DTL - increase in DTA ;; or increase DTL + decrease in DTA
55
capital maintaince approach formula ?
capital maintaince approach = decrease in asset - capital stock sold + dividend declared
56
primary objective of income tax ?
primary objective of income tax = to recog defer tax lia and asset reported for future tax consequences
57
bad debt expense effect on tax ?
DTA , because book inc < tax income, tax more this year, tax less next year
58
which method has tax advantage of anticipating deduction ?
allowance
59
FIFO advantages ?
FISO ending inventory appropriate market value ;; year end inventory and COGS are same under perpetual and periodic
60
which include in inventory cost : insurance premium or advance commission ?
only insurance premium is included in inventory cost
61
wut is securtization ?
securitizaiton = transfer financial asset to a trust or other entity and sale of beneficial interests in that entity to investor
62
wut is factoring ?
factoring = a mean of discounting receivable on a non-recourse , non-notification basis
63
FIFO vs LIFO for lower of cost or market LCM ?
LIFO = use LCM
| FIFO and other cost = use lower of cost or net realizable value
64
IFRS inventory measure at ?
IFRS inventory measure at lower of cost or NRV (=sell price - cost of completion - disposal)
65
wut information public entity present about geographic areas ?
present external rev to foreign, rev from external customer, asset
66
dilutive EPS numberator = ?
income + after tax interest ;; DO NOT SUBTRACT OR ADD PREFF stock DIV
67
change from FIFO to LIFO , when to apply ?
from FIFO to LIFO, apply prospectively at earliest date practicle
68
sale price of 75k , which is 25% mark up, COGS = ?
COGS = sale price / 1+markup
69
consigment T account ?
consignment in T account = has debit bal = debit = adverise + delivery + installment + commission ;; credit = sale ;; final bal = remit to seller
70
freight cost for good shipped , paid by consignee, recorded as wut on consignee book ?
record as receivable on consignee book
71
when that u can only use weight average inventory ?
weighted average inventory only work in periodic system
72
% of sale vs % of AR , balance sheet vs IS approach ?
```
balance sheet (% of AR) = ending bal
IS approach , (% of sale) = the expense
```
73
exchange equipment for note in 3 year, know present value rate, find interest rev in yr 2 ?
discount the note , this is the initial carry amount, get carry amount * rate = interest for 1st year,
interest yar 2 =( cary amount year1 + interest year 1 ) * rate
74
hold the note then discount to bank, wut to remember ?
always find the maturity value first , maturity = face amount + interest for that whole note
2) then use this amount * rate * time remaining, let say note is 8, u hold for 3 months then discount to bank, u will * by 5 months
75
process of discounting
maturity amount = face + total interest recei (=Face*stated*noteterm)
bank dis = maturity*bankrate*noteremaining
cash receive = maturity amount - bank dis amount
carry amount of note = face + accrued interest (=face*stated*note elapsed)
G/L = cash received - carry amount
76
book income to tax income formula ?
pretax book income - municipal bond income (non taxible, so subtract) + life insurance premium (non deductible, so add back) - excess of tax depreciation = taxable income
77
how to find effective tax rate ?
taxable income * current rate = tax expense
effective rate = tax expense / taxable income
78
wut is potential common stock ?
potential common stock entitle holder to obtain CS
79
how impairment loss affect accumulated depreciation ?
debit the impairment loss to AD
80
how to report intem infrequent in occurance and unusual in nature or both ?
report them separate component of income , NOT NET OF TAX
81
equity method is not required when ?
equity method is not required when it is held for sale
82
capital expenditure vs rev expenditure ?
capital expen = betterment, benefit future period
| rev = costs, COGS, repair expense
83
obligation callable by credititor within 1 year ?
curr lia
84
machinery for own use vs machinery held for sale, interest exp ?
machinery held for sale = expense all
| machinery for own use = expense interest incurred after completion
85
weighted average accumulated expenditure use wut months ?
use remaining months
86
income tax basis differ from GAAP cuzz ?
recog rev, expensese in diff reporting period
87
warranty cost vs tax deductible ?
warranty cost is not tax deductible until it actually occur, result a DTA
88
how to disclose defer tax ?
disclose the temporary diff and operating loss , and tax credit carryforward
89
book depreciable asset > tax basis , effect ?
tax has higher depre expen , lower income in curr year, will get tax more , DTL
90
enactment rate change in Sep, become effective in Jan, changes in tax law initially reported ?
changes in tax laws initially report in period that include the enactment rate ( in interim FS for 3 months ending Sep)
91
didnot record insurance cost that related to inventory, effect on accrued lia and RE ?
```
understated lia (dr inventory, cr lia)
overstated RE cuzz COGS understated
```
92
how to pick probability tax benefit ?
pick the ones that > 50% probability and has highest amount
93
what type of asset that qualify for interest capitalization ?
asset that qualify for interest capitalization are asset constructed for the reporting entity's own use
94
how to present non-curr asset held for sale ?
report non-curr asset held for sale at 1 line item in the curr asset section
95
which : 1) do not provide for periodic payment of interest , 2) not secured by collateral ?
AP
96
curr income tax expense =
curr income tax expense = taxable income * enacted rate
97
Income b4 income tax exp 60k in year 2, tax rate 30% , 40k net operating loss carry forward from yr 1. max income tax benefit for yr 2?
tax benefit = 40k*30% rate
98
tax basis has higher ending accumulated depreciation , DTA or DTL ?
tax has higher AD , more taxable in future , DTL
99
use cost incurr for book , and completed contract for tax ; effects on the final year?
the first 2 years: more reve in boook than tax , DTL
| final year completion; report all rev in tax , decrease DTL
100
reporting LIFO inventory at lower of cost or market value , illustrate wut ?
illustrate the practice of convertism
101
an increase of prepair insurance cause wut in tax ?
an increase of prepaid insurance cause increase in DTL
102
an increase in rent receivable cause what in tax ?
an increase in rent receivable cause increase in DTL
103
bad debt exp effect in tax ?
DTA
104
installment sale effect in tax ?
DTL
105
gain on sale of land effect in tax ?
DTL
106
what is defer tax ?
defer tax is a lia that represent accumulated difference between inc tax exp reported on book and inc tax actually paid
107
how to find inc tax exp ?
inc tax exp = curr tax exp (=taxable inc*rate) + increase in DTL - increase in DTA
108
organization cost between book and tax , effect of DTL or DTA ?
book: expense all organizational cost ,, lower book inc, tax more this yer, tax less next year = DTA
109
curr maturity of long tern debt is wut lia ?
curr maturity of long term debt is current lia
110
how to get to taxable inc if : 1 ) depreciation in book > tax depre by 8k , 2) equity method result book inc of 35k , 3) 25k div , 80% deduction
pretax - excess book depre - untax equity inc + 80% div taxable
111
how to report rev from coupon ?
unearned rev at the cash received amount
112
how to report the receivable from sub ( 30% owned) ?
report the receivable separately
113
how to find cash collected on contract % completion ?
contract billing - AR
114
wut r the alternatives for estimating the standalone selling price ?
1) use the estimatate in seller's market 2) residual apporach
115
software cost capitalization (internal develop software): exp, capitalize, amortize?
expense : until tech feasiblity establish
capitalize: after tech feas...until available for sale
amortize : greater of SL or rev ratio( =( capitalize cost*project rev)/ life time rev))
116
cost of market research activities ?
cost of market research activities are not RnD cost
117
wut to pay attention about goodwill ?
goodwill is capitalized, and test for impairment but NOT amortized
goodwill is not subject to recoverability test cuzz it has indefinite useful life
118
internal develop patent , capitalize or expense ?
internal develop patent: expense the related RnD , capitalize: legal fee, sucessful defending , amortize shorter of useful life or legal life
119
in IFRS, if CGU has impairment loss ( carry amount > recoverable amt) wut to do ?
impairment loss must reduce all goodwill to zero first
120
if gross margin = 25% of sale , COGS ?
COGS = 75% of sale
121
RnD cost expense vs capitalize ?
1) cost of equip acquired, constructed is RnD expense when it use only on research and have no alternative future use
2) RnD expe = salaries, design , testing prototype
122
a long lived asset is measure at the lower of carry amount or fair value minus cost to sell if it is ?
held for sale
123
numerator of dilutive EPS ?
NI + - divident on preff stock + after tax interest (=face*stated rate*discount amortization)
124
when impair of long lived asset become loss ?
impair: when carry amount > fair value
loss: when carry amount > undiscount CF
125
equity ratio ?
equity ratio = equity / total asset
126
if ratio > 0 , equal decrease in numerator and denominator ?
increase ratio
127
journal entry for when customer return invoiced goods for which they have not paid ?
Dr sale return , Cr Ar
| Dr inventory, Cr COGS
128
what is the stock split effect on C/S ?
stock split decrease the par value on each share, increase # of share
129
distribute dividend effect on C/S ? entry ?
distribute dividend has no effect on C/S
| Dr RE, Cr APIC, Cr Cash
130
treasury stock at cost method, effect on # of C/S ?
doesnt affect C/S account when TS bought and sold at cost method ,, it just increase # of share
131
RE appropriation can be used to ?
RE appropriation can be used to restrict earnings available for dividend
132
JE for issuance of bond with detachable warrant ?
Dr cash (=$*share excercise at buy price) , Dr warrant (=if 90% exercise * $ wut was credit to warrant initially) , Cr C/S, Cr APIC
133
how to find bond discount when know total proceeds + fair value of warrant attach ?
(FV of bond / total FV bond + FV warrant)*total proceeds
134
8yr1, 500k 1 year , noninterest bearing note, discount at 10.8% , use SL method, carry amount at dec 31 yr1 ?
discount amt = 500k*10.8% = 54k ;; begin carry amount = 446k ; SL amortization = 446k +54k*5/12
135
how to find begin ARO? period depreciation ARC ? yr 2 accretion expense ?? settlement loss ?
1) begin ARO = undis CF*present value at credit adj risk free rate
2) depre = (1)/# of year
3) accretion exp = (begin ARO*CAF rate)+begin ARO
4) settlement loss = watch out for the yr
136
wut financial instrument issued by a public company should be reported on issuer book as a lia on date of issuance ?
C/S that contain a unconditional redemption feature
C/S, preff that is not redemable is treated as equity
137
weighted average expenditure when there is purchase land and progress payment /
(purchased land * # remaining/12 + progress payment*#remaining/12) * rate
pick the lower of this or total loan interest
138
future contract G/L entries , at inception vs end of yr vs settlement ?
@ inception = no entries
@ end of yr= Dr future contract , Cr Unrealize gain ( this gain go to OCI)
@ settlement = relass gain from OCI to NI , Dr Cash , Cr future contract
139
average total asset formula
average total asset = net rev (=avg AR*AR turn over) / total asset turnover
140
price to earning ratio
price to earning ratio = market price per share / basis EPS
141
which FS analysis express the final items as a % of base year amount ?
horizontal common size analysis
142
foreign curr transaction G/L report where ?
income
143
foreign curr translation reported where
OCI
144
Band use equity method to account for investment in Guard, how should Band record 2% stock dividend received from Guard ?
this is STOCK DIV ,, just a memorandum entry reducing the unit cost , this apply for both Fair value and equity method
145
wut is nonreciprocal transfer ?
transfer of asset, services in 1 direction , record at fair value when transfer to another entity or a shareholder of the entity
146
JE to declare property div , effect on RE ? if property carry amount 60k, FV 70k ?
decrease RE 60k (=net effect of 70k - 10k gain)
147
2-1 stock split vs 10% stock div ?
stock split : has no effect on the account , decrease par value of C/S
10% stock div: Dr RE (Fair value of stock) Cr capital stock acc (par value), Cr APIC ( excess of fair value over par value) ;; RE decrease but total equity no change
148
liquidating dividend effect ?
liquidating dividend result in distribution in excess of corporate's RE ;; effect: decreaes contributed capital (C/S + APIC)
149
IFRS impairment loss ?
IFRS impairment loss may be reversed ,
compare carry amount vs recoverable
recoverable = greater of value in use (present value of discounted CF) or net realizable value (sale proceed less cost to sell)
150
wut to do with unamortized cost of replaced software for internal use ?
when software is replaced , unamortized cost of old software is expensed
151
estimate uncollectible expense using the ratio of past return loss from uncollectible account to past net credit sale , this follow accounting concept of ?
concept of matching
152
organizational cost in tax vs book ?
book; expense organizational cost;;;
| tax: captalize , and amortize over 15 years
153
IFRS , how to measure intangible asset ?
IFRS, measure intangible asset using cost model or revaluation model
154
legal fee ? expense or capitalize ?
legal fee = organizational cost = expense
155
how to treat underwriter fee for initial stock offering ?
treat underwriter fee for initial stock offering as reduction in the proceeds , not organizational cost
156
how to treat exploration cost and purchase of mineral right ?
exploration cost and purchase mineral right are capitalize item
157
how to record compensation expense when company issue restricted stock ?
at grant date = (# of share * $ price at grant date )/ # of years;;; if issue more at yr 2: yr2 shares*$ / # of yer , then add yr 1
158
effect of amortization of prior service cost in FS ?
prior service cost = cost of amendment initially recog as debit to OCI @ amenment date: Dr OCI, Cr pension lia
when prior service amortize: Dr pension exp, Cr OCI ;; increase OCI
159
fair value of plan asset formula ?
begin FV + contribution - benefit paid +- actual return on plan asset ( actual > expected -- gain ) = ending FV
160
how to find net gain loss for defined benefit pension plan ?
net of asset gain (=actual return - expected) and lia G/L (=from PBO formula)
161
PBO formula =
begin PBO + service cost + interest cost + prior service cost - prior service credit - benefit paid + lia loss- lia gain = ending PBO
162
previously recog impairment loss ?
previously impairment loss can not be reversed under GAAP
163
income bond vs other bond ?
income bond pay interest only if the issuing company has earned the interest , the principal still be paid on the due date
164
periodic pension expense =
service cost + interest cost (=(begin PBO+prior service cost)* discount rate) - expected return on plan asset (=begin FV*expected rate) +- amortization of net gain, loss (=gain - 10% of (greater of begin PBO or Fair value)) +- amortization of prior service cost
165
how to depreciate capital lease ?
depreciate lease over asset life when lease contain a bargain purchase option
