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Question 1

The interest calculations for bonds under effective interest method of amortization

Answer 1

• Interest payable = beg FV * contractual interest rate
• Interest expense = beg CV * effective interest rate

Question 2

Amortization of leasehold improvements should be over the life

Answer 2

• of the improvements or the remaining life of the lease, whichever is shorter

Question 3

When assets are transferred in a troubled debt restructuring, the asset (real estate) is adjusted to

Answer 3

• fair value and an ordinary gain or loss is recorded for the difference between the liability being wiped clean and the FV of the asset transferred

Question 4

According to SEC

Answer 4

• large accelerated = market val of common equity of $700mil or more
• accelerated filer = market val of common equity of $75mil or more
• small reporting co = market val of common equity of $75mil or less and annual rev less than $100mil

Question 5

Unrealized gains and losses are reported as follows

Answer 5

• trading debt securities - reported at fair value with unrealized gains and losses included in earnings (along with “realized” gains and losses, if any).
• available-for-sale debt securities - reported at fair value with unrealized gains and losses reported as a separate component of other comprehensive income until realized

Question 6

Unrealized gains on available-for-sale (AFS) securities are recorded in

Answer 6

• other comprehensive income (OCI) on the BS

Question 7

Retro or Pro spective changes

Answer 7

• acctg principle - retro (prior/RE) - ex: chg in inventory valuation method (lifo to fifo)
• estimate - pro (going fwd/future) - ex: depreciation method chg

Question 8

For trading securities

Answer 8

• Unrealized losses or gains effect the balance
• Interest income does NOT effect the balance

Question 9

Purchases and sales of available-for-sale securities are included in

Answer 9

• net cash used in investing activities

Question 10

The following are included in cash flows from financing activities

Answer 10

• bonds
• dividends
• treasury stock
• LT debt

Question 11

When preparing the statement of cash flows using the indirect method, the amortization of a bond discount should be

Answer 11

• eliminated by adding the amount back to net income in the operating section

Question 12

At date of acquisition, the consolidated equity will be equal to the

Answer 12

• parent company’s equity plus the fair value of any noncontrolling interest