Flashcards in Test 2 Deck (45):

1

## What do you associate an interest swap with

### Think of a loan from a bank, you pay interest to them and also are involved with a counter party

2

## How would you set up an interest swap table

###
Rate

Floating Rate

1. Fixed PMT (Rate x Prin.)

2. -Floating PMT (Floating Rate x Prin)

3. =net increased receipts

NPV(floating rate x future cash pmts) =#

Principle - # = Gain/loss on FMV

3

## What are the JE's for interest rate swaps

###
Issuance: D: Cash C: NP

Interest: D: Interest Expense C: Cash (#1)

AND

D: Interest Exp C: Cash (#3)

FV Adjustments:

D: NP C: Holding Gain

AND

D: Holding Loss C: Interest Rate Swap

4

## What do you do after the first year of an interest rate swap

### same steps but the FV will be based off an updated value and the new floating rate

5

## What're the two steps to finding impairment of PPE,finite life Intangibles

###
1. Sum of undiscounted cash flows < Book value means there is an impairment. If not met, there is nothing

2. Do BV-FV

6

## How do you go about impairment under IFRS

###
You just compare BV to the higher of the PV or (FV-cost to sell)

aka

BV-(Higher of PV OR FV- Costs to sell)

7

## How do you find impairment of an indefinite life intangible

### One step: BV-Estimated FV

8

## Goodwill is only recognized for impairment when you buy what portion of a company

### the whole damn thing

9

## How do you find impairment for goodwill

###
First is FV less than BV? if so....

Impairment= BV - Implied value of goodwill

10

## What does simple capital structure mean

### doesnt have potential shares, either has commons stock or non-convertible preferred stock

11

## complex capital structure means

### they have at least one convertible share option

12

## Stock splits and stock dividends do what

### can change the # of shares outstanding because they are RETROACTIVE (apply as if they were there all year)

13

## Basic EPS equation

### (Net income-pref. div.) / Weighted #(MULTIPLY BY MONTHS) of shares outstanding

14

## Incremental shares equation (what to add to the denominator of diluted)

### Assumed shares x ((Market price per share - Excersised price per share) / Market price per share))

15

## Dealign with Diluted, how do you go about doing the impact and what do you do with that number

###
Divide:

1. Principle x rate ($120,000 bond x 8.3%)=Interest

Interest * (1-tax rate)

BY:

2. Shares Completed ($120,000/$100 per share)*split of 6 per share

That gives you impact. Rank from lowest from highest. Starting with lowest, add 1 and 2 to the numerator and denominator of EPS equation to find Diluted EPS

16

##
Dilutive convertible bonds affect both the numerator and the denominator in computing diluted

EPS.

### True

17

## Basic earnings per share ignores:

### All potential common shares.

18

##
When several types of potential common shares exist, the one that enters the computation of

diluted EPS first is the one with the:

### Lowest incremental effect.

19

## Which of the following results in increasing basic earnings per share?

### purchasing treasury stock

20

## Equation for dilutive EPS

###
Principle x rate (100,000. 5% bond)=Interest

Interest *(1-taxrate)=Interest costs added to numerator

Denomiator: Add the result of multiplying bonds by # of shares it converts into

21

## When a companys only potential common shares are convertible bonds:

### Diluted EPS will be the same whether or not the bonds are converted.

22

##
When we take into account the dilutive effect of stock options, rights, and warrants in the

calculation of EPS, the method used is called the:

### Treasury Stock Method

23

##
All other things equal, what is the effect on earnings per share when a corporation acquires

shares of its own stock on the open market?

### Increase

24

## Even if it says the preferred dividends weren't paid or declared do you stilll subtract from the numerator?

### Heck YES!

25

## It's a finance lease for the lessor if one of the following of

###
BOSAMPS is followed

B-BPO

O-Ownership Transfer

S A-Substancially All (90%) of assets fair value

M P- Major Part (75%) of the economic life

S- Specialized in nature

26

## If it doesn't follow BOSAMPS what is it

### Operating Lease

27

## If it doesnt fall under Financing or operating it is

### Either Sales type with/without profit

28

## Lessee (Current User) Entries (Finance Lease)

###
Acquisiton: D: ROUA C: Lease Pay.

First Pay: D: LP C: Cash

Second: D: LP D: Int. Exp C: Cash

Amortize: D: Amort Exp C: Right of Use Asset

etc...

29

## If its an operating lease what changes on the Lessor Side of things

### They record a credit to Deferred Rent rev in the initial entry and then record rent revenue and depreciation as time goes on

30

## Components of AnnualPension Expense

### SIR AGE

31

## What is SIR AGE

###
Service Cost for the Year

+Interest on liability

-Return on assets

+Amortization of prior service cost

+/-: Gain/Loss

=Expense

32

## JE Operating Lease for the Lessor

###
1/1: D: Cash C: Def. Rent Rev.

12/31: D: Def. Rent Rev. C: Rent Rev

D: Cash C: Rent rev

D: Dep Exp.. C: A/D

33

## JE Operating lease for the lessee

###
1/1 D: ROUA C: LP

D: LP C: Cash

12/31:

D: LP

D: Int Exp

C: Cash

D: Amort Exp C: ROUA

34

## Long term contract under revenue recognition over time: how do you find the Revenue and the Gross Profit

###
First Find the % complete: Cost incurred during the year (add the cost incurred during for each following year) / First Year cost incurred + Estimated costs to complete as of year end...Each time you go through this, add the most recent estimated cost to complete figure. But do not include the initial estimate amount

Multiply this % by the actual total contract price... This number is your revenue.

IF first year subtract the costs incurred to get gross profit

IF NOT first year, Subtract the revenue by the cumulative revenue and then subtract that by the year's cost incurred.

35

## Journal Entries for Long term contracts

###
Initial: D: Construction in progress C: Various Accounts

Billings: D: AR C: Billings on contract

Collection: D: Cash C: AR

Gross profit:D: Construction in progress(GP) D: Cost of construction(Current year cost) C: Revenue

36

## What account is construction in process? What does it lppk like on the BS

###
Its a current asset (inventory)

Less: Billings

If billing are more than the construction in progress it creates a liability

37

## When do you record a gain/loss in respects to interest rate swaps

###
Record a Gain first and then a holding loss if Floating>Fixed

Record a loss first and then a gain if Fixed>FLoating

38

## How do you deal with premiums or discounts with respect to diluted EPS/impact

###
For Premium and discount: (what it was sold for - face value)/life being amortized

Take that number and if PREMIUM SUBTRACT, IF DISCOUNT ADD to the first step and then multiply by (1-tax rate)

39

## If a project doesnt qualify for revenue recognition over time what do you do

### the revenue and costs will be recognized in the last year (lets say 2020) so you would add up all the costs incurred during the year, report the revenue of the contract(can't exceed stated price) and would plug for construction in progress.

40

## What increases PBO?

### Service Cost, Interest Cost,

41

## What increases Plan assets

### Contributions and return on plan assets

42

## Amortization decreases what aspect of pension

### OCI PSC

43

##
Preferred dividends are subtracted from earnings when computing basic earnings per share

whether or not the dividends are declared or paid if the preferred stock is:

### Cumulative

44

## For an opperating lease, how do you find amoritzation

### take the years interest payment and subtract it from the Cash paid

45