What is the principal amount of a noninterest-bearing note?
Present value of the face amount discounted at the yield rate on the note.
What is the international treatment of debt issue costs?
Reduction in the proceeds from the debt.
What is the
interest revenue
or
expense
on a note?
Effective interest rate × Net receivable or payable balance at the beginning of the period.
The interest revenue or expense on a note is computed by taking the effective interest rate times the net receivable or payable balance.
List the two steps of Dollar Valued (DV) Last In First Out (LIFO) Retail.
- Apply DV LIFO;
- Multiply by the cost ratio.
List the formula for Number of Days' Sales in Accounts Receivable (AR).
365/ AR Turnover.
What financial statements are required of an entity in liquidation?
A statement of net assets in liquidation and a statement of changes in net assets in liquidation.
When is revenue recognized under accrual accounting?
Revenues are recognized when earned and collection is reasonably assured, regardless of the period of cash collection.
Define "discount on note" for a note exchanged for cash and other privileges.
The amount of noninterest revenue recognized over the term of the note.
What comprises United States Generally Accepted Accounting Principles (GAAP)?
The Financial Accounting Standards Board (FASB) Accounting Standards Codification, comprise authoritative U.S. GAAP for publicly traded companies, Securities and Exchange Commission (SEC) pronouncements are also GAAP.
What is the required accounting if a change in an investor's level of ownership results in a loss of significant influence, but the entire investment is not disposed of?
- Stop using Equity Method
- Account in FV either as AFS or HTS.
- Adjust to FV based on date significant influence was lost
- Difference between FV and CV as gain/loss in current income.
List the
Multi-step Income Statement
Under what conditions does International Financial Reporting Standards (IFRS) No. 9 permit an investor to elect to report gains or losses from changes in fair value of equity investments in other comprehensive income, rather than through profit and loss (net income)?
If the investor does not hold an equity investment for trading purposes, the investor may elect to report changes in fair value through other comprehensive income, rather than through profit and loss (net income). The election must be made when the investment is first recognized and subsequently cannot be changed.
What is a stated rate?
Rate stated in the note and determines the cash interest due on the note each period.
What is the income statement effect of the fair value option applied to financial liabilities?
Recognize gain or loss for the change in the fair value adjustment of the liability during the period.
What is in the cost/retail numerator?
Net purchases at cost.
Which is always larger, margin on sales or margin on cost?
Margin on cost.
What is an
Imputed Interest Rate?
Also known as the
Debtor's incremental borrowing rate.
An imputed interest rate represents the rate at which the borrower could obtain financing from a different source.
List the return on total assets formula.
(Net Income + Interest Expense (net of tax)) / Average Total Assets.
What is the impairment test for definite life intangibles?
Two steps:
- The book value (BV) of the definite life intangible is compared to the recoverable cost (RC) of the intangible asset. If the BV > than the RC then
- BV compared to fair value (FV). If BV > FV then impairment loss = BV - FV.
When is liquidation imminent?
A plan for liquidation approved by the person (s) who have the authority to make the plan effective or a plan for liquidation is being imposed on the entity by other forces (i.e., forced bankruptcy).
List the formula for working capital.
Current Assets - Current Liabilities.
How do you calculate
Gross Profit % ?
(Sales-COGS) / Sales
At the time an investor makes an investment that gives it significant influence over an investee, what information must the investor determine in order to use the equity method of accounting?
At the time of investment, the investor must determine:
- Book value of assets and liabilities of investee;
- Fair value of assets and liabilities of investee;
- Allocation of any difference between cost of investment and fair value of investee's assets and liabilities.
What amount of revenue is recognized for a period for an extended warranty when total warranty costs are estimable?
The total amount received for the extended warranty multiplied by the fraction: warranty costs incurred for the period divided by the total estimated warranty costs to be incurred.
What is the purpose of the operating section of the statement of cash flows under the direct method?
The purpose is to show all cash inflows and outflows for operating activities.
Is Goodwill Amortized?
NO, but it is tested for impairment.
How are deferred revenues expected to be earned more than one year from the balance sheet date classified?
Noncurrent liability.
Do we report interest expense on
Non-interest Bearing Notes?
Yes!
We report imputed interest on non-interest bearing notes.
List the two different methods of recording a note for which a discount or premium is recorded.
- Gross method;
- Net method.
How do we account for the transfer of an investment from held-to-maturity to held-for-trading?
Investment in Trading (FV)
Investment in HTM (Unamortized)
Recognize unrealized holding gain/ loss in net income.
List the return on owner's equity formula.
Net Income / Average Stockholders' Equity.
List the formula for times preferred dividend.
Net Income / Annual Preferred Dividend Obligation.
If a firm has a Purchase Commitment that cannot be modified and the price declines, what journal entry should be booked?
DR: Loss on Purchase Commitment.
CR: Liability on Purchase Commitment.
What increases in pretax earnings when a gift card is used by a customer to purchase an item?
Gross margin for the item sold.
At what value should a note receivable be recorded?
The present value of all future cash flows.
What is the classification of an account that is credited when cash is received from gift cards sold to customers?
Current liability, noncurrent liability, depending on expected period of sale.
Under IFRS, at what value can you report intangible assets?
Amortized cost or fair market value.
What is the role of the Financial Accounting Advisory Council (FASAC)?
- Guidance on major policy issues
- Project Priorities
- Formation of task forces
What costs can be capitalized to an intangible asset?
Price paid to other parties.
What causes a discount on a note?
When yield rate is greater than stated rate.
Under what conditions will an investment give the investor significant influence, but not control, over the investee?
When an investor owns 20% to 50% of the voting equity securities of an investee and there are no impediments to the investor exercising its voting rights to influence the investee's operating and financial policies. Investments in non-voting equity securities (e.g., preferred stock) or in debt securities does not convey influence.
When is the straight-line method not allowed for notes payable accounting?
Installment notes, and when the yield and stated rates are materially different.
List the book value per preferred share ratio formula.
Preferred Shareholders' Equity (including dividends in arrears) / Number of Outstanding Preferred Stocks.
How do we account for the transfer of an investment from held-to-maturity to available-for-sale?
- Credit held-to-maturity at unamortized cost;
- Debit available-for-sale at fair value;
- Unrealized (holding) gain or loss to Other Comprehensive Income.
What is the American Institute of Certified Public Accountants (AICPA)?
The AICPA is the professional organization for participating CPAs.
At what level is goodwill impairment testing performed under U.S. GAAP and IFRS?
Under U.S. GAAP, goodwill impairment is tested at the reporting unit level. Under IFRS, goodwill impairment is tested at the cash generating unit.
List the debt ratio formula.
Total Liabilities / Total Assets.
During liquidation, when can an entity write down the value of a liability?
Only when legally forgiven.
Describe the difference between an interest-bearing and a noninterest-bearing note receivable.
Interest-bearing: the amount of cash to be collected from an interest-bearing note is the face amount of the note plus interest;
Noninterest-bearing: the face amount of the note includes principal and interest that will be collected at maturity date.
List the return on common stockholders' equity formula.
(Net Income-Current Period Preferred Dividend Obligation) / Average Common Stockholders' Equity.
What payroll taxes are paid in equal amounts by the employer and the employee?
Federal Insurance Contributions Act (FICA) tax, Medicare.
When are expenses recognized under accrual accounting?
Expenses are recognized when incurred, regardless of the period of cash payment.
What is Original Selling Price?
Cost plus initial markup.
Using the indirect method for reporting cash flows from operations, should a decrease in inventory be added to or subtracted from accrual based net income?
A decrease in inventory should be added.
What is the amount borrowed on an installment note issued at discount?
Product of the periodic payment and the annuity factor for the term of the note and the yield rate on the note.
List the criteria for reclassifying current liabilities to long term.
- The intent to refinance the short-term obligation must be proven; and
- The firm must demonstrate the ability to refinance the obligation.
When recording Interest Expense
for a Note Payable,
how does the Journal Entry look like for the
Gross Method and the Net Method?
Gross Method
Interest Expense
Discount
Cash
Net Method
Interest Expense
Note Payable
Cash
What is an
Annuity Due?
Annuity Due represents a series of payments made or received at the beginning of the period.
List the three ways to meet the "ability to refinance" requirement.
- Actually refinance before issuance of the financial statements;
- Enter into a noncancelable refinancing agreement supported by a viable lender;
- Issue equity securities replacing the debt.
How do you calculate
Stock Rights?
FMV or Rights
(FMV of Rights + FMV of Stock)
x
Cost of Stock
Identify the three major equity method items recognized each period by an investor.
- Recognize investor's share of investee's net income/loss;
- Recognize investor's share of investee's dividends declared;
- Recognize adjustment to share of investee's net income/loss for "depreciation/amortization" of amount allocated to excess of fair value over book value.
When recording a Note Payable,
how does the journal entry for
Gross Method and Net Method
look like?
Gross Method
Cash
Discount
Notes Payable
Net Method
Cash
Notes Payable
Define "interest-bearing note payable."
A note in which the interest element is explicitly stated.
What do equity/investment leverage ratios measure?
Measure relative sources of equity and equity value.
What is the net note balance for a note issued at a discount?
Face value less unamortized discount.
How much of the impairment loss can be recovered under IFRS?
The recovery of an impairment loss is limited to the carrying value had the impairment not occurred.
What do profitability ratios measure?
Aspects of a firm's operating (income/loss) results on a relative basis.
What amount of revenue is recognized for a period for an extended warranty when total warranty costs are not estimable?
The total amount received for the extended warranty multiplied by the fraction: 1/(term of extended warranty contract in years).
How is the total employer expense for payroll computed?
Gross pay + employer payroll taxes + employer portion of employee fringe benefits.
List the formula for times interest earned.
(Net Income + Interest Expense + Income Tax Expense) / Interest Expense.
List the total common stock dividend payout rate formula.
Cash Dividends to Common Shareholders / Net Income to Common Shareholders.
Under what conditions can property already held be transferred into or out of the investment property category?
Transfers of property into or out of the investment property category can be made only when it is clearly evident that there has been a change in the use of the property.
What body developed Generally Accepted Accounting Principles (GAAP)?
The Financial Accounting Standards Board (FASB).
What is a Joint Venture?
An association of two or more entities that exercise joint control over an undertaking for profit generally set up for a limited purpose, a limited time, or both.
What do we call the
(1) maker and (2) holder
of a note?
1) Maker is the buyer or borrower.
(2) The holder is the seller or lender.
Provide examples of the class of assets can you carry at fair market value under IFRS?
Property, plant, and equipment; identifiable intangible assets; financial assets including investments and financial instruments.
How should a short-term note payable refinanced every six months on a continuous basis be classified?
The classification of this note is Current.
List three disclosures required when the entity is reporting under the liquidation basis of accounting.
Any three of the following:
1) A statement that the financial statements are presented using the liquidation basis of accounting,
2) Description of the liquidation plan,
3) Methods and significant assumptions used to measure assets and liabilities, or
4) Type and amount of costs and income accrued associated with the liquidation plan.
How are gains/losses from extinguishment of debt reported on the income statement?
Recognized as components of income from continuing operations.
What method is used to amortize intangible assets?
Straight line, unless another systematic method can be shown as more appropriate.
What is the Cost to Sales Ratio?
1 / (1 + Markup %) = Cost to Sales Ratio
List the cash availability or interval ratio formula.
(Cash + Net Receivables + Marketable Securities) / Average Daily Cash Expenditures.
What is financial statement ratio analysis?
The development of quantitative relationships between various elements of a firm's financial statements.
What is the Accounting Principles Board?
The entity that published thirty-one opinions, some of which are now part of the Codification.
Using the indirect method for reporting cash flows from operations, should a decrease in unearned revenue be added to or subtracted from accrual based net income?
A decrease in unearned revenue should be subtracted.
What is the balance sheet effect of the fair value option applied to financial liabilities?
Report liability at fair value.
How is the change in the deferred revenue account calculated for a period?
Cash received during the period less revenue earned for the period.
What is the purpose of the operating section of the statement of cash flows under the indirect method?
The purpose is to adjust accrual net income to net cash flow from operating activities.
What is the classification of an account credited when cash is received from customers for an extended warranty?
Current liability, noncurrent liability, depending on expected period of warranty claim work.
How are current liabilities valued and recorded?
Due to materiality, normally recorded at face value.
List the debt to equity ratio formula.
Total Liabilities / Total Shareholders' Equity.
What are the characteristics of investment property under International Financial Reporting Standards (IFRS)?
- Investment property consists of building and/or land;
- Held by the owner or a lessee under a capital lease;
- For the purpose of earning rental income, recognizing capital appreciation, or both.
List the price to earnings ratio formula.
Market Price for a Common Share / Earnings Per Share (EPS).
What are the categories of investments under International Financial Reporting Standards (IFRS) No. 9?
Under IFRS No. 9 two categories of investments (and other financial assets) include:
- Debt investments measured at amortized cost;
- All other investments, including debt instruments not at amortized cost and all equity investments.
Under what conditions is the residual value of a definite life intangible not assumed to be zero?
1) When the entity has a commitment from a third party to purchase the intangible asset at the end of its useful life;
OR
2) the residual value can be determined by reference to an exchange transaction in an existing market for that asset and that market is expected to exist at the end of the asset's useful life.
What are Net Markdowns?
A net decrease in the original selling price.
What are the first three steps the Financial Accounting Standards Board (FASB) uses when issuing a new accounting standard?
Considers whether to add a project to its agenda in consultation with the Financial Accounting Foundation (FAF); Conducts research; Holds a public hearing on the topic.
At the time an investor makes an investment that gives it significant influence over an investee, what information must the investor determine in order to use the equity method of accounting?
At the time of investment, the investor must determine:
- Book value of assets and liabilities of investee;
- Fair value of assets and liabilities of investee;
- Allocation of any difference between cost of investment and fair value of investee's assets and liabilities.
Describe the relative sales value method for recording costs.
Records costs for each item as
Relative sales value to the total sales value of the group.
When an investor has significant influence over the operating and financial policies of an investee, what method must be used to account for the investment in the investee?
The investment must be carried on the investor's books and reported in the investor's financial statements using the full equity method of accounting.
Is the fair value option for financial liabilities required and to what securities is it applied?
It is an option (not required) and can be applied to any and all financial liabilities.
What accounts are used to record cash received from a customer before the revenue is earned?
Unearned revenue, revenue collected in advance.
Using the indirect method for reporting cash flows from operations, should an increase in accounts receivable be added to or subtracted from accrual based net income?
An increase in accounts receivable should be subtracted.
What is Present Value?
The present value represents the amount you would pay now for an amount to be received in the future.
List the journal entry for an Investor to recognize proportionate share of investee dividends using Equity Method.
DR: Dividends Receivable/Cash
CR: Investment in X
What is the difference between
Ordinary Annuity
and
Annuity Due?
Beginning of Period = Annuity Due
End of Period = Ordinary Annuity
List the formula for number of days' supply in inventory.
365/ Inventory Turnover.
If stock rights are not exercised and lapse, what entry should the investor make?
The investor writes-off the stock rights and recognizes a loss. The entry is:
DR: Loss on Expiration of Stock Rights
CR: Security Stock Rights
What happens when the
Face Value of a Note
=
the Present Value of a note?
No premium or discount exists.
What payroll taxes are paid only by the employer?
State and federal unemployment taxes paid only by employer.
How is the present value in a noncash transaction determined?
The fair market value of the noncash asset or of the note receivable, whichever is more readily determinable.
How do we account for the recovery of a Purchase Commitment loss?
A gain to the extent of the previously recognized loss.
What are the seven key components of the general purpose external financial report?
- Income Statement;
- Balance Sheet;
- Statement of Cash Flows;
- Statement of Retained Earnings;
- Statement of Comprehensive Income;
- Footnote Disclosures;
- Auditor's Opinion.
What is the required accounting for a potential loss on a Purchase Commitment when the commitment can be modified?
The loss is required to be footnoted as a contingent liability, but is not accrued in the accounts because the loss is not probable given that the contract can be revised.
List the working capital ratio formula.
Current Assets / Current Liabilities.
What is the Margin Formula?
Sales - Cost = Margin
Which liability requires more future cash payments: a current liability reported at $2 million or a noncurrent liability reported at $2 million?
Noncurrent liability requires more future cash payments.
What is the amount of interest recognized for a period on a note calling for a face amount due at maturity, issued with an effective interest rate not equal to the stated rate?
Product of effective rate at date of issuing the note and the principal balance at the beginning of the period.
When is interest computed on a
Note Payable?
Interest is computed after the first payment.
- Revised Balance = Orig. Bal — Payment
- Interest Expense = (Relevant months of the current year / 12) x Revised Balance x interest %
What is the classification of assets that are in the form of cash, or will be converted into cash, or consumed within one year or the operating cycle of the business, whichever is longer?
The classification is current assets.
Define Premium on a Note
A premium on a note occurs when the interest rate on a note is greater than the market yield rate.
The market bids up the price of the bond above par until the effective interest rate on the note equals the market yield rate.
Are gift cards liabilities, definite liabilities, or contingent liabilities?
They are definite liabilities.
How is Normal Spoilage handled?
Subtracted along with sales from Goods Available for Sale at Retail to arrive at Ending Inventory at Retail.
What is the total interest expense recognized on a noninterest-bearing note?
Total payments less amount borrowed.
What factor does an
Amortized Discount play
at maturity date of a bond?
When a bond is purchased at a discount, it was paid for less that it's face value.
Amortized Discounts get added to the Bond payable amount over the term of the bond.
Adding the amortized discount allows us to match to the Bond face value at maturity.
How do you calculate
Interest Expense for the period?
Interest expense for the period
=
(Market Rate x Beginning note balance)
—
Effective Interest Method
What is the Fair Value of a note?
Maturity value of note and interest payments discounted to the present value.
List the formula for inventory turnover.
Cost of Goods Sold (COGS) / Average Inventory.
What conditions must be met under International Financial Reporting Standards (IFRS) No. 9 for an investment in debt to be classified as debt instruments measured at amortized cost?
Two conditions must be met:
Business model test - where the entity intends to hold the investment to collect the contractual cash flows, not to sell the instrument prior to its contractual maturity to realize changes in fair value;
Cash flow characteristic test - where the contractual terms of the investment give rise to cash flows on specific dates that are solely payments of principal and interest.
How are nonmonetary liabilities paid?
Payable in services or nonmonetary assets.
When an investor has significant influence over the operating and financial policies of an investee, what method must be used to account for the investment in the investee?
The investment must be carried on the investor's books and reported in the investor's financial statements using the full equity method of accounting.
Define "market rate"
Interest rate used to determine the present value of a note receivable.
What is the reported amount of a note calling for a face amount due at maturity, issued with an effective interest rate not equal to the stated rate?
Present value of remaining cash flows discounted at the effective rate.
List the journal entry for an Investor to recognize proportionate share of investee income using the Equity Method.
DR: Investment in X
CR: Investment (equity) revenue
Identify the three major equity method items recognized each period by an investor.
- Investee's Net income/Loss
- Investee's Dividends Declared
- Investee adjustments to Net income/loss
How is interest expenses on the current line of an effective interest bond amortization schedule computed?
Multiply one-half the yield rate at date of issuance by the book value of the bond issue on the line above the current line.
What are the acceptable methods (models) for measuring and reporting investment property?
The cost method (model) and the fair value method (model). An entity may use only one of these methods to measure and report all of its investment property.
Define "sales taxes payable".
Account recognized for sales tax collected from customers.
What are long-term assets?
- Assets NOT classified as current assets.
- Reported on the balance sheet
- Represent a company's property, equipment, and other capital assets (reduced by depreciation)
- Expected to be useable for more than one year.
What does the Securities and Exchange Commission (SEC) do?
Administers US Securities Laws
ex: Securities Act of 1933, Securities Act of 1934
What is the impairment test for indefinite life intangibles?
One step: BV compared to FV. If BV > FV then impairment loss = BV - FV.
What is a Bond?
A Bond is a financial instrument paying:
- Interest over the term
- Face value at the end of the term
How does an entity show intent to refinance short-term obligations?
Must be proven, possibly in the form of board of directors' meeting minutes.
What major transactions or events would cause the carrying amount of an investment to change when the cost method is used to account for the investment?
- Liquidating dividend
- Purchase and sale of additional shares
List the Accounts Receivable Turnover ratio formula.
Net Credit Sales / Average Net Accounts Receivable.
What causes a premium on a note?
When yield rate is ess than stated rate.
What are the major differences between U.S. Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) in accounting for joint ventures?
- Contributions of nonmonetary assets:
- U.S. GAAPat carrying value;
- IFRSat FV for share not owned by contributing entity, with gain/loss recognized.
- Methods of Reporting:
- U.S. GAAP - primarily using equity method; partnership or full consolidation basis when appropriate;
- IFRS - equity method or proportionate consolidation.
- U.S. GAAPat carrying value;
- IFRSat FV for share not owned by contributing entity, with gain/loss recognized.
- U.S. GAAP - primarily using equity method; partnership or full consolidation basis when appropriate;
- IFRS - equity method or proportionate consolidation.
List the formula for the Acid Test or Quick Ratio.
(Cash + Net Receivables + Marketable Securities) / Current Liabilities.
List the book value per common stock ratio formula.
Common Shareholders' Equity / Number of Outstanding Common Shares.
What do operational activity ratios measure?
They measure the efficiency with which a firm carries out its operating activities.
List the steps to retire debt on the books.
- Record interest, amortization of discount/premium, issue costs to date of retirement;;
- Remove debt and related accounts;
- Record gain or loss.
List the three key elements of liabilities.
- Probable future sacrifice of economic benefits;
- Obligations to transfer assets or provide services in the future;
- Result of past transactions or events.
What interest rate
should be used for calculating
Interest Expense on Notes?
Market Interest Rate or Yield Rate
What entry is made by an investor who receives stock rights?
An entry is made to transfer some of the cost of the investment in the stock that "earned " the rights to an account for the rights. The entry is:
DR: Security Stock Rights
CR: Investment
When can impairment of an intangible be recovered?
Impairment of an indefinite or definite life intangible CANNOT be recovered.
Cost + Markup = ?
Selling Price
Define "Purchase Commitment".
Type of commitment made when a firm commits to the purchase of materials at a set unit price.
Which agency enforces Generally Accepted Accounting Principles (GAAP)?
Securities and Exchange Commission (SEC).
What do liabilities represent?
Represent outsider claims to a firm's assets or are enforceable claims for services to be rendered by the firm.
What is the amount of interest recognized for a period on an installment note (one requiring equal periodic payments that include both principal and interest)?
Product of effective rate at date of issuing the note and the principal balance at the beginning of the period.
How is total interest expense for a bond issue using an effective interest bond amortization schedule (assume a premium) computed?
Sum of the cash interest column less sum of amortization of premium column.
How do you determine an
Intangible's Useful Life?
Choose the shorter of
1) Legal Life
OR
2) Estimated Useful Life
List the owner's equity ratio formula.
Shareholders' Equity / Total Assets.
List the per share common stock dividend pay out rate formula.
Cash Dividends per Common Share / Earnings Per Share (EPS).
List the two different methods of amortizing a discount or premium on a note.
- Effective interest method;
- Straight-line method.
List the Margin on Cost formula.
(Sales-COGs) / COGS
Using the indirect method for reporting cash flows from operations, should an increase in accounts payable be added to or subtracted from accrual based net income?
An increase in accounts payable should be added.
What is
Note Issued at a Discount?
Note issued at a discount occurs when:
Stated Rate
What account should be credited when gift cards are considered forfeited and the seller has no obligation to the state?
Miscellaneous revenue or sales.
List the conditions that must exist for debt to be extinguished.
- Debtor pays creditor and is relieved of obligation;
- Debtor is legally released from being primary obligor.
What are the steps in the Basic Retail Method?
- Determine Ending Inventory at Retail
- Calculate Cost to Retail Ratio
-
Ending Inventory at cost = Ending Inventory at Retail x Cost to Retail ratio
What are intangible assets?
Long-term operational assets that lack physical substance or presence but are currently used in the operation of a business and have a useful life extending more than one year from the balance sheet date.
What are Net Additional Markups?
A net increase in the original selling price.
What topics does the Financial Accounting Standards Board (FASB) Accounting Standards Codification NOT include?
- Other comprehensive basis of accounting;
- Cash basis;
- Income tax basis;
- Regulatory accounting principles.
In what forms may a joint venture be established?
- By agreement or contract alone;
- As a corporation;
- As a partnership;
- As an undivided interest entity.
What do liquidity (or solvency) ratios measure?
Measure the ability of the firm to pay its debts as they come due.
What is the amount of the periodic payment for an installment note issued at discount?
Face value divided by the annuity factor for the term of the note and the stated rate on the note.
What is the
Future Value of an Annuity?
An annuity is a periodic payment or receipt made in consecutive intervals over time compounded at a stated interest rate.
The future value of an annuity represents the total of the periodic payments and accumulated interest at some point in the future.
What are the two ways to present Cash flows from Operating Activities?
- Direct Method
- Indirect Method
What are the general types of ratios?
- Liquidity/Solvency;
- Operational Activity;
- Profitability;
- Equity/Investment Leverage.
List the formula for determining Operating Cycle Length.
Days' Sales in Accounts Receivable + Days' Supply in Inventory.
How is the present value in a cash transaction determined?
The amount of cash that exchanged hands.
List the classifications of intangible assets.
Definite life intangibles, indefinite life intangibles.
List the types of intangibles
Marketing Related, Customer Related, Artistic Related, Contract Related, Technology Related, Goodwill.
What is the distinction between notes payable and accounts payable?
- Time period is usually extended;
- Notes have an interest element.
What measurement methods are used to measure and report invesment property under IFRS?
Fair Value Method
Cost Method
Identify the following:
What factor does
Amortized Premium play
at maturity date of a bond?
When a bond is purchased at a premium, we basically paid more than the face value of the bond.
When a company amortizes the premium, it deducts the bond payable amount by that premium amount over the life of the bond.
Even though we paid more than the face value of the bond, this method of amortizing the premium allows us to match to the bond face value at maturity date.
What is the international applicability of the fair value option?
Limited to liabilities that are part of a group with financial assets managed together.
Is a noninterest-bearing note issued at a premium or discount?
Discount.
List the common stock yield formula.
Dividend per Common Share / Market Price per Common Share.
What is the Simple Interest Method?
Periodic interest is computed based on the principal balance only.
The simple interest method computes interest based upon the amount of principal only. Interest is computed as Principal x Interest x Time. The compound interest method computes interest on principal and any interest earned and not withdrawn.
What does Generally Accepted Accounting Principles (GAAP) address?
Recognition, measurement, and disclosure.
How is amortization of definite life intangibles recorded?
Debit amortization expense and credit the intangible asset (there is no accumulated amortization contra account as with tangible assets).
What causes transfers between classifications for investments which do not give the investor significant influence?
Changes in investor intent or Changes in investor ability to hold-to-maturity.
What is a "Stand Still" agreement?
A standstill agreement is a written agreement between two firms whereby certain actions between the firms are limited.
What purpose does the Financial Accounting Standards Board (FASB) Accounting Standards Codification serve?
Sole source of authoritative U.S. GAAP for nongovernmental entities, with exception to the SEC's guidance.
Under what conditions will an investment give the investor significant influence, but not control, over the investee?
When an investor owns 20% to 50% of the voting equity securities of an investee and there are no impediments to the investor exercising its voting rights to influence the investee's operating and financial policies. Investments in non-voting equity securities (e.g., preferred stock) or in debt securities does not convey influence.
List the profit margin formula.
Net Income/Net Sales.
List the methods used for estimating ending inventory.