CPA Financial Accounting and Reporting All responses are correct, leading to an outstanding grade.
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Course
FAC1601 Financial Accounting & Reporting
Institution
FAC1601 Financial Accounting & Reporting
If there is commercial substance to an exchange, the exchange is measured at: - Answer Fair Value.
The gain is equal to the old asset's fair value and it's book value. If the fair value was 30 and its book
value is 25, the gain is 5.
How does retail inventory method establish lower of cost or ma...
If there is commercial substance to an exchange, the exchange is measured at: - Answer Fair Value.
The gain is equal to the old asset's fair value and it's book value. If the fair value was 30 and its book
value is 25, the gain is 5.
How does retail inventory method establish lower of cost or market valuation for ending inventory? -
Answer By excluding net markdowns from the cost to retail ratio.
Can consolidated financial statements be prepared from a business combination that was accounted for
using the acquisition method OR the pooling of interests method? - Answer Yes to both. The
pooling of interest method CANNOT be used anymore for business combinations, combinations that
happened before that still need to be consolidated.
Does a foreign sub using the local currency as its functional currency has their financials translated or
remeasured? - Answer Translated.
Does a foreign sub using US dollars as its functional currency has their financials translated or
remeasured? - Answer Remeasured.
Under translation, common stock is translated at the what exchange rate? - Answer The historic
exchange rate.
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,500 shares of 6%, $100 par callable preferred stock are called at $101. The shares were issued at $103 per
share. What is the journal entry to record the retirement? - Answer DR preferred stock for
50,000DR PIC-preferred for 1,500CR PIC retirement of preferred for 1,000CR Cash for 50,500
Working capital: - Answer current assets - current liabilities
Acid test: - Answer (cash + net receivables)/current liabilities
Acc Rec turnover: - Answer Sales/ avg net receivables
Inventory turnover: - Answer COGS/ avg inventory
Times interest earned: - Answer EBIT/ interest expense
Return on total assets: - Answer (net income + after-tax interest expense)/ avg total assets
Return on equity: - Answer Net income / avg owners equity
Dividend payout ratio - Answer Common dividends / net income
What are the 2 primary qualitative characteristics? - Answer Relevance and Faithful representation
2 components of relevance: - Answer Predictive value and confirmatory value
3 components of Faithful Representation - Answer Completeness, neutrality, and free from
material error
What are the 4 enhancing characteristics? - Answer Comparability, verifiability, timeliness, and
understandability
Times interest earned is: - Answer income before interest and income tax over interest expense
What is a central characteristic of a joint venture? - Answer Shared control. None of the
participating parties are likely to have unilateral control of the joint venture.
What is the defensive-interval ratio? - Answer The ratio of quick assets to daily operating
expenditures. The ratio is showing the length of time in days that the firm can operate with its present
liquid resources- so it's a liquidity measure.
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, Inventory turnover ratio: - Answer COGS/ avg inventory for the period
Where are G/L on remeasurment and translation booked? - Answer Remeasurement is on the
income statement, translation go in an equity account. Remeasurement is when the foreign sub's currency
is the US dollar. It's translation if the sub's currency is the local foreign currency.
Receivables turnover ratio: - Answer Net sales / avg net accounts receivable
What statements are usually included in personal financial statements? - Answer A statement of
financial condition and a statement of changes in net worth.
If a donation is conditional, how should it be accounted for? - Answer As a refundable advance.
For donation of specialized services to a nonprofit, at what value should they be recognized? - Answer
Fair value.
For a NP, are contributions spread over a few years restricted or non restricted? - Answer The
contribution in the current year is non restricted(unless it comes with an actual restriction), and the
contributions for future years are recognized at present value and are RESTRICTED.
When are the payments for an "Annuity Due" made? - Answer At the beginning of each period.
How is a lease payment calculated when the lease payments are due at the beginning of the period? -
Answer You divide the FAIR VALUE of the leased equipment by the ANNUITY DUE rate.
What is the journal entry at the inception of a capital lease and the payments are due at the beginning of
each period? - Answer DR: Leased asset for its fair value amountCR: Lease Liability for plug
amountCR: Cash for the payment amount
How do you calculate the interest expense at the end of the year on a capital lease with payments at the
beginning of the period? What is the journal entry? - Answer You multiply the remaining lease
liability amount by the interest capitilization rate.DR: Interest expenseCR: Lease liability
How does the LESSOR in a capital lease determine the amount of Lease Receivable? - Answer
Multiply the payment by the number of payments.
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