1

Question 1

Multi step income statement

Answer 1

Net Sales
Minus COGS
Equals gross margin
Minus operating expenses
Equals income or loss from operations
Plus other revenue and gains
Minus other expenses and losses
Plus or minus unusual shit
Equals income before taxes
Minus income tax expense
Equals income from continuing operations 
Plus or minus discontinued operations net of tax
Equals net income

Question 2

How to account for an incident that is unusual but is a common occurrence

Answer 2

Record the actual gain or loss for the year incurred and if it is common you don’t need a separate disclosure but if it’s not common you need a separate disclosure

Question 3

Comprehensive Income Vs Other Comprehensive income

Answer 3

Comprehensive income is Net Income net of other comprehensive income.

Question 4

Items included in other comprehensive income

Answer 4

• pension adjustments, gains & losses from defined benefit pension plan
• unrealized gains & losses on available for sale debt securities
• foreign currency translation adjustments
• instrument specific credit risk(changes in FV for FV elected liabilities

Question 5

Reporting components of comprehensive income

Answer 5

Company can report them as individual net tax basis or each component on a before net tax basis so if tax rate is given in the question then net it against other comprehensive income

Question 6

Changes in (gains and losses on) effective portion of cash flow hedge

Answer 6

Effective portion is reported in other comprehensive income & ineffective portion is reported in current income

Question 7

Direct Statement of cashflow calculation

Answer 7

1. Add ending A/R
2. Subtract beginning A/R
3. Subtract ending unearned revenue
4. Add beginning unearned revenue

Question 8

LIFO to FIFO exception

Answer 8

If there are comparative statements then you go back and fix the retained earnings

Question 9

How to calculate discounting notes

Answer 9

1. Multiple face value by rate while remembering the date for interest then add that to the face value
2. Multiply rate by remaining life of the note divided by year
3. Subtract 2 from 3

Question 10

Interest rates and values of bonds

Answer 10

1. If bond is quoted at a discount that means interest rates have increased causing a discount
2. If bond is quoted at a premium that means interest rates have decreased causing the premium

Question 11

Expected future cash flows vs present value expected cash flow for asset impairment

Answer 11

Use the expected value not the present value to help calculate impairment

Question 12

How to calculate APIC after a combination when you issue stock to acquire companies

Answer 12

Use the par value and the fair value of stock you issued to come up with numbers you need

Question 13

Leases and the statement of cash flows

Answer 13

Principal payments are finance related while interest payments are related to operating

Question 14

Interest expense and stockholders equity

Answer 14

If interest expense is overstated or understated it effects net income which in turn will effect retained earnings and stockholder’s equity

Question 15

Note about revenue recognition allocation

Answer 15

If buyer does not have expertise to install, the machine and installation are allocated together as one thing, but if you can install then it is a separate allocation