Recap

Question 1

When using the gross margin method, how do you caculate the percentage that is applied to sales when estimating COGS?

Example - 40% markup of cost

Answer 1

Add 1 and divide by 1

Ex - 1.00/1.40= .71

Question 2

What market do you use if your trying to measure the commodity’s fair value?

Principal or Most advantageous market?

Answer 2

PRINCIPAL

This will be the market with the greatest volume and level of activity for the asset or liability in the fair value calculations

Question 3

When using the average pricing method to determine the value of inventory, what’s the first step to get the price per unit?

Answer 3

Add up all the units (beginning inventory and all purchases)
- then multiply each purchase by the price to get costs
-then divide the cost by the total units

Question 4

When using the average pricing method to determine the value of inventory, what’s the step to calculate the COGS once you have the price per unit?

Answer 4

Multiply the price per unit but total units sold

Question 5

When using the dollar value inventory method, how do you calculate the layer for the current year?

Answer 5

You subtract the current year’s base cost from the prior year’s base cost

Question 6

When using the dollar value inventory method, how do you calculate the pricing index?

Answer 6

Divide the current year costs by the base year costs

Question 7

When recording a bond, how do you calculate the carrying value when they don’t give it to you, and you have to calculate the present value and interest?

Answer 7

Interest payment = face value x interest amount x months

then take the interest payment and multiply by the present value percentage

to get carrying value:
multiply face value and the present value of $1 of market rate percentage - watch for half year interest becaues you will divide interest rate by 2

then take the interest rate and multiply by the present value ord annunity of $1 rate - add both amounts together

Question 8

What’s the formula for Cost of Goods Available?

Answer 8

Cost of goods sold + ending inventory

Question 9

When calculating payroll expense, what items are included in calculation? What about the liability?

Answer 9

Payroll expense includes FICA and FUTA Taxes payable only

Liability includes the federal income tax withheld, both portions of FICA taxes and FUTA TAX

Question 10

When putting together a cash flow statement, where would you put the purchase of Trading securities?

Answer 10

Operating activities section

Question 11

What inventory costing method would give you the lowest COGS and the highest ending Inventory, resulting in a LOWER inventory turnover

Answer 11

FIFO

Question 12

What inventory costing method would give you the HIGHEST COGS and the LOWEST ending Inventory, resulting in a HIGHER inventory turnover

Answer 12

LIFO

Question 13

How would you record an unconditional pledge by a non-profit that will be collected over more than one year?

Answer 13

Pledge receivable, valued at its present value.

Question 14

When trying to find the most advantageous market, what two costs are taken into consideration?

Answer 14

Transaction and transportation costs

Question 15

How do you determine someones effective tax rate?

Answer 15

Income tax expense / pretax income

Question 16

What’s the formula to calculate the days in inventory?

Answer 16

Ending inventory / COGS/365

Question 17

How do you find the value of net bonds payable at the end of the year for bonds? Do you use the stated or market value?

Answer 17

Multiply the face amount by the present value market percent of a dollar

Then multiply the interest ( fv x stated rate) by the present value of an ordinary annuity or annuity due

add together

Question 18

How do you calculate the gain on disposal of stock?

Answer 18

Multiply the fair value on the date of declaration x shares
Multiply the carrying value by the shares

subtract for gain

Question 19

How do you calculate the book value per share of common stock?

Answer 19

Total stockholders’ equity / outstanding common stock

-dividends in arrears reduce

Question 20

What do you do with the residual value guarantee when you’re calculating the lease liability?

Answer 20

ADD to the present value of lease payments.

Question 21

When reconciling the bank statement, how do you calculate the cash disbursements?

Answer 21

Take the current month disbursements
- subtract last months
-add current months

Question 22

How do you calculate the accretion expense for an ARO? What rate?

Answer 22

CARRYING VALUE X CREDIT ADJ RISK FREE INTEREST RATE

Question 23

TRUE OR FALSE?

GAAP requires that net amount of DTAs AND DTLs be reported on balance sheet as a single noncurrent amount?

Answer 23

TRUE

Question 24

How would you record a note payable for services provided in the future when the fair value is less than the note payable?

Answer 24

It’s considered a discount and will be booked that way, the difference between the fair value and face amount.

Question 25

Does comprehensive income in owners transactions or nonowner transactions?

Answer 25

Non owner transactions

Question 26

Where do you report a fair value adjustment that's related to credit risk?

Answer 26

Income statement Net of tax

Question 27

Where do you report fair value adjustments that are market related?

Answer 27

OCI Net of tax

Question 28

When calculating unrealized gains/losses in AFS securities, where is it reported if the fair value option is elected for market risk?

Answer 28

Component of income from continuing operations OCI if fair value option wasn't selected

Question 29

Where do dividends get recorded when using the equity method? Income statement or balance sheet

Answer 29

Balance sheet! Reduce the investment account

Question 30

When determining NFP expenses, is fundraising a program or supporting expense?

Answer 30

Supporting Supporting services are secondary expenses to the mission

Question 31

When determining mark up for inventory, what's the calculation if someone is marked up 40% and cost 50k?

Answer 31

.40 x 50k

Question 32

When your recording a lease, if they give you the pv with implicit rate or the pv with the incremental, which one do you use?

Answer 32

Implicit

Question 33

According to GAAP, justification for the method of determining periodic deferred tax expense is based on the concept of?

Answer 33

Recognition of assets and liabilities

Question 34

For the statement of cash flows, where are donations without and with restrictions presented?

Answer 34

Without- operating With. - financing

Question 35

True or false? A NFP doesn't record in the financial statments for donated items that are restricted for display?

Answer 35

They aren't recognized in the FS

Question 36

What is the formula for the sum of the years depreciation?

Answer 36

You have to add up all of the years and for each year the cost of the asset doesn't change For ex - 5 year useful life 1 +2+3+4+5 = 15 1st year - 5/15 2nd year - 4/15 3rd year - 3/15

Question 37

When calculating the lease liability, what do you do when the lease has a guaranteed residual value?

Answer 37

You add that to the liability. If it's asking what it will be after the payment you need to multiply that amount by the present value of a $1

Question 38

True or false? Under FIFO, you get the same ending result for inventory under periodic and perpetual methods?

Answer 38

True!

Question 39

How do you calculate lease expense when you have a 4 year lease and for half of the first year they say you don't have to pay rent?

Answer 39

Add up all the monthly payments even if you were paying and divide by the total months .

Question 40

When handling a construction contract, when do you recognize an asset or liability?

Answer 40

Asset when - actual costs incurred and paid are more than progress billings Liability - progress billings are more than actual costs and paid

Question 41

How do you record a Line of credit when they don't take any money from it during the year?

Answer 41

Just disclose it, don't create a liability

Question 42

Is unearned revenue considered a current or long term liability?

Answer 42

Current

Question 43

Is deferred revenue considered a current or long term liability?

Answer 43

Long term

Question 44

If someone preparing their financial statements under the cash basis of accounting. What's one financial statement that would be included in their FS prepared under the cash basis?

Answer 44

Statement of revenues collected and expenses paid

Question 45

True or false? Special purpose frameworks include these basis Income tax basis Cash basis Contractual basis Regulatory basis

Answer 45

TRUE

Question 46

When calculating cash and cash equivalents, what do you do with posted dated checks?

Answer 46

Dont add them Payment hasn't been made. They aren't liquid cash

Question 47

When calculating cash balance, do you add marketable equity and debt securities?

Answer 47

NO!

Question 48

What is the formula when someone doesn't want to pay sales tax? Ex- 2000 and sales tax is 8%

Answer 48

2,000 / 1.08 Add sales tax percent to 1

Question 49

When looking at liabilities, how much of your line of credit is included in current liabilities?

Answer 49

The amount you draw

Question 50

True or False? When dealing with accrues for compensation, do you accrue a payment of compensation if the services have been rendered, payment is probable, the amount can't be reasonably estimated, and rights are vested?

Answer 50

NO Amount needs to be reasonably estimated.

Question 51

About the investing section of the cash flow statement, what do you record as cash used if you sell an AFS debt security for $35,000 when the carrying value is $33,000?

Answer 51

35,000

Question 53

How is a small stock dividend (<25% of existing shares) recorded on the declaration date?

Answer 53

Debit Retained Earnings (at fair market value of the shares to be issued) Credit Common Stock Dividend Distributable (at par value) Credit Additional Paid-in Capital (excess of fair value over par) Explanation: Small stock dividends are treated like a cash dividend reinvested in stock, so they capitalize at market value. On distribution: Debit Common Stock Dividend Distributable, Credit Common Stock.

Question 54

How is a large stock dividend (>25% of existing shares) recorded on the declaration date?

Answer 54

Debit Retained Earnings (at par value of the shares to be issued) Credit Common Stock Dividend Distributable (at par value) Explanation: Large stock dividends are viewed more like a stock split (no significant change in market price per share is expected), so they capitalize only at par value (market value is ignored). On distribution: Debit Common Stock Dividend Distributable, Credit Common Stock. No Additional Paid-in Capital is involved.

Question 55

When calculating a lease liability, how do you have the residual value at the end of the lease?

Answer 55

You need to include it into the lease liability balance. Subtract the guaranteed value from the fv at the time, multiply by the present value percentage, and add to the lease liability

Question 56

For a lease, do you expense or capitalize leasehold improvements?

Answer 56

They are capitalized over the shorter of the lease term or useful life.

Question 57

How do you calculate a lease liability amortization expense?

Answer 57

Its the balance divided by either the useful life or lease term. Useful life if there is a purchase option or it transfer to the lessee at the end of the lease.

Question 58

'When recording a lease, do you use the incremental or implicit rate to record liability?

Answer 58

'when recording a lease liability, use the PV of the lease term, using the implicit rate if known to get lease balance.

Question 59

How do you handle a nonrefundable lease fee when recording your rent expense each month?

Answer 59

The total should be included to the total rent paid over the length of the lease and subtracted monthly. ex- 10,000 for 5 years plus 30,000 fee 10,000 * 60 months (5 years) = 600,000 + 30,000 = 630,000 / 60 = 10,500