Simple Notes

Question 1

What the natural balances of the following accounts?

Revenue
Expense
Loss
COGS
Gain
Liability
Equity
Asset
Contra-Asset
Retained Earnings
Common Stock
Contra-Equity
Accumulated Other Comprehensive Loss
Owner’s Draw

Answer 1

Revenue = Credit (sales)

Expense = Debit (Dep Exp)

Loss = Debit (Foreign Exchange Loss)

COGS = Debit

Gain = Credit (Foreign Exchange Gain)

Liability = Credit (Accounts Payable)

Asset = Debit (Cash)

Contra-Asset = Credit (Acc Dep)

Equity = Credit (Retained Earnings/Common stock)

Retained Earnings = Credit

Common Stock = Credit

Contra-Equity = Debit (Treasury Stock)

Accumulated Other Comprehensive Loss = (Debit)

Owner’s Draw = Debit

Question 2

What are the categories of governmental funds, including the accounting methods?

Answer 2

General Funds (Current Financial Resources/Modified Accrual Basis) = Debt Service, Capital Projects, General, Permanent, Special Revenue

Proprietary Funds (Economic Resources/Accrual Basis) = Internal Service, Enterprise

Fiduciary Funds (Economic Resources/Accrual Basis) = Investment Trust, Pension Trust, Custodial, and Private Purpose Trust

Question 3

What are the journal entries to issue stock Par Value/Cost Method?

Using 100 $5 par value for $15

Answer 3

Par Value:
Cash Debit = 1,500
APIC Credit = 1,000
Common Stock Credit = 500

Cost Method:
Cash Debit = 1,500
APIC Credit = 1,000
Common Stock Credit = 500

Question 4

What is a large accelerated, accelerated, and non-accelerated qualifications along with filing dates?

Answer 4

Large Accelerated Filer:
Public float over 700 million
10-K = 60 days to file
10-Q = 40 days to file

Accelerated Filer:
699-75 million in public float and 100 million in revenue
10-K = 75 days to file
10-Q = 40 days to file

Non-Accelerated Filer:
Less than 75 million float or less than 100 million in revenue
10-K = 90 days to file
10-Q = 45 days to file

Question 5

What is the direct method in regards to exchange rates?

Answer 5

Quoting an exchange rate from the domestic perspective of a company.

British Retailer would quote the following exchanage rate example 1.59 USD = 1 GPB from their perspective.

1/1.59 = 0.63

Which would be 0.63 British pounds = 1 USD

Question 6

What is the difference between cashflow hedges and fair value hedges?

Answer 6

Cash flow hedges go to AOCI, while fair value hedges go to the income statement, even though they both deal with derivatives.

Question 7

How are small stock dividends treated and quantified?

Answer 7

Stock dividends generally under 20-25% recorded at FAIR VALUE

They do not affect stockholders equity or assets since the retained earnings, common stock, APIC offset each other since they are recorded at FAIR VALUE.

Question 8

How are large stock dividends treated and quantified?

Answer 8

Stock dividends over 20-25% recorded at PAR VALUE.

They do not affect stockholders equity or assets since the retained earnings, common stock, APIC offset each other since they are recorded at par value.

ALthough APIC is only recorded if stock is recorded above par.

Question 9

A foreign currency transaction is recorded where?

Answer 9

Net income before discontinued operations within continued operations.

Question 10

What is the difference between issued and outstanding shares?

Answer 10

Issued shares are when shares are issued including additional issuances but doesn’t incorporate treasury buy back and reselling because they are always issued but affected by stock splits.

However outstanding stocks are shares held by shareholders (available to the public) affected by stock splits, treasury share buybacks and reissues.

Question 11

How can OCI be presented?

Answer 11

Can be presented in a single financial statement displaying both net income and OCI separately or presented within a seperate statement on its own

Must be presented clearly and empathized as everything else.

Question 12

What is OCI comprised of?

Answer 12

• Unrealized gains/losses on available-for-sale securities
• Foreign currency translation adjustments
• Pension plan actuarial gains/losses
• Effective portion of cash flow hedge

Question 13

What kind of dividends affects EPS/dilluted EPS?

Answer 13

EPS = Convertible and regular Preferred dividends are subtracted, common stock dividends are ignored, and cumulative preferred dividends are subtracted no matter (even if not declared), noncummulative must be declared to be subtracted.

Dilluted EPS = Regular preferred dividends are subtracted but CONVERTIBLE PREFERRED dividends ARE NOT, common stock dividens are ignored, and cumulative preferred dividends are subtracted if they are not convertible (even if not declared), noncummulative must be declared to be subtracted.

Question 14

How can Net Income be calculated when given the beginning and ending year trial balance? Instead of using the Sales - Expenses/Loses + Gains/Revenues - COGS/COS - Impairments.

Answer 14

Use the ending retained earnings and subtract the - the begining retained earnings.

Otherwise subtract or add the Sales, expenses, gaines etc…

Question 15

How do you calculate UGL AFS Security debt security for OCI? Does any parts go to any other financial statements/sections?

Answer 15

UGL = Take the fair value at YE - the Beginning value or

If there is an impairment, it goes into UGL for OCI, and if impairment is written down during the year it goes into the income statement under income from contiung operations (as it would be a loss).

Therefore, Fair value difference and impairment equal UGL FOR AFS DEBT securities

Question 16

How is Instrument-specific credit risk elected to use fair value and calculated as the excess of the total change in fair value relative to the change in fair value attributable to the risk-free rate?

Answer 16

Added not subtracted if stated excess even if the exhibit is named financial LIABILITY.

Question 17

Difference between Interest receivable/payable and Interest expense/revenue for bonds?

Answer 17

Interest receivable/payable depends on who is paying and receiving the state rate percentage which goes on the BS. You need to receive or pay out interest.

Interest expense/revenue for bonds depends on who is paying/receiving the yield rate percentage which goes on the income statement. You earned or paid out interest.

Question 18

Financial income/book income being higher than taxable income and vice versa means what?

Answer 18

Financial income/book income being higher than taxable income = DTL

taxable income being higher than Financial income/book income = DTA

Question 19

How are AR, AP, PE, and Accrued revenue treated when going up from start to end YE from cash to accrual and vice versa?

Answer 19

Cash to accrual = AR increases accrual amount, AP decreases accrual amount, PE increases accrual, accrued revenue decreases accrual amount

Accrual to cash opposite

Question 20

How do you calculate escrow liability? And if a maintenance fee is charged based on interest earned?

Answer 20

Add escrow liability, escrow receipts

Subtract real estate taxes paid during the year from number 1

Multiply the interest earned by the maintenance fee add this to number 2 and 1

Question 21

What are the criteria of Pont in Time Revenue Recognition?

Answer 21

Customer accepted assets along with ownership of the legal title, risks, rewards, physical possesion, and entity has collection rights.
* Entity currently has a right to collect payment for the asset
* The legal title for the asset is with the customer
* Physical possession of the asset is transferred by the entity to the customer
* Significant risks and rewards of ownership of the asset are with the customer
* The asset has been accepted by the customer

Question 22

What are the criteria of Over time Revenue Recognition?

Answer 22

• Simultaneous receipt and consumption of customer benefits as and when the company performs.
• The performance of the entity creates or enhances an asset controlled by the customer.
• The performance of the entity does not create an asset with alternative use of the entity and the entity has an enforceable right to payment for the completed performance to date.

Question 23

What are the two methods for over time revenue recognition?

Answer 23

Input method/output method for over time revenue recognition.

Input: Based upon the fulfillment amount towards contracts like costs incurred, labor hours, machine hours.

Output: Based upon the amount of services/goods DELIVERED to an entity.

Question 24

Debt issued with detachable stock warrants how are proceeds allocated?

Answer 24

Based on relative fair values and must be

Question 25

What are some examples that goes into OCI opposed to what doesn't?

Answer 25

Foreign currency translation loss: 30,000 Unrealized gain on available-for-sale debt security: 10,000 Unrealized loss on available-for-sale equity security: 10,000 Amortization of actuarial pension loss: 15,000 Actual return on pension plan assets: 65,000 Goes into it: Foreign Currency Translation Loss UGL AFS DEBT Securities Amortization of actuarial pension loss Doesn't go into it: Actual return on pension plan assets UGL on trading/HTM Securities.

Question 26

How are issued shares calculated? Along with when a state protect shares held in treasury from dilution when stock splits and dividends are declared.

Answer 26

Regular formula (Originally Issued shares + issued shares X stock split amount or stock dividends) X original par value Protected shares from Dillution: (Originally Issued shares + issued shares X stock split amount or stock dividends) X new par value DNU Treasury stocks within the formula at all

Question 27

What is the difference journal entry-wise for a small stock dividend as opposed to a large stock dividend for declaration date?

Answer 27

Small Stock Dividend (Cost/Fair Value): Retained Earnings Debit @Fair Value Common Stock Credit @Par Value APIC Credit @DifferencePlug Large Stock Dividend (Par Value): Retained Earnings Debit @Par Value Common Stock Credit @Par Value

Question 28

Calculate the journal entries for the below problem Cost/par value method Part 1: BY: 25,000 shares of $5 par common stock were issued at $8 per share. Several months later, Lexin repurchased 1,500 shares at $12 per share. Before the end of the fiscal year, the company re-sold 500 shares at $10 per share and then another 500 shares at $15 per share.

Answer 28

Issuance Journal Entry: Par Value: Cash Debit 200,000 APIC Credit 75,000 CS Credit 125,000 Cost: Cash Debit 200,000 APIC Credit 75,000 CS Credit 125,000

Question 29

Calculate the journal entries for the below problem Cost/par value method Part 2: BY: 25,000 shares of $5 par common stock were issued at $8 per share. Several months later, Lexin repurchased 1,500 shares at $12 per share.

Answer 29

Par: TS Debit 7,500 APIC-CS Debit 4,500 RE Debit 6,000 (no APIC-TS before) Cash Credit 18,000 Cost: TS Debit 18,000 Cash Credit 18,000

Question 30

Calculate the journal entries for the below problem Cost/par value method Part 3: BY: 25,000 shares of $5 par common stock were issued at $8 per share. Several months later, Lexin repurchased 1,500 shares at $12 per share. Before the end of the fiscal year, the company re-sold 500 shares at $10 per share and then another 500 shares at $15 per share.

Answer 30

Par: Cash Debit 5,000 TS Credit 2,500 APIC Credit 2,500 Cash Debit 7,500 TS Credit 2,500 APIC Credit 5,000 Cost: Cash Debit 5,000 RE Debit 1,000 TS Credit 6,000 Cash Debit 7,500 TS Credit 6,000 APIC-TS 1,500

Question 31

If an exporter/seller's home currency appreciates/depreciates which is a gain or loss? If an Importer/buyer's home currency appreciates/depreciates versus a foreign currency which is a gain or loss?

Answer 31

Exporter/Seller - home vs foreign exchange currency app: Loss foreign buyers need more money Exporter/Seller - Home vs foreign exchange currency dep: Foreign buyers need less money Importer/Buyer - home vs foreign exchange currency app: Gain need less to buy foreign goods Importer/Buyer - Home vs foreign exchange currency dep: Loss need more to buy foreign goods