30#-I. Conceptual Framework and Financial Reporting - 1.FASB+2.IFRS+3.General Purpose F/S Flashcards Preview

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1

Flax Corp. uses the direct method to prepare its Statement of Cash Flows. Flax's trial balances at December 31, 20X4 and 20X3, are as follows:

December 31

                                                  20X4                    20X3

Debits:

Cash$ 35,000$ 32,000

Accounts receivable33,00030,000

Inventory31,00047,000

Property, plant, & equipment100,00095,000

Unamortized bond discount4,5005,000

Cost of goods sold250,000380,000

Selling expenses141,500172,000

General & administrative expenses137,000151,300

Interest expense4,3002,600

Income tax expense20,40061,200

$756,700$976,100

================

Credits:

Allowance for uncollectible accounts$ 1,300$ 1,100

Accumulated depreciation16,50015,000

Trade accounts payable25,00017,500

Income taxes payable21,00027,100

Deferred income taxes5,3004,600

8% callable bonds payable45,00020,000

Common stock50,00040,000

Additional paid-in capital9,1007,500

Retained earnings44,70064,600

Sales538,800778,700

$756,700$976,100

==================

Flax purchased $5,000 in equipment during 20X4.

Flax allocated one-third of its depreciation expense to selling expenses and the remainder to general and administrative expenses.

What amounts should Flax report in its Statement of Cash Flows for the year ended December 31, 20X4, for cash paid for goods to be sold?

  1. $258,500
  2. $257,500
  3. $242,500
  4. $226,500

 

4.

Two accounts are related to cost of goods sold: inventory and accounts payable.

Cost of goods sold                                                            $250,000

Less decrease in inventory (This represents an increase to cost of goods sold for inventory not purchased in the current period. Thus, the cash paid for inventory is less than cost of goods sold by this amount.)                                                                     (16,000)

Less increase in accounts payable (This represents an increase in purchases and, therefore, cost of goods sold that was not paid for in the current period. Thus, the cash paid for inventory is less than cost of goods sold by this amount.)                              (7,500)

Equals cash paid for inventory                                         $226,500

2

AICPA.120607FAR_11_17
Lesson Reference: Statement of Comprehensive Income
Difficulty: medium
Bloom Code: 3

   Burns Corp. had the following items:
   Sales revenue                                                                                      $45,000
   Loss on early extinguishment of bonds                                               36,000
   Realized gain on sale of available-for-sale debt securities                28,000
   Unrealized holding loss on available-for-sale debt securities             17,000
   Loss on write-down of inventory                                                              3,100


Which of the following amounts would the statement of comprehensive income report as other comprehensive income or loss?

  1. $11,000 other comprehensive income
  2. $16,900 other comprehensive income
  3. $17,000 other comprehensive loss
  4. $28,100 other comprehensive loss

3.

Other comprehensive income is comprised of

  • unrealized gains/losses on available-for-sale debt securities,
  • minimum pension liability adjustment,
  • foreign currency translation adjustment, and
  • unrealized gains/losses on cash flow hedges.

The only other comprehensive income item listed is the$17,000 unrealized gains/losses on available-for-sale debt securities

3

BCC-0049B
Lesson Reference: Consolidation Less than 100% Ownership
Difficulty: medium
Bloom Code: 3
On January 1, year 1, Ritt Corp. purchased 80% of Shaw Corp.'s $10 par common stock for $975,000. On this date, the carrying amount of Shaw's net assets was $1,000,000. The fair values of Shaw's identifiable assets and liabilities were the same as their carrying amounts. The fair value of the noncontrolling interest in Shaw on January 1, year 1, was $250,000. This value included the acquisition premium attributed to any goodwill. For the year ended December 31, year 1, Shaw had net income of $190,000 and paid cash dividends totaling $125,000.
In the December 31, year 1 consolidated balance sheet, noncontrolling interest should be reported at

  1. $200,000
  2. $213,000
  3. $233,000
  4. $263,000

4.

ttps://app.efficientlearning.com/pv5/v8/5/app/cpa/far.html?# 6/32
The percentage of the subsidiary's stockholders' equity not owned by the parent represents the noncontrolling interest's share of the fair value of net assets of the subsidiary. The fair value of the noncontrolling interest is measured at the acquisition date and adjusted in future periods for the portion of the acquiree's income and dividends attributable to the noncontrolling interest. Therefore, the noncontrolling interest at 12/31/Y1 is calculated as follows:

Fair value of noncontrolling interests                                      $250,000
Plus: Share of net income ($190,000 × 20%)                               38,000
Less: Share of dividends ($125,000 × 20%)                                (25,000)
Noncontrolling interest 12/31/Y1                                               $263,000

 

4

AICPA.090460FAR-SIM
Lesson Reference: Intercompany (I/C) Fixed Asset Transactions
Difficulty: medium
Bloom Code: 2
An intercompany depreciable fixed asset transaction resulted in an intercompany gain. Which one of the following is least likely to be reflected in the consolidated financial statements prepared at the end of the period in which the intercompany transaction occurred?

  1. Consolidated income will be less than the sum of the incomes of the separate companies being combined.
  2. Consolidated assets will be less than the sum of the assets of the separate companies being combined.
  3. Consolidated depreciation expense will be more than the sum depreciation expense of the separate companies being combined.
  4. Consolidated accumulated depreciation will be more than the sum of accumulated depreciation of the separate companies being combined.

3.

Consolidated depreciation expense will be less, not more, than the sum of depreciation expense of the separate companies being combined. Because the intercompany transaction resulted in again, the buying affiliate will have the asset on its books with the intercompany gain included in its carrying value and will depreciate that value on its books. For consolidated purposes, that depreciation on the intercompany gain will be eliminated, resulting in less depreciation expense than the sum of the depreciation expense of the separate companies.