dumb and stupid 1

order from operating income —> comprehensive income

operating income + non operating income + unusual items - tax = income from continuing operations

ICO - discontinued ops = net income

net income + OCI = CI

which periods included for 10-Q

B/S (this quarter, last YE)

I/S (this quarter, last YE-this quarter, prior year of both)

SCF (last YE-this quarter, prior year)

book value per share (and what is the numerator?)

common SE / common SO

common SE = SE - dividends in arrears - pref stock outstanding (greater of callable price, par, or liquidation value)

purchase of treasury JE (cost vs. par)

cost: debit treasury (cost), credit cash

par: debit treasury (par), debit APIC common, deb/cred APIC treasury or RE, credit cash

resale of treasury JE (cost vs. par)

cost: debit cash, credit treasury (cost), deb/cred APIC treasury or RE

par: debit cash, credit APIC common (new excess), credit treasury (par)

how to simplify cost vs. par entries

at cost, treasury will be valued at cost

at par, treasury will be valued at par, APIC common at the original excess and then resale excess

for every G/L, APIC treasury and/or RE will be the plug figure based on whatever is left in the APIC treasury account (not APIC common)

retirement of treasury JE (cost vs. par)

cost: debit common (par), debit APIC common, credit treasury (cost), deb/cred RE (loss b/c APIC treasury doesn’t exist yet) or APIC treasury (gain)

par: debit common, credit treasury

direct retirement of stock

debit common, debit APIC common, deb/cred APIC retired stock or RE, credit cash

donated stock JE & reissuance

receipt: debit treasury stock, credit APIC (FMV)

reissuance: debit cash, credit treasury, deb/cred APIC treasury (based on sale - book value)

stock receivable JE for receipt

debit sub receivable, credit capital stock sub, credit APIC

then debit cash, credit sub receivable

stock receivable JE for default (refund vs. keep)

refund: debit capital stock sub, debit APIC, credit cash

keep: debit capital stock sub, credit APIC (retain a portion of APIC)

when will stock rights be recorded?

when payment is received

debit cash, credit APIC stock rights —> then normal cap stock + APIC

recipient accounting for liquidating dividend

debit cash (full), credit dividend income, credit investment (return on investment)

company accounting for stock dividend

debit RE, credit stock (will use APIC if it is small)

similar JEs for construction contracts PIT and OT

incurring costs, billings (contra-CIP), payment, loss (debit loss, credit CIP)

profit & final JE for OT

debit CIP, debit cost, credit revenue

last: debit billings, credit CIP

final JE for PIT

debit cost, credit CIP

debit billings, credit revenue

when to capitalize for costs of fulfilling a contract

if it relates to enhancing resources, will be recovered, and relate directly to the contract

when to capitalize for costs of obtaining a contract

if the costs wouldn’t be incurred regardless

who doesn’t have inventory or a liability until an item is sold (then they have a liability)?

consignees and agents

(bill and hold also don’t have inventory)

forward vs. call vs. put

must repurchase, can repurchase, customer may force repurchase

forward and call options for repurchase agreements

more expensive than original price —> financing

cheaper than original price —> lease

put options for repurchase agreements

when original price > repurchase, lease or sale with right of return (market value > repurchase)

when original price < repurchase, financing or lease (market value > repurchase)

when to change beginning RE (NoT)

error in PY

when to change just current RE

change in estimate, change in principle inseparable from estimate (LIFO), error in CY, modification of terms in debt restructuring

when to change both beginning and current RE (cumulative effect)

change in principle, change in entity

when to recognize/accrue, disclose, or ignore subsequent events

recognize/accrue - existing at B/S date

disclose - material after B/S date

ignore - immaterial, inestimable after B/S date

when to accrue, disclose, ignore contingencies

(must be before B/S date but uncertain)

accrue - probable and estimable

disclose - reasonably possible

ignore - remote or a gain (unless DOG then disclose)

market vs. income vs. cost approach of valuation

market - based on principal market (level 1 or 2)

income - based on DCF

cost - based on replacement cost

dupont RoA

asset turnover * return on sales

sales / average assets * net income / sales

(return indicates net income)

turnover ratios (patterns)

inventory, A/R, A/P as the denominator (averages)

COGS, sales, COGS as the numerator

equity multiplier

total A / total SE

PE ratio (and what does it indicate?)

stock price / EPS — indicates growth potential

quick ratio

cash + equivalents + net A/R / current L

capital turnover

sales / working capital

working capital = current A - current L

how should HFS assets be recognized?

as NRV in B/S. stop depreciation

do treasury stock gains exist?

NO!

days in inv, A/R, A/P

365 / turnover ratios but using “end” instead of average

what kind of common stock would be recognized as a liability?

unconditional redemption

Cumulative vs. participating preferred stock

Cumulative: constant rate of dividends (would be in arrears if not paid), whereas noncumulative would be declared

Participating: specific rate for dividends, same with common and the excess would be distributed pro rata

what is the SEC P&D requirement section?

S-X

what would be a change in inventory method inseparable from estimate?

change TO LIFO