Training the Street Accounting- Final Exam || all accurately
answered.
two objectives of financial reporting correct answers relevant and reliable
historical cost correct answers firm records the amount of the transaction
fair value correct answers whatt the transaction is worth as of the balance sheet date, also known
as "mark to market"
Fair Value Hierarchy correct answers The fair value hierarchy provides insight into the priority
of valuation techniques that are used to determine fair value. The fair value hierarchy is divided
into three broad levels.
Fair Value Hierarchy
Level 1: quoted prices in active markets like common stock on NYSE
Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or
liability either directly or through corroboration with observable data.
Level 3: Unobservable inputs (for example, a company's own data or assumptions). this is the
most iffy. (ex: a DCF)
Level 1 is the most reliable because it is based on quoted prices, like a closing stock price in the
Wall Street Journal. Level 2 is the next most reliable and would rely on evaluating similar assets
or liabilities in active markets. At the least-reliable level, Level 3, much judgment is needed
based on the best information available to arrive at a relevant and reliable fair value
measurement.
,FV Level 3 observality correct answers if an observable input has >10% impact on fair value,
then it must be level 3
substantial doubt correct answers 75% doubt a firm wont meet obligations
revenue correct answers sales-returns (products and services have been delivered) "top line"
accounts recievable correct answers claim to case
retained earnings correct answers captures revenue
do dividends change the income statement correct answers no
another name for income statment correct answers profit and loss
net income= correct answers revs-expenses +/- other income (including gains and losses)
pg 22 correct answers make sure to double check this somehow (brad?)
accrual accounting correct answers economic measurement is not equal to cash flow (in other
words we dont record when cash is physically moving, just the effects in accrual)
Matching Principle/ accrual accounting (revenues) correct answers entities match the revenues
with the period when it is earned ; example, gift cards. when you buy a gift card, the accounts
receivable increases, and its matched with deferred revenue (liability!) on the balance sheet until
it is earned
redo pg 28 correct answers matching with tif giftcard on cc using accrual accounting
, matching principle/ accrual accounting (expenses) correct answers entities match the expense
with the revenue; its not an expense until its sold. example is inventory on the bal sheet until
revenue is earned (like when the person uses the gift card)
balance sheet correct answers a firms assets and source of capital (liabilities and equity) at a
single point in time
what are the three primary ways to fund assets correct answers other liabilities (accounts payable
accrued expenses and deffered revenue); debt (interest bearing liabilities) and equity (residual
owners, high risk high reward)
what are some omissions (items not on the balance sheet) correct answers intangible assets like
Brand; purchase commitments, like coke's commitment to buy sugar, off balance sheet
commitments and contingencies
example identifying inventory: if you sell a restaurant is that inventory for the restaruant? correct
answers no that would be ppe, the business sells food so that would be the inventory
assets correct answers probably economic benefits obtained or controlled by an entity as a result
of past transactions or events ; US lists them in order of liquidity and IFRS has a specific order ;
5 general categories are current assets, long term investments, ppe, intangables, other
cash conversion cycle correct answers average time to pay for inventory, sell inventory and/or
services, and collect cash (cash->inventory->a/p->sale-> cash) when u add in A/r after sale and
before cash it makes the cycle longer
prepaid revenue share correct answers this is like when google pays apple to be the default
search engine on safari, in bankruptcy its pretty worthless
does "cash" include overdrafts correct answers no ; overdrafts are usually liabilities
answered.
two objectives of financial reporting correct answers relevant and reliable
historical cost correct answers firm records the amount of the transaction
fair value correct answers whatt the transaction is worth as of the balance sheet date, also known
as "mark to market"
Fair Value Hierarchy correct answers The fair value hierarchy provides insight into the priority
of valuation techniques that are used to determine fair value. The fair value hierarchy is divided
into three broad levels.
Fair Value Hierarchy
Level 1: quoted prices in active markets like common stock on NYSE
Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or
liability either directly or through corroboration with observable data.
Level 3: Unobservable inputs (for example, a company's own data or assumptions). this is the
most iffy. (ex: a DCF)
Level 1 is the most reliable because it is based on quoted prices, like a closing stock price in the
Wall Street Journal. Level 2 is the next most reliable and would rely on evaluating similar assets
or liabilities in active markets. At the least-reliable level, Level 3, much judgment is needed
based on the best information available to arrive at a relevant and reliable fair value
measurement.
,FV Level 3 observality correct answers if an observable input has >10% impact on fair value,
then it must be level 3
substantial doubt correct answers 75% doubt a firm wont meet obligations
revenue correct answers sales-returns (products and services have been delivered) "top line"
accounts recievable correct answers claim to case
retained earnings correct answers captures revenue
do dividends change the income statement correct answers no
another name for income statment correct answers profit and loss
net income= correct answers revs-expenses +/- other income (including gains and losses)
pg 22 correct answers make sure to double check this somehow (brad?)
accrual accounting correct answers economic measurement is not equal to cash flow (in other
words we dont record when cash is physically moving, just the effects in accrual)
Matching Principle/ accrual accounting (revenues) correct answers entities match the revenues
with the period when it is earned ; example, gift cards. when you buy a gift card, the accounts
receivable increases, and its matched with deferred revenue (liability!) on the balance sheet until
it is earned
redo pg 28 correct answers matching with tif giftcard on cc using accrual accounting
, matching principle/ accrual accounting (expenses) correct answers entities match the expense
with the revenue; its not an expense until its sold. example is inventory on the bal sheet until
revenue is earned (like when the person uses the gift card)
balance sheet correct answers a firms assets and source of capital (liabilities and equity) at a
single point in time
what are the three primary ways to fund assets correct answers other liabilities (accounts payable
accrued expenses and deffered revenue); debt (interest bearing liabilities) and equity (residual
owners, high risk high reward)
what are some omissions (items not on the balance sheet) correct answers intangible assets like
Brand; purchase commitments, like coke's commitment to buy sugar, off balance sheet
commitments and contingencies
example identifying inventory: if you sell a restaurant is that inventory for the restaruant? correct
answers no that would be ppe, the business sells food so that would be the inventory
assets correct answers probably economic benefits obtained or controlled by an entity as a result
of past transactions or events ; US lists them in order of liquidity and IFRS has a specific order ;
5 general categories are current assets, long term investments, ppe, intangables, other
cash conversion cycle correct answers average time to pay for inventory, sell inventory and/or
services, and collect cash (cash->inventory->a/p->sale-> cash) when u add in A/r after sale and
before cash it makes the cycle longer
prepaid revenue share correct answers this is like when google pays apple to be the default
search engine on safari, in bankruptcy its pretty worthless
does "cash" include overdrafts correct answers no ; overdrafts are usually liabilities
