thats good, coz thats what i would do too. 1 question CP - shouldn’t (500) be positive since it is mentioned in the liabilities section? assuming that, the net effect would be 1) L drops by 500, E up by 500 2) A up by 1000, E up by 1000 i.e. E up by 1500.
right. On the Balance sheet - L Down 500, E Up 500 A Up 1000 E Up 1000 So A Up 1000, L Down 500, E Up 1500 Thanks Niraj.
JasonU Wrote: ------------------------------------------------------- > you can’t just synthesize adjustments to the b/s > without linking to i/s and cf > > like the decrease in goodwill, you don’t just > decrease goodwill (has an indefinite life), it has > to be impaired which is a one-time CF from > operation which is why it is written down on the > balance sheet and an offsetting amount is removed > from equity Yikes! No. THere is NO cash impact to a goodwill impairment. It is an explicitly non-cash charge.
Thanks CP that makes it pretty clear.
cpk, thanks for the COGS thing…I was just loking at the tax part, but yeah, I would have used teh wrong formula on the exam! Regarding the funded status, I’m not sure about the adjustment you are making because the $1000 was already there as an asset in Funed Status, and the B/S was aleady balanced. So, if you are going to explicitly show the liability of $500, TA should remain intact. Assume TA=$10,000, which includes $1000 of Funded Status. If you want to show a liability of $500, then you increase liability (+$500) and deduct $500 from equity. I don’t think it’s correct to change assets. Agreed?
I understood the original question to mean: You currently have a 500 Liab. Next year it becomes a 1000 Asset. How would you reflect it.
This is why its in the CFO, its non cash so it needs to be added back to reconcile net income mcf Wrote: ------------------------------------------------------- > JasonU Wrote: > -------------------------------------------------- > ----- > > you can’t just synthesize adjustments to the > b/s > > without linking to i/s and cf > > > > like the decrease in goodwill, you don’t just > > decrease goodwill (has an indefinite life), it > has > > to be impaired which is a one-time CF from > > operation which is why it is written down on > the > > balance sheet and an offsetting amount is > removed > > from equity > > Yikes! No. THere is NO cash impact to a goodwill > impairment. It is an explicitly non-cash charge.
I think the point of this exercise is to show how to adjust the B/S for good earnings quality, so (someone correct me if I’m missing something) since a funded status disguises some useful information…in this case a hidden $500 liability, not shown anywhere (except of course in the footnotes), what you then need to do is tear apart the Funded Status and expose its inside. However, TA must remain the same, as we are simply playing with places only. This understanding is based on what’s being said hear, I have not read anything about funded status adjustment… so take it with a grain of salt.
Does sales of receivables increase revenue? What are the adjustments?
cpk123 Wrote: ------------------------------------------------------- > COGS FIFO=COGS LIFO - Delta LIFO Reserve > > The (1-T) part goes into Net Income. > > Net Income FIFO=Net Income LIFO + Delta LIFO > Reserve * (1-T) CP do we need to know this? I assume you want lifo cogs on IS?
niraj_a Wrote: ------------------------------------------------------- > thats good, coz thats what i would do too. > > 1 question CP - shouldn’t (500) be positive since > it is mentioned in the liabilities section? > > assuming that, the net effect would be > > 1) L drops by 500, E up by 500 > > 2) A up by 1000, E up by 1000 > > i.e. E up by 1500. nice. got it.
contingent liability -> assets up, liabilities up
why assets up?
aliman over studied that’s why
Cause a contingency is something you’re not sure of (think selling AR with recourse) so you add to A and L.
no a contingency is a possible lawsuit of 5M (or at least thats what i meant) i believe you should inc libailities and dec equity for 5M. if you have ally mcbeal as your lawyer tho and are confident u will win the case then u dont have to do anything on the B/S