Formula Sheet

Current Assets
 Cash and cash equivalents
 Trading securities, at fair value
 Accounts receivable, net of allowance.
 Notes receivable.
 Inventory Income Statement and Balance Sheet
 Prepaid expenses
Chapter 1
Investments
Module 2
 Available for sale securities, at fair value
 Held to maturity securities.
 Investments in affiliates

Property, Plant, and Equipment

 Land
 Building
 Equipment
 Less: Accumulated Depreciation

Intangible Assets
 Goodwill
 Patents, net of amortization

Other Assets
 Pension and other postretirement benefit assets
 Deferred income tax asset

Current liabilities
 Current portion of long-term debt
 Accounts payable
 Notes payable
 Interest payable
 Salaries payable
 Unearned revenue

Long Term Liabilities

 Bonds payable
 Deferred income tax liability
 Pension and other postretirement benefit liabilities

Stockholders Equity
 Capital Stock
 Preferred Stock
 Common stock
 Paid-in capital
 Retained Earnings
 Accumulated Other Comprehensive Income
 Treasury stock at cost
Gross profit or loss is recognized in each period by the following steps:
Step 1  Compute gross profit
of completed contract:
Step 2  Compute percentage
of completion:
Step 3  Compute gross profit
earned (profit to date)
Step 4  Compute gross profit
earned for current year
Contract price
< Estimated total cost >
Gross profit Revenue Recognition: Part 2
Total cost to date
Chapter 1
Total estimated cost of contract
Step 1 * Step 2 = PTD Module 4
PTD at current FYE
<PTD at beginning of period>
Current year-to-date GP

Accounting for the Completed Contract Method

 Gross profit or loss = Contract price – Total costs
Statement of Comprehensive
Net Income + Other Comprehensive Income = Comprehensive Income Income

Segment Profit or Loss Calculated as follows: Chapter 1

Revenues Module 7
Less: directly traceable costs
Less: reasonably allocated costs
= Operating profit or loss Segment Reporting

Converting Cash Basis Revenue to Accrual Basis Revenue: Chapter 2

Cash basis revenue Module 5
+ Ending AR
- Beginning AR
- Ending unearned revenue
+ Beginning unearned revenue
= Accrual basis revenue

Converting Cash Paid for Purchases to Cost of Goods Sold: Special Purpose Frameworks
Cash paid for purchases Chapter 2
+ Ending AP
- Beginning AP Module 7
- Ending inventory
+ Beginning inventory
= Cost of goods sold
Converting Cash Paid for Operating Expenses to Accrual Basis
Cash paid for operating expenses
+ Ending accrued liabilities
Special Purpose Frameworks
- Beginning accrued liabilities
- Ending prepaid expenses Chapter 2
+ Beginning prepaid expenses
Module 7
= Accrual basis operating expenses

Liquidity Ratios
 Current Ratio = Current assets / Current liabilities
 Quick Ratio = Cash and Cash Equivalents + Short Term Marketable Securities +
Receivable (net) / Current liabilities

Activity Ratios
 Accounts receivable turnover = Sales (net) / Average accounts receivable (net)
 Days sales in accounts receivable = Ending accounts receivable (net) / Sales (net) / 365
 Inventory turnover = Cost of goods sold / Average inventory
 Days in Inventory = Ending Inventory / Cost of Goods Sold / 365
 Accounts Payable Turnover = Cost of Goods Sold / Average accounts payable
 Days of Payable Outstanding = Ending accounts payable / Cost of goods sold / 365
 Cash Conversion Cycle = Days sales in accounts receivable + Days in inventory – Days
of payables outstanding
 Asset Turnover = Sales (net) / Average total assets

Profitability Ratios Ratio Analysis

 Profit Margin = Net Income / Sales (net)
Chapter 2
 Return on Assets = Net income / Average total assets
 DuPont return on assets = Profit margin * Asset turnover Module 8
o Profit Margin  Net Income / Sales (net)
o Asset turnover  Sales (net) / Average total assets
 Return on equity = Net income / Average total equity
 Return on sales = Income before interest income, interest expense, and taxes / Sales
(net)
 Gross Profit Margin = Sales (net) – Cost of goods sold / Sales (net)
 Operating Cash Flow = Cash flow from operations / Current liabilities
 Ratio Analysis

Chapter 2
Coverage Ratios
 Debt to Equity Ratio = Total liabilities / total equity Module 8
 Total Debt Ratio = Total liabilities / Total assets
 Equity multiplier = Total assets / Total equity
 Times Interest Earned = Income before interest expense and taxes / Interest expense
o Earnings before interest and taxes / interest expense
 Earnings per share = Income available to common shareholders / Weighted average
common shareholders outstanding
 Price Earnings Ratio = Price per share / Basic earnings per share
 Dividend Payout = Cash dividends / Net Income Inventory

Market Ceiling = Selling Price – Cost Chapter 3

Market Floor = Net Realizable Value – Profit Module 3

Periodic Inventory System – COGS is calculated

Beginning inventory PP&E: Cost Basis
+ Purchases Chapter 3
= Cost of Goods Available for Sale
- Ending inventory (physical count) Module 4
= Cost of goods sold

Price Index = Ending inventory at current year cost / Ending inventory at base year cost

Cost Model Formula

 Cost model carrying value = Historical cost – Accumulated Depreciation – Impairment

Revaluation Model
 Revaluation model carrying value = Fair value at revaluation date – Subsequent
accumulated depreciation – Subsequent impairment

Straight Line Depreciation

 Cost – Salvage value / Estimated useful life.

Depreciation expense = Cost – Salvage Value * Remaining life of asset / Sum of the year’s
digits

Calculating the Sum of the Years Digits

 S = N * (N + 1) / 2
 N = Estimated useful life
PP&E: Depreciation and Disposal

Chapter 3

Module 4
Units of Production Depreciation
 Step 1: Cost – Salvage value / Estimated units of hours = Rate per unit or hour
 Step 2: Rate per unit (or hour) * Number of units produced (or hours worked) =
Depreciation Expense
PP&E:
Declining Balance Depreciation (Double Declining Depreciation)
Depreciation and
 Depreciation expense = 2 * 1/n * (Cost – Accumulated Depreciation)
Disposal

Depletion Calculation Chapter 3

 Total depletion = Unit depletion rate * Number of units extracted”

Unit Depletion Rate (Depletion per Unit)

 Unit depletion rate = Depletion base / Estimated recoverable units

Depletion Base Calculated Intangibles

Cost to purchase property.
+ Development costs to prepare the land for extraction. Chapter 3
+ Any estimated restoration costs. Module 7
- Residual value of land after the resources are extracted

Amortization of Capitalized Software Costs

 Annual amortization (on a product-by-product basis) is the greater of:
a. Percentage of revenue = Total capitalized amount * Current gross revenue for period /
Total projected gross revenue for project
b. Straight line = Total capitalized amount * 1 / Estimate of economic life Impairment

Chapter 3
Impairment Test
 Negative Module 8
o Impairment
 Assets held for use = Fair value – Net carrying value = Impairment loss
 Asset held for disposal:
Fair value
- Net carrying value.
= Impairment Loss
+ Cost of disposal
= Total impairment loss
 Fair value – Net carrying value = Positive (no impairment) or Negative (impairment)
Undiscounted future net cash flows
 Negative
o Impairment
 Assets held for use = FV or PV future cash flows – Net carrying value =
Impairment loss
 Assets held for disposal:
FV or PV future net cash flows
Impairment
- Net carrying value.
= Impairment Loss Chapter 3
+ Cost of disposal
Module 8
= Total impairment loss

Disclosures for Investments in Equity Securities

Net gains and losses recognized during the period on equity securities.
- Net gains and losses recognized during the period on equity securities sold during the period.
= Unrealized gains and losses recognized during the reporting period on equity securities
still held at the reporting date Financial Instrument

Chapter 4
Equity method – Bank account and use your BASE account analysis:
Module 1
 Beginning Balance
 Add: Investor’s share of investee’s earning (like bank interest; it is income when earned,
not when taken out).
 Subtract: Investor’s share of investee’s dividends (like bank withdrawals; and it is not
income.
 Ending balance Equity method

Asset Adjustment (Equity Method) Chapter 4

 FV of net assets acquired – BV of net assets acquired = Asset adjustment Module 2

Goodwill (Equity Method)

 Purchase price – Fair value = Goodwill
Acquisition Method: Part 1
CAR Formula (Acquisition Method)
 Assets – liabilities = Equity Chapter 4
 Assets – liabilities = Net book value Module 4
 Assets – liabilities = CAR

Acquisition Date Calculation (of CAR)

 Acquisition
o Beginning retained earnings + Income – Dividends = Ending retained earnings
Acquisition Date Computation
 Fair value of subsidiary * Noncontrolling interest % = Noncontrolling Interest

Noncontrolling Interest After the Acquisition Date Acquisition Method: Part 2

Beginning noncontrolling interest
+ NCI share of subsidiary net income Chapter 4
- NCI share of subsidiary dividends Module 5
= Ending noncontrolling interest

Computation of Net Income Attributable to the Noncontrolling Interest

Subsidiary’s Income
- Subsidiary’s expenses
Subsidiary’s net income
* Noncontrolling interest %
= Net income attributable to the noncontrolling interest

Full goodwill method (U.S. GAAP)

 NCI = Fair value of subsidiary * Noncontrolling interest %

Partial goodwill method (IFRS)

 NCI = Fair value of subsidiary’s net identifiable assets * Noncontrolling interest %

Fair Value of Subsidiary

 Fair value subsidiary = Acquisition cost + NCI at FV

Full goodwill method (U.S. GAAP)

 Goodwill = Fair value of subsidiary – Fair value of subsidiary’s net assets

Partial goodwill method (IFRS)

 Goodwill = Acquisition cost – Fair value of subsidiary’s net assets acquired

Cumulative Accretion Expense + Cumulative Depreciation Expense = Asset retirement

obligation

Payables and Accrued liabilities

Chapter 5

Module 1

Present Value = FV / (1 + r)N Long Term Liabilities

PV * (1 + r)N = FV Chapter 5

Module 3
Present Value of $1 Long Term Liabilities
 PV = FV * 1 / (1 + r)N
Chapter 5
 PV = Future value / (1 + r)N
Module 3
Future Value of $1
 Future value = Present value * (1+r)N

Present Value of an Ordinary Annuity

 PV of OA = Annuity payment * Present value of ordinary annuity of $1 for appropriate n
and r

Future Value of an Ordinary Annuity

 Periodic payment * Future value of an ordinary annuity of $1 for appropriate n and r

Bonds: Part 1
FACE + Unamortized Premium = Carrying Value
Chapter 5
FACE – Unamortized Discount = Carrying Value Module 4

(Straight Line) Interest Expense is calculated as follows:

 Premium/Discount and Bond Issuance Cost / Number of Periods Bonds is Outstanding =
Period Amortization

 $ paid – Interest Expense = Amortization

Interest expense = Face value * Stated interest rate – Premium amortization

Or
+ Discount and bond issuance cost amortization

Effective Interest Method (Interest Expense)

 Interest expense = Carrying value at the beginning of the period * Effective (market)
interest rate

Discount/Premium Amortization Bonds: Part 2

 Amortization of the discount = Interest expense – Interest payment
o Interest Expense > Coupon  Loss Chapter 5
 Amortization of the premium = Interest payment – Interest expense Module 5
o Interest Expense < Coupon  Gain

 Net carrying value * Effective interest rate = Interest expense

 Bond face * Coupon rate = Interest payment
  Interest expense – interest payment = Amortization
Bonds: Part 2
Carrying value of the bond = Face value + Unamortized premium
Chapter 5
Carrying value of the bond = Face value – Unamortized discount
Module 5

Transfer of Assets
Troubled Debt
 Recognize Gain/Loss Restructuring and
o FV asset transferred – NBV asset transferred = Gain/loss Extinguishment
 Recognize Gain
o Carrying amount of the payable – FV asset transferred = Gain Chapter 5
 Recognize Gain Module 6
o Carrying amount of the payable – FV equity transferred = Gain

 Receivable – FV asset / Equity received = Shortfall (Loss)

 (Gain) or loss = Reacquisition price – Net carrying amount

Reacquisition price = Face * % paid

Face
- Unamortized discount; or
< carrying value > + Unamortized premium; and
<Gain> Loss - Unamortized issuance cost

Tax Return Temporary Financial

Difference Statement
* Current tax rate * Future (enacted)
tax rate
Current liability + Deferred liability =
- Deferred asset Total tax expense

Thus, total income tax expense/benefit can be depicted as follows:

Current income tax payable
or refundable as determined
on the corporate tax return
Balance sheet
+/- Change in the deferred
income tax asset or liability
from the beginning to the end
of the reporting period
Balance sheet
= Total income tax expense
or benefit
Income statement

Income Taxes:
Part 1

Chapter 6

Module 5
Projected Benefit Obligation: Pension Benefits:
Beginning projected benefit obligation Part 1
+ Service cost
+ Interest cost Chapter 7
+ Prior service cost from current period plan amendments Module 1
+ Actuarial losses incurred in the current period
- Actuarial gains incurred in the current period
- Benefits paid to retirees
= Ending projected benefit obligation

Calculate the ending fair value of plan assets or to solve for the actual return on plan
assets:
Beginning fair value of plan asset
+ Contributions
+ Actual return on plan assets
- Benefits paid to retirees
= Ending fair value of plan assets

Net periodic Pension Cost Calculation:

Current Service Cost
+ Interest Cost
- Return on Plan Assets
+ Amortization of Prior Service Cost
+/- (Gains) and Losses
+ Amortization of Existing Net Obligation or Net Asset
= Net Periodic Pension Cost

Beginning of Period PBO * Discount Rate = Interest Cost

Beginning FV of plan assets * Expected rate of return on plan assets = Expected return on plan
assets

Beginning unrecognized prior service cost / Average remaining service life = Amortization of
prior service cost

The Corridor Approach Pension Benefits:

Unrecognized gain or loss Part 1
< 10% of PBO or Market related value (greater)>
Excess Chapter 7
/ Average remaining service life Module 1
Amortization of unrecognized gain or loss
Amortization of Existing Net Obligation or Net Asset at Implementation Pension Benefits:
Projected benefit obligation Part 1
< Fair value plan assets>
Initial unfunded obligation Chapter 7
/ 15 years or average employee job life (greater) Module 1
Minimum amortization

Fair value of plan assets

< PBO>
Funded status

Defined Benefit Pension Plan Calculation:

Pension Benefits:
Beginning funded status (pension benefit asset/liability)
Part 2
+ Contributions
v- Service cost Chapter 7
- Interest cost
Module 2
+ Expected return on plan assets
- Prior service cost incurred in the current period due to plan amendment
+ Net gains incurred.
- Net losses incurred during the current period
= Ending funded status (pension benefit asset/liability)

Funded status calculation:

+ Contributions
- Net loss
- Service cost/interest cost/return on assets
= Funded status

Income Statement Formula: Financial

Current Service Cost Statements of
+ Interest Cost on (APBO) Employee Benefit
- Return on Plan Assets Plans
+ Amortization of Prior Service Cost
<Gains> and Losses Chapter 7
Amortization/Expense Transition Amount (Net Obligation) Module 4
= Net Postretirement Benefit Cost
 Financial
Amortization or Expense of the Transition Obligation
Statements of
Accumulated postretirement benefit obligation at adoption of SFAS 106 (ASC 740) Employee Benefit
- Fair value of plan assets Plans
Initial unfunded obligation
/ 20 years or average remaining service period (greater of) Chapter 7
Minimum amortization Module 4
Or
Expense full amount

Book value per common share = Common shareholders equity / Common shares outstanding

Common Stockholder’s Equity Formula:

Total Shareholder’s Equity Stockholder’s
- Preferred stock outstanding (at greater of call price or par value) Equity: Part 1
- Cumulative preferred dividends in arrears
Chapter 7
= Common shareholder’s equity
Module 5
Retained Earnings Calculation:
Net income/loss
- Dividends (cash, property, and stock) declared
+/- Prior period adjustments
+/- Accounting changes reported retrospectively.
= Change in Retained Earnings

Basic EPS = Income available to common shareholders (Net Income – Preferred Dividends) /
Weighted average number of common shares outstanding
Earnings per
Weighted Average Number of Common Shares Outstanding: share
Shares outstanding at the beginning of the period
+ Shares sold during the period (on a time-weighted basis) Chapter 8
- Shares reacquired during the period (on a time-weighted basis) Module 1
+ Stock dividends and stock splits (retroactively adjusted)
- Reverse stock splits (retroactively adjusted)
= Weighted average number of common shares outstanding

Diluted EPS Formula

Diluted EPS = Income available to the common stock shareholders + Interest on dilutive
securities / Weighted average number of common shares (assuming all dilutive securities are
converted to common stock)

Additional shares outstanding = Number of shares – (number of shares * exercise price / average
market price)
Indirect Method
Net Income
+ Noncash expenses/losses
- Noncash income/gains
+ Increases (decreases) in operating liabilities/(assets)
- Increases (decreases) in operating assets/(liabilities)
= CFO

Direct Method
Revenues Statement of
- Increase in receivables Cash Flows
+ Decrease in receivables.
+ Increase in unearned revenue. Chapter 8
- Decrease in unearned revenue Module 3
= Cash received from customers

Cost of Goods Sold

+ Increase in inventory.
- Decrease in inventory
- Increase in accounts payable
+ Decrease in accounts payable.
= Cash paid to suppliers

Salaries and wages expense

- Increase in wages payable
+ Decrease in wages payable.
= Cash paid to employees

Other operating expenses

- Decrease in prepaid expenses
+ Increase in prepaid expenses.
+ Decrease in accrued liabilities.
- Increase in accrued liabilities
= Cash paid for other expenses

Indirect Method
Net Income OA (add  decrease)
+ Depreciation/Amortization OL (subtract  increase)
- Gain/Amortization Bonds Premium
- Equity earnings
- (+/-) Change in OA
+ (+/-) Change in OL
 Statement of Cash Not for Profit
Flows Revenue
= CFO Recognition
Selling Price – NBV = Gain or Loss Chapter 8
Chapter 8
Module 3
Module 5

Total Contribution Received – Fair value of premiums = Contribution revenue (net)

Assessed student tuition and fees – Canceled classes = Gross revenue from tuition and fees

Gross patient service revenue – Charitable services = Patient service revenue (net)

Balance Sheet
Current assets + Deferred outflows
+ Current liabilities + Deferred inflows of resources + Fund balance
= Total current liabilities, deferred inflows of resources, and fund balances

Statement of Revenues, Expenditures, and Changes in Fund Balance

Revenues
- Expenditures
+ Other financing sources <uses> Fund Structure and
= Net change in fund balance Fund Accounting

Statement of Net Position Chapter 9

All assets + Deferred outflows of resources Module 2
<All liabilities + Deferred inflows of resources>
= Net position

Statement of Revenues, Expenses and Changes in Fund Net Position

Operating Revenue
- Operating expenses
+ Nonoperating revenue <expenses>
= Change in net position

Statement of Fiduciary Net Position

All assets + Deferred outflows of resources
Government-wide
<All liabilities + Deferred inflows of resources>
Financial Statement
= Net position
Chapter 10
Statement of Changes in Fiduciary Net Position
Module 4
 Additions – Deductions = Change in net position
Assets and deferred outflows of resources – liabilities and deferred outflows of resources = Net
position
Total governmental fund balance
+ Capital assets (existing and current)
- Accumulated depreciation
- Non-current liabilities (existing)  LTD
+ Eliminate/reverse deferred inflows (add the reduction of deferred inflows associated with
revenue recognized and closed to net position as an addition to net position
- Accrued interest payable
+ Internal service fund net position Deriving
= Net position from governmental activities Government-wide
Financial
Net change in fund balance – total governmental funds Statements and
+ Capital outlay Reconciliation
+ Principal payments on non-current debt Requirements
- Asset disposals (net book value)
- Sources (other financing sources – debt proceeds) Chapter 10
+ Revenue (measurable but unavailable) Module 6
- Interest expense (accrued)
- Depreciation expense
+ Internal service fund net revenue
= Change in net position of governmental activities