Assets and related topics Flashcards
A company decided to change its inventory valuation method from FIFO to LIFO in a period of rising prices. What was the result of the change on ending inventory and net income in the year of the change?
Decrease, Decrease
In order to compute dollar-value LIFO, the firm applies a price index to the LIFO inventory layers added. When the price index is greater than
1.0, dollar-value LIFO will be greater than the comparable base-year amounts.
In a consignment arrangement, the consignor will maintain title to the goods provided to the consignee until the point at which the consignee sells those goods to a third-party customer.
This includes any freight costs
Disadvantage of periodic system
A disadvantage of the periodic inventory system is that the cost of good sold amount used for financial reporting purposes includes both the cost of inventory sold and inventory shortages
Gains or losses on disposal of fixed assets (including involuntary conversions) are recognized during the period incurred based on recorded amount (NBV). Any insurance proceeds must be included in the determination:
Note: Repairs would have been expensed and would not have become part of the NBV.
Capitalized interest
Accumulated Expenses time the applicable interest rate
To be included in inventory, a cost must be usual, necessary and make the item ready for sale.
Exampled-Monthly import duty
modifications did not increase the building’s market value, and the rearrangement did not extend the production line’s life. Should the building modification costs and the production line rearrangement costs be capitalized?
Yes and Yes
Rule: Expense ordinary repairs but capitalize expenditures, which are “additions” or “benefit several periods” or “improve efficiency” as is the case in this question.
Legal fees and other costs associated with registering a patent are
Capitalized
The proceeds from the sale of the building should be
should be deducted from the cost of the land.
Rule: Cost of land includes all costs necessary to put the land in place and condition for construction of the plant. Any proceeds from the sale of any existing buildings (or standing timber, or soil) or scrap are deducted from the cost of the land.
Fundraising expenses are incurred to _______
induce contributions
The most common functional classifications for nongovernmental not-for-profits are _______
program services and support services that may include fund-raising and management and general
Special revenue funds are __________
expendable (may be entirely used up)
permanent funds are________
nonexpendable (legally restricted to the extent that income and not principal may be used for the restricted purpose).
Which of the following fund types should account for fixed assets in a manner similar to a “for profit” organization?
Enterprise fund should account for fixed assets in a manner similar to a “for profit” organization. Its accounting is similar to accrual basis commercial accounting.
How should unconditional pledges received by a nongovernmental not-for-profit organization that will be collected over more than one year be reported
pledges receivable, valued at their present value.
What kind of inventory can firms capitalize?
For special order goods held for sale to customers.. Ordinary would not qualify
When to capitalize for building?
Rule: Expense ordinary repairs but capitalize expenditures, which are “additions” or “benefit several periods” or “improve efficiency”
To be included in inventory, a cost must be….
usual, necessary and make the item ready for sale
Booking inventory gains and losses in the interim
Temporary market declines in inventory need not be recognized at interim when a turn-around can reasonably be expected to occur before the end of the fiscal year.
Under U.S. GAAP, when making a change to LIFO, it is generally considered
impracticable to calculate the cumulative effect of the change (in most cases, data on the historical LIFO layers in not available)
