Assets and Related Topics

Question 1

What qualifies as a “Cash Equivalent”

Answer 1

Highly liquid investment with an original maturity <90 days

Question 2

Checks postdated on future dates (should/shouldn’t) be included in checkbook balance.

Answer 2

Should NOT

Question 3

Is restricted cash considered a cash equivalent?

Answer 3

NO

Question 4

Bank Reconciliation: Bank Portion

Answer 4

Bank Balance - Checks Outstanding + Deposits in Transit

Question 5

How should cash accounts in the same bank be treated?

Answer 5

Net the balances

Question 6

Negative Bank Balances should be recorded as ???

Answer 6

A liability

Question 7

Equation for Proceeds on Note from Bank

Answer 7

Face Value x Interest Rate x Total Time = Maturity Value

Maturity Value x Discount Rate x Time Discounted = Proceeds

Question 8

Using the Allowance Method to write off an uncollectable has what effect on Net Income?

Answer 8

No Effect

Question 9

Using the Allowance Method to write off an uncollectable has what effect on Total Assets?

Answer 9

No Effect

Question 10

Allowance Method: Journal Entry to Write-Off an Uncollectable

Answer 10

DR: Allowance for Doubtful Accounts (Decrease)
CR: A/R

Question 11

Allowance Method: Journal Entry to Recover a Write-Off

Answer 11

DR: Cash
CR: Allowance for Doubtful Accounts (Increase)

Question 12

FOB: X

Answer 12

X = Where BUYER will put the transport costs and goods on their books

Question 13

Allowance Method: Journal Entry to Estimate BDE?

Answer 13

DR: BDE
CR: Allowance for Doubtful Accounts

Question 14

Accounts Receivable T-Account

Answer 14

BB + Credit Sales - Cash Sales - Write Offs - Sales Returns = EB

Question 15

Allowance for Doubtful Accounts T-Account

Answer 15

BB + Expense Adjustment + Recovery - Write Offs = EB

Question 16

Aging AR or % Uncollectable is Calculated to find…

Answer 16

Ending Balance for Allowance for Doubtful Accounts

Question 17

Dollar Value LIFO Calculation

Answer 17

Current Year End Price / PI = Base Year

(Change from Prev Base Year * PI) + Prior Base = DVL

Question 18

IFRS Inventory Valuation

Answer 18

Lower of Cost or NRV

Question 19

If Mkt Value < Fixed Purchase Price in a Purchase Commitment…

Answer 19

Recognize a loss and a liability

Question 20

AVG Price Model

Answer 20

COGA / # Units

Question 21

How are Leasehold Improvement costs capitalized?

Answer 21

Lesser of useful life or lease term

Question 22

Interest incurred during construction is treated how:

Answer 22

1) Capitalized during construction if for personal use
2) Expense after completion if for personal use
3) Expense all if Held-for-Sale

Question 23

When assets are purchased and require fixed payments, how should the value be determined?

Answer 23

PV of an Annuity x Fixed Payment

Question 24

What do you do if a revalued asset becomes zero?

Answer 24

Reduce the revaluation surplus, then take Recoverable Amount less Carrying Value (w/o surplus)

Question 25

Self-Constructed Assets: Weighted Avg Accum Expenditures

Answer 25

1) Take payments in each month and multiply by the months outstanding (start till end of period-12/12->7/12 etc), then add them
OR
2) Take cumulative payments and multiply by the months outstanding (start till next payment)

Question 26

Self-Constructed Assets: Which interest to use? (Assuming Weighted Avg Accum Expenditures > Construction Loan and Interest)

Answer 26

Lesser of Actual Interest or Avoidable Interest

1) Actual = Total of All Loans (Construction and Misc)
2) Avoidable = Construction Loan Interest + (WAAE in excess of construction loan) * Weighted Average of Misc Interest

Question 27

Self-Constructed Assets: After solving for WAAE, what should you do before comparing interest rates?

Answer 27

Check if the construction loan covers it, if it does, we don’t do anything else.

Question 28

Inventory: In the conventional retail method, Markups are included in ??? but not ???

Answer 28

Retail, but not cost

Question 29

Impairment: US GAAP

Answer 29

NO REVERSALS ALLOWED (except for FA classified as held-for-sale)

1) Sum of Cash Flows < CV = Impaired
2) FV - CV = Impairment Loss

Question 30

Impairment: IFRS

Answer 30

REVERSALS ALLOWED (except GW)

1) Recoverable Amt: Greater of NRV or PVFCF
2) RA - CV = Impairment Loss (If Negative)

Question 31

Golden Rule of Nonmonetary Exchanges

Answer 31

Fair Value Given = Fair Value Received

Question 32

Involuntary Conversions Calculation

Answer 32

Cash Received - CV (NBV) - Costs Associated with the Transaction

Question 33

At what level does GAAP require Goodwill to be tested?

Answer 33

At the Reporting-Unit Level