Deck 11 Flashcards
The write-down of inventory is reflected in:
COGS, unless the amount is material
Periodic inventory system
Uses purchases; units of inventory and costs are counted and valued at the end of the period (No COGS until period end)
Perpetual Inventory system
No purchases; Each inventory item is updated for each purchase and each sale immediately as they occur (keeps a running total of inventory balances)
FIFO periodic vs. FIFO perpetual inventory
Amounts will be the same
Weighted average method (periodic system)
Divide total costs of inventory available by the total number of units of inventory purchased
Moving average method (perpetual system)
Same calculation at the weighted average method except that this calculation is done after each purchase
Price index for Dollar Value LIFO =
Ending inventory at current year cost / ending inventory at base year cost
Difference between dollar value LIFO and regular LIFO:
Regular LIFO is measured in units while Dollar value LIFO is measured in dollars
Capitalized interest equals the lower of the two:
1) Total interest incurred or 2)avoidable interest
Where are revaluation losses and gains reported?
Gains: OCI; Losses: income statement
Historical cost definition
Measured by the cash or cash equivalent price of obtaining the asset (used for fixed assets under GAAP)
Capitalize vs. Expense of Equipment:
Additions: capitalize; improvements and replacements: capitalize; Ordinary repairs: expense; extraordinary repairs: capitalize
Additions to equipment (capitalize or expense)
Capitalize
Improvements and replacements (capitalize or expense)
Increase life: reduce accumulated depreciation; Increase usefulness: Capitalize
Computing capitalized interest costs is based on:
Accumulated expenditures (not amount borrowed)
Capitalization of interest can only be for costs during what period?
During the period of construction (before and after - expense)
Impairment loss under GAAP:
Impairment loss occurs if the carrying value exceeds the undiscounted cash flows
Depreciable base of an asset =
Cost minus salvage value
When a permanent impairment occurs with equipment, the loss should be credited to what account:
Accumulated depreciation
Average composite life =
Total depreciable cost / annual depreciation
When selling or disposing of a group or composite asset, what is the journal entry?
Dr. Cash and accumulated depreciation; Cr. Asset
