Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

acc 301 > EXAM 3 > Flashcards

EXAM 3 Flashcards

1
Q

Cost

A

Inventory valuations using specific identification

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Net Realizable Value

A

Inventory item’s selling price - icosts of completion and disposal

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Lower-of-Cost-or-Net-Realizable-Value (LCNRV) and Lower-of-Cost-or-Market (LCM) : To account -

A
  1. Individual Items
  2. Major Categories
  3. Total Inventory
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

A company (may/may not) change from year to year its application of LCNRV

A

may NOT

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

(LCNRV/LCM) ADJ. Journal Entries:
COGS Method

A

DR- COGS
CR- Inventory

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

(LCNRV/LCM) ADJ. Journal Entries:
LOSS Method

A

DR- Inventory Loss
CR- Inventory

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

LCNRV Method’s are both:

A

accepted by GAAP
result in same net income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Gross Profit is affected under what method (COGS/LOSS)

A

COGS

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Lower-of-Cost-or-Market is allowed by GAAP if a company uses:

A

LIFO or retail inventory costing method

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Market

A

inventory item’s replacement cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Ceiling

A

market must not be higher than inventory item’s NRV

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Floor

A

market must not be lower than NRV - normal profit margin

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

To record market:

A

at lower of the cost or the market

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Retail Inventory Method:
must be known-

A

-total cost of merchandise purchased
-total retail value of merchandise purchased
-total cost of goods available for sale
-total retail value of goods available for sale
-net sales for the period

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Physical counts (are/are not) required, but most companies perform

A

Are NOT

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Retail Inventory method is accepted by:

A

GAAP and for income tax purposes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Markups

A

increase above the original selling price of a product

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Markup Cancellation

A

reduction of the markup (not to exceed the markup amount)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Net Markups

A

markups - markup cancellations

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Markdowns

A

reduction in the original selling price of a product

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Markdown Cancellations

A

reduction of the markdown (not to exceed the markdown)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Net Markdowns

A

markdowns - markdown cancellations

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Conventional Approach (cost to retail %)

A

(Cost of Goods Available) / (Retail Price of Goods Available + Net Markups)

DO NOT SUBTRACT NET MARKDOWNS

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Inventory Disclosures

A

-Inventory Basis (LCNRV,LCM)
-Inventory Cost Method (FIFO,LIFO,Avg. Cost)
-Inventory Components
-Significant Financing Arrangements

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Debt Investments and Examples

A

investments in the debt of another company/entity
ex. US GOV securities, municipal/corporate bonds

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Premium

A

coupon rate > effective interest rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Discount

A

coupon rate < effective interest rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Held-to-Maturity Debt Securities

A

positive intent and ability to hold until maturity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Record HTM securities at

A

amortized cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Acquisition cost

A

-plus amortized discount
-less amortized premium

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

Face Value of the Security

A

-less the unamortized discount
-plus the unamortized premium

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

To amortize discount/premium:

A

effective interest method

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

Straight-line interest method is only acceptable if:

A

its results are similar to effective interest method

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

Available-for-Sale Debt Securities

A

no intent to sell in near term or to hold until maturity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

AFS Security Current Asset v Long Term Investment

A

Within one year- Current Asset
Longer than one year - Long Term Investment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

ADJ from amortized cost to fair value

A

DR- Fair Value ADJ (permanent)
CR- Unrealized Holding Gain or Loss - equity (temporary)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

Other Comprehensive Income

A

-no effect on net income
-closed to accumulated other comprehensive income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

Trading Debt Securities

A

intent to sell them in near future

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

Fair Value Option: HTM and AFS

A

-record at fair value
-record the unrealized holding gain/loss in net income
-apply the instrument-by-instrument basis
-adoption must be when investment is purchased (continued as long as entity owns it)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

Fair Value HTM: to record -

A

DR- HTM Debt Securities
CR- Unrealized Holding Gain or Loss - Income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
41
Q

Fair Value AFS: to record -

A

DR- AFS Debt Securities
CR- Unrealized Holding Gain or Loss - Income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
42
Q

Equity Investment and Examples

A

investment in the capital stock of another company
ex. common/preferred stock

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
43
Q

Include _____ _______ in the cost of an equity security

A

broker’s commissions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
44
Q

Investor

A

purchases equity investments and records the investment as an asset

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
45
Q

Investee

A

has the common/preferred stock

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
46
Q

Significant Influence

A

ability of the investor to influence the operational and financial policies of the investee

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
47
Q

Investor owns:
< 20%
20-50%
> 50%

A

Fair Value Method
Equity Method
Consolidated Financial Statement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
48
Q

to record and adjust less than 20%

A

-Adjust to fair value at the end of the year
DR- Fair Value ADJ
CR- Unrealized Holding Gain or Loss (affects net income)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
49
Q

DR and CR balance in Unrealized Holding Gains or Losses

A

CR- increase net income
DR- decrease net income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
50
Q

Realized gain or loss on the sale of an equity security

A

Gain- increase net income
Loss- decrease net income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
51
Q

Investee Loss

A

if net loss exceeds the carrying value, company will stop equity method and leave at 0

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
52
Q

The changes in the fair value of Available-for-Sale Debt Securities do not affect net income. (T/F)

A

True
-affects Comprehensive Income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
53
Q

A company will DR AFS for increases in the fair value of the debt security and CR AFS for decreases in the fair value of the debt security. (T/F)

A

False
-will DR/CR the Fair Value ADJ account

54
Q

Assume a company has HTM DS but did not select the fair value option. At what value should the HTM DS be shown on a company’s Balance Sheet?

A

Amortized Cost

55
Q

On 1/1/2022 a company purchased HTM DS that are due 12/31/2027. Under what category will the company include HTM DS on its 12/31/2022 Balance Sheet?

A

Long-Term Investments

56
Q

What effect, if any, (increase, decrease, no effect) will a CR balance in the Unrealized Holding Gain or Loss - Equity account for the year ended 12/31/2022 have on the company’s 12/31/2022 net income? The company did not elect the fair value option for this security.

A

No Effect

57
Q

A company may record some of its HTM DS at amortized cost and some of its HTM Ds at fair value. (T/F)

A

True

58
Q

A company may record some of its AFS BS at amortized cost and some of its AFS DS at fair value. (T/F)

A

False
-should always report at fair value

59
Q

Are equity securities adjusted to fair value at year end?

A

No

60
Q

What effect, if any, will the receipt of cash dividends from the investee have on the investor’s net income?

A

No Effect

61
Q

What effect, if any, will the investor’s share of the investee’s net income have on the investor’s net income?

A

Increase

62
Q

What effect, if any, will the investor’s share of the investee’s net loss have on the investor’s net income?

A

Decrease

63
Q

PPE characterisitics

A

-Long Lived
-Physical/Tangible
-Used for purpose of the company’s operations

64
Q

To record PPE:

A

-Capitalize (record as asset)
-Historical Cost

65
Q

Land

A

-Purchase Price
-Do NOT depreciate

66
Q

When land was originally purchased and building is razed:

A

-Cost of removing the old building: Add to cost of land
-Proceeds from the salvage of materials from the demolition of the old building: Deduct to the cost of land

67
Q

Land held for resale (should/should not) be recorded under PPE

A

Should NOT

68
Q

Land Improvement Examples

A

Landscaping
Driveways
Parking Lots
Sidewalks

69
Q

Buildings Purchased

A

-Purchase price
-Closing costs
-Realtor’s commissions
-Costs of remodeling

70
Q

Buildings Constructed

A

-Contract price
-Architect and building permits
-Excavation costs
-Commissions, etc.
-Interest Costs

71
Q

Equipment

A

-Purchase Price
-Sales Tax
-Freight Costs
-Insurance on the equipment (while in transit)
-Installation Costs
-Costs of testing the equipment

72
Q

Interest Capitalization

A

-requires a period of time to get the qualifying asset ready for its intended use
-discrete asset

73
Q

When should you use interest capitalization?

A

for company’s own use or for sale/lease

74
Q

When should you not use interest capitalization?

A

used in business now, currently being used in the business, not discrete assets

75
Q

Interest Capitalization Period

A

expenditures have occurred, process is ongoing for intended use, interest cost has been incurred

76
Q

Amount of interest to capitalize: capitalize the LOWER of

A

avoidable interest or actual interest

77
Q

Weighted Average Accumulated Expenditures

A

Amount x Capitalization Period

78
Q

Weighted-Average accumulated expenditures are equal to or less than the specific borrowings

A

weighted-average accumulated expenditures x specific borrowings interest rate = avoidable interest

79
Q

weighted-average accumulated expenditures exceed specific borrowings

A

a) amount of specific borrowings x specific borrowings interest rate
b) excess of weighted-average accumulated expenditures over the specific borrowings x weighted-average interest rate of other borrowings

(a) + (b) = avoidable interest

80
Q

Interest Capitalization Disclosures

A
  • contra-account to interest expense under “other expenses”
  • notes to the financial statement
81
Q

How should the company account for interest earned on the excess funds?

A

Record the interest earned as “Interest Revenue”

82
Q

Deferred-Payment Contracts

A

Long-term debt to purchase PPE

83
Q

How should PPE be value on the day it is acquired?

A

Fair value

84
Q

What if the purchase of PPE involves a deferred-payment contract?

A

Value at the cash paid plus the PV of the debt at the time of the purchase

85
Q

Recognition of the interest on long-term notes:

A

Effective interest method

86
Q

Assume a company purchases PPE by issuing common stock. The common stock is not publicly traded. The par value of the common stock may be used to value the PPE. (T/F)

A

False
-Par value may never be used

87
Q

Assume a company exchanges capital stock for the purchase of a PPE asset. At what value should the company record the asset on its book?

A

Record the asset at fair value of the capital stock given up or the fair value of the asset received, whichever is more readily determinable. If the capital stock is publicly traded assume the fair value is more readily determinable.

88
Q

Three Steps of the exchange of non-monetary assets

A

1) Comercial Substance
2) Calculate the amount of gain or loss
3) Amount of loss or gain to be recognized

89
Q

Non-monetary asset has commercial substance:
If the exchange results in a loss/gain

A

recognize the loss/gain

90
Q

Non-monetary asset lacks commercial substance:
If the exchange results in a loss

A

recognize the loss

91
Q

Non-monetary asset lacks commercial substance and has no cash:
If the exchange results in a gain

A

defer the gain

92
Q

Non-monetary asset lacks commercial substance and cash is paid:
If the exchange results in a gain
< 25%
> 25%

A

defer gain
recognize gain

93
Q

Record a capital expenditure as:

A

an asset

94
Q

Record a revenue expenditure as:

A

an expense

95
Q

At what value should PPE be recorded?

A

Historical Cost

96
Q

PPE (may/may not) be increased to fair value after it is originally recorded.

A

may NOT

97
Q

Depreciation

A

systematic allocation of an asset’s depreciable cost over its estimated useful life

98
Q

Estimated useful life

A

period of time that the company expects to use the depreciable asset

99
Q

Salvage Value

A

company’s expected disposal value of the depreciable asset

99
Q

Depreciation Base

A

cost - salvage value

99
Q

Book value

A

cost - accumulated depreciation

99
Q

Gain and Losses for PPE

A

Gain- CR
Loss- DR

100
Q

Straight-Line depreciation
Full Year and Partial

A

[(Cost - Salvage Value)/ (Estimated Useful Life)]

[(Cost - Salvage Value)/ (Estimated Useful Life)] x [(number of months)/ (12)]

100
Q

A company could recognize either a gain or a loss as a result of an involuntary conversion of PPE. (T/F)

A

True

100
Q

A company could recognize either a gain or loss as a result of an abandonment of PPE. (T/F)

A

False
-a company will not record a gain of abandonment

100
Q

Changes in accounting estimate for PPE

A

-Change in estimated useful life
-Change in salvage value
-Change in depreciation method

100
Q

An accelerated depreciation method will result in higher total depreciation expense over the life of the depreciable asset than the straight-line depreciation method. (T/F)

A

False

100
Q

Accelerated Depreciation and Examples

A

-higher depreciation expense in the asset’s earliest years when compared to straight-line
-total accumulated depreciation over the life of the asset will be the same under all methods

EX. Declining Balance, Sum-of-the-Years’ Digits

100
Q

Activity Depreciation
Full and Partial

A

[(Cost - Salvage Value)/(Total Estimated Units)] x (actual units produced in the year)

[(Cost - Salvage Value)/(Total Estimated Units)] x (actual units produced in the period)

100
Q

Double-Declining Balance Depreciation
Full and Partial

A

[(cost-accumulated depreciation)/(estimated useful life)] x 2

[(cost-accumulated depreciation)/(estimated useful life)] x 2 x [(number of months/12)]

100
Q

Sum-of-the-Years’ Digits

A

(Number of years of estimated useful life remaining as of the beginning of the year)/(Sum of the years of the asset’s estimated useful life = [n x (n+1)]/ 2)

100
Q

Under the double-declining balance depreciation method, salvage value is deducted in calculating depreciation expense. (T/F)

A

False

100
Q

Under the sum-of-the-years’ digits, at the end of a depreciable asset’s estimated useful life the ____ _____ should = its _____ ______

A

book value, salvage value

101
Q

Company’s should not use ____ approach

A

Prospective

102
Q

If the estimated future undiscounted net cash flows are greater than the asset’s carrying value:

A

the asset is not impaired

103
Q

If the estimated future undiscounted net cash flows are less than the asset’s carrying value:

A

the asset is impaired

104
Q

If undiscounted net future cash flows is less than the carrying value, impairment loss is calculated by:

A

-the excess of the PPE carrying value over fair value

105
Q

Accounting treatment for research and development:

A

expense research and development costs in the period incurred

106
Q

Limited life and Examples

A

-definite (specific) lives
EX. Patents/Copyrights

107
Q

Patents

A

gives the owner the right to exclusively manufacture, use, and sell a product
life: 20 years

108
Q

Copyright

A

gives the creator the right to use, reproduce, and sell their artistic work
life: life of creator + 70 years

109
Q

Amortization Expense (Limited-Life)

A

(cost-residual value)/(legal life)

DR

110
Q

Limited Life Effects:
Total Assets
Total Liabilities
Net Income

A

Decrease
No Effect
Decrease

111
Q

Trademark

A

a name, symbol, etc. that represents a company or product
life: 10 yrs. INDEFINITELY, unless becomes generic
- do not amortize
-test for impairment annually

112
Q

Goodwill

A

-Do NOT capitalize
-test annually

113
Q

Indefinite-life assets other than goodwill should be amortized. (T/F)

A

False

114
Q

Goodwill is the excess of the ____ ____ over the ____ _____ of the acquired company’s net assets

A

Purchase Price, Fair Value

115
Q

Net assets are _____ _____ less _____ ______

A

total assets, total liabilities

116
Q

A company only capitalizes goodwill when it buys another company; internal-goodwill is not capitalized. (T/F)

A

True

117
Q

Franchise

A

limited-life or indefinite-life depending on terms

acc 301 (1 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions