F3 Flashcards
1
Q
For cash & cash equivalents, which of the following would be included?
- $5,000 six-month Treasury bill maturing 2/15/2
- $19,000 one-year certificate of deposit maturing on 1/15/2
- Bank draft in amount of $6,000 from a German Customer
A
- Bank draft
(Only item included as the treasury bill & CD have original maturities greater than 90 days
2
Q
If a check payable was deposited within the year but returned before year-end as NSF. Would it be included or excluded from cash as of year end?
A
It would be excluded from cash
3
Q
Would a check dated 1/2/year 2 be included with in the check book balance of 12/31/ year 1
A
No it would not
4
Q
Which would not be included in Cash & cash equivalents?
- Petty cash
- Commercial paper (6 month maturity)
- Certified of deposit (2 month maturity)
A
- Commercial paper (6 month maturity)
Any investments with a maturity date over 3 months of purchase date should not be included
5
Q
Original maturity date must within …. Of purchase date?
A
3 months
6
Q
There are two reconciling items for balance per bank statement
A
Deposits in transit & outstanding checks
Ignoring bank errors
7
Q
If a check is not disbursed as of year-end it must be?
- Subtracted for cash reported
- Disregarded from cash reported
- Added back to checkbook balance
A
- Added back to checkbook balance
8
Q
When one has two banks with one being a positive and one being a negative would they both be classified as cash?
A
No the positive is considered for cash but the negative is considered a liability and not added to cash
9
Q
If one has an account with both a negative and positive what must they do?
- Disregard the negative and only acknowledge the positive
- Add and subtract together
- Disregard the positive and only acknowledge the negative
- Keep them separated
A
- Add and subtract together if within same bank
10
Q
What can be included in cash disbursements?
A
Outstanding checks & disbursements (not deposits)
11
Q
When merchandise is sold ($6,000) with credit terms of 2/15, n/40 along with trade discounts of 30% & 20% what does this mean if they pay it off with the 15 days?
A
The merchandise will have 3 discounts the first would be 30% to the 6,000 then 20% to the 4,200 and finally a discount of 15% to the 3,360 with would take away an extra 504 leaving $2,856
12
Q
Amounts before allowances for sales returns & uncollectible accounts means
A
Gross accounts receivable
13
Q
Inventory & security deposits would not be included in
A
Accounts Receivable (those a typically noncurrent assets)
14
Q
If a company receives a $60,000 6-month, 10% interesting bearing note from customer. How much would would the amount increase to?
A
63,000.
(10% x 1/2 yr [6 months] = 5% x 60000
(Interest goes off of year).
15
Q
Would net sales revenue for new sales made during the month include prior month sales made?
A
No only new sales during the month
16
Q
The net realizable value of receivables and (minus) accounts receivable at 12/31 would equal to
A
The ending balance of allowance for uncollectible accounts
17
Q
Under the percentage of receivables method the ending balance in the allowance account is equal to the
A
Total estimated amount
18
Q
Which method of recording uncollectible accounts expense is consistent with accrual accounting?
Allowance. Direct write off
No. No
Yes. Yes
No. No
Yes. No
A
Yes. No
19
Q
Gas co-factored it’s receivables without recourse with Ross Beck. Gas received cash as a result of its transaction, which is best described as:
- Sale of gas accounts receivable to Ross, with the risk of uncollectible accounts retained by Gas
- Loan from Ross to be repaid by the proceeds from Gas accounts receivable
- Loan from Ross collaterized by gas accounts receivable
- Sale on gas is accounts receivable to Ross, with the risk of uncollectible accounts transferred to Ross
A
- Sale on gas is accounts receivable to Ross, with the risk of uncollectible accounts transferred to Ross
(Because there is a non-recourse the risk is transfer to Ross if unable to sale all invoices)
20
Q
A method of estimating uncollectible account that emphasizes account valuation rather than income measurement is the allowance method based on?

1. Gross sales
2. Direct write off
3. Aging receivables
4, credit sales less returns and allowances
A
- Aging receivables
21
Q
The discount is always applied on the
A
Maturity value
22
Q
Beg Allowance + BDE - Recovery - write off =
A
Ending Allowance
23
Q
Selling price - cost to sell
A
Net realizable value
24
Q
NRV - profit margin
A
Market
25
Cost by base year cost expressed in total dollars rather than quantity & price of specific goods as unit of measurement
Dollar Value method LIFO
26
Sales x Cost of goods sold % =
| $620,000 x (1-.25%)
Cost of goods sold
27
When the goods are shipped to customer FOB destination they belong to who if goods are in transit
Seller
| Ownership will not transfer to buyer until good are received by buyer
28
When the goods are shipped to customer FOB Shipping point they belong to who if goods are in transit
Buyer
(Because the goods are in transit (in the truck) they belong to the buyer even if not physically present
29
Beg bal + purchases - purchase discount + freight-in - ending inventory =
Cost of Goods Sold
30
Would freight out be included in capitalizable as inventory?
No
| It’s a selling expense
31
Co co estimated its ending inventory using a method based on the financial statements of prior periods in order to prepare its quarterly interim financial statements. What type of inventory system & method of estimating ending inventory is Coco using
Inventory System Met of est end inv
Perpetual. gross profit mar
Periodic. Gross profit mar
Perpetual. Retail method
Periodic. Sales method
Periodic. Gross Profit Margin
(Periodic must estimate inventory & COGS)
(GPM estimate values under periodic systems)
32
Company has a fiscal year end of September 30. The cumulative construction in progress balances at July 31, August 31, September 30 were 500,000, 800,000, & 1,500,000, respectively. The interest rate on company that used to finance the construction pride check was 5% from July 1 through September 30. What amount of interest should be capitalized on the two to project on September 30
11,666
July 500,000 x 5% / 12 = 2,083
August 800,000 x 5% /12 = 3,333
Sept. 1,500,000 x 5% /12 = 6,250
33
To find the average accumulated expenditures for total expenditures of the year one must have the total expenditures………?
Divided by 2
34
When corp acquired land, buildings, & equipment for $180,000. At the time of acquisition the corp paid $20,000 for assets to be appraised. The values were as stated: land $130,000, buildings $70,000, equipment $50,000.
What should be the assigned each asset for cost?
1. 90k, 60k, 30k
2. 120k, 80k, 40k
3. 130k, 70k, 50k
4. 104k, 56k, 40k
4. 104k, 56k, 40k
35
All notes Payable are required to be reported at the ….. payments to be made
Present value (ordinary annuity factor)
36
How to calculate the weighted average accumulated expenditures for land purchased on January 1 of 150K and progress payment for a contractor of 120K on July 1?
1. 15k
2. 27k
3. 30k
4. 21k
4. 21k
150k 12/12 = 150
120k. 6/12 = 60
210 x 10% = 21k
37
Cat co. Partes del Office Building On which It is located for 680 K cash and an existing 320K mortgage. For Realty tax purposes, the property is assessed at 950K 60% of which is allocated to the building at what amount should cat record the building?
1. 500k
2. 600k
3. 950k
4. 570k
2. 600k
38
Cane Cole began constructing a building four its own used in January. During the year Kane incurred interest of 50K specific construction debt and 20K on other borrowings. Interest computer on the way the average amount of accumulated expenditures for the building during the year was 40K what amount of interest cost should Kane capitalize?
1. 40k
2. 50k
3. 70k
4. 80k
40k
(Avoidable Interest equals interest on the weighted average amount of accumulated expenditures
39
County assessment for sewer $3,000
Title search fees. 400
Cash paid for land & building $135,000
Excavations for construction of basement 24,000
Removal of old building. 18,000
What amount should be included for land?
1. 154,000
2. 180,000
3. 137,400
4. 156,400
4. 156,400
| All are included besides excavation for construction of basement
40
Proceeds from sale of salvaged materials from demolition of old building should be ……. to/from land account
Subtracted from land amount
41
The building suffered uninsured fire damage. The damage portional of the building was refurbished with higher quality materials. The cost and related accumulated depreciation of the damaged portion are identifiable. To account for these events the owner should?
1. Reduce accumulated depreciation equal to the cost of refurbishing
2. Record loss and current. Equal to some of cost of refurbishing and the carrying amount of damage portion of the building
3. Capitalize is the cost of refurbishing and record a loss In the current. Equal to the carrying amount of the damage portion of the building.
4. Capitalize the cost of refurbishing by adding the cost to the carrying amount of building
3. Capitalize is the cost of refurbishing and record a loss In the current. Equal to the carrying amount of the damage portion of the building.
42
Read Co. Incurred leasehold improvement cost for its leased property. The estimated useful life of the improvements was 15 years. The remaining life of the nonrenewable lease was 20 years. These cost should be?
1. Expensed as incurred
2. Capitalized and expensed in the year in which the lease expires
3. Capitalize and depreciated over 15 years.
4. Capitalized and depreciated over 20 years
3. Capitalize and depreciated over 15 years.
43
If borrowings are not tied specifically to the construction of an asset, which method should be used?
Weighted average interest rate
44
Based on weighted average of accumulated expenditures, Interest cost is incurred …….. the construction period and should be expensed
Before or after the construction
45
Avoidable interest equals the interest on …….
Weighted average amount of accumulated expenditures
46
All notes payable are required to be reported at the …. Of payments to be made
Present value
47
The cost that should be allocated is the total purchase price of land & building, not
Assessed value
48
Debt issuance cost are presented on the balance sheet as a direct reduction to the
Carrying amount of a bond & should not be included in the cost of the land
49
When a construction project is completed, the interest charged will consist of the
Balance times the Interest rate after completion divided monthly (/12)
50
When permanent impairment occurs, the book value is reduced and a loss is recorded. The loss is credited to?
Accumulated depreciation
51
On July one, one of Blue CO’s Delivery vans were destroyed in an accident. In that date Devane’s carrying value was $2500 on July 15, blue received and recorded a $700 invoice for a new engine installed in the van in May and another $500 invoice for various repairs. In August, blue received $3500 under its insurance policy on the van which it plans to replace the van. What amount should blue report as gain or loss on disposal of the van?
1. $300
2. $(200)
3. $1,000
4. $0
1. $300
$2,500 + $700 = $3,200
$3,500 - $3,200 = $300 gain
($500 of various repairs would not be added to the NBV as they are expensed).
52
Soap Corp. uses the sum of the years digits method to depreciate equipment purchased in January year one, for $20,000. The estimated salvage value of the equipment is $2000 and the estimated useful life is four years what should soap report as the assets carrying amount as of December 31 year 3?
1. $1,800
2. $2,000
3. $4,500
4. $3,800
4. $3,800
$20,000 - $2,000 = $18,000
```
Year 1: 4/10 x 18,000 = $7,200
Year 2: 3/10 x 18,000 = $5,400
Year 3: 2/10 x 18,000 = $3,600
Year 4: 1/10 x 18,000 = $1,800
10/10. $18,000
```
53
Which of the following statements correctly describes the proper accounting for non-monetary exchanges that are deemed to have commercial substance?
1. It defers gains & recognizes loses immediately
2. It defers losses to extent of any gains
3. It recognizes gains and losses immediately
4. It defers any gains & losses
3. It recognizes gains and losses immediately
54
A transaction was reported as a non-monetary exchange of assets under which of the following circumstances should exchange be measured based on the report it amount of the non-monetary assets surrendered?
1. When the transaction lacks commercial substance
2. When the entity’s future cash flows are expected to change as a result of the exchange.
3. When the timing I of future cash flows of the asset record differs significantly from the configuration of the future cash flows of asset transferred
4. When the transaction had commercial substance
4. When the transaction had commercial substance
(When a transaction involving a non-monetary exchange lacks commercial assistance the reported amount of monetary assets rendered is used to record the newly acquired asset. If the transaction has commercial substance the fair value approach is used).
55
Bensol Co. And Sable Co exchanged similar trucks with fair values in access of caring amounts in exchange that lacks commercial assistance under US gap. In addition Bensol paid sable to compensate for the difference in truck values. As a consequence of the exchange sable recognizes:
1. Neither a gain nor a loss
2. Again determined by the portion of cash received to the total consideration
3. Again equal to the difference between the fair value in carrying amount of the truck
4. A loss determined by the portion of cash received two to total consideration
4. A loss determined by the portion of cash received two to total consideration
56
Which other following statements is correct concerning start of cost?
1. Cost of start up activities, including organization cars, should be expensed as incurred
2. Start a cost activities, including organization costs, should be capitalized and expensed only if an impairment exist
3. Cost of start up activities should be capitalized in amortized on a straight line bases over the lesser of the estimated economic life of the company, or 60 months, wow organization cost should be expensed as incurred
4. Cost of start up activities, including organization cost, should be capitalized and amortized on a straight line basis over the lesser of the estimated economic life of the company, or 60 months.
1. Cost of start up activities, including organization cars, should be expensed as incurred
57
Which of the following assets would typically be reported on a company‘s balance sheet as an intangible asset?
1. Derivative securities
2. Cost of research and development
3. Leasehold improvements
4. Cost of patent registrations
4. Cost if patent registrations
58
On January 1, you’re one, a company with a calendar year and begin developing a software program that it intends to market and sell to its customers. The software coating was completed on March 31, year one, at a cost of $300,000, and the software testing was completed on January 30, year one, at a cost of $50,000. The company achieved in the logical feasibility on July 31, year one, at which time the company began producing product masters at a cost of $125,000. What amount should the company report for the total research and development expense for the year in the December 31, year one?
1. $300,000
2. $425,000
3. $350,000
4. $475,000
3. 350,000
(call related to the planning, design, coding, and testing of software that are incurred until technological feasibility has been reached will be recorded as research and development expense. Therefore, the coding of $300,000 and the testing of $50,000 will both be expensed).
59
On March 1 year one, P co purchased S Co at a cost that resulted in recognition of goodwill of $300,000. During the first quarter of the year P co spent an additional $50,000 on expenditures design to maintain that will. And it’s December 31, year one, balance sheet what amount should P co go report as Goodwill?
1. $300,000
2. $350,000
3. $250,000
4. $325,000
2. $350,000
60
Goodwill acquired in an arm slump transaction is capitalized, but internally created goodwill is……… Because an objective measure of its value is difficult to obtain.
Expensed
61
Which of the following is the proper treatment of the cost of equipment used in research and development activities that will have alternative future uses?
1. Capitalize and appreciate it over the term of the research and development project.
2. Expensed in the year in which the research and development project started.
3. Capitalized and appreciated over its estimated useful life.
4. Either capitalized or expensed, but not both, depending on the term of the research and development project.
3. Capitalized and appreciated over its estimated useful life.
62
When the product is in commercial production, it is………… R&D phase?
Out of the
63
Which of the following should a company classify as a research and development expense?
1. Periodic design changes to existing products.
2. Routine design of tools, jigs, molds, & dies.
3. Legal work on patent applications
4. Redesign of a product prerelease
4. Redesign of a product prerelease
(Answer 2. Is wrong because routine or periodic design changes to old products are considered manufacturing costs, not research and development cost).
64
If materials, equipment/facilities developed have alternative future uses or R&D cost are undertaken on behalf of others under a contractual arrangement.
The only times R&D are capitalized
65
Intangible asset should be amortized over the lesser of the?
Useful economic life of the legal life
66
Which of the following statements is most accurate in regard to the capitalization of computer software cost to be licensed?
1. Software cost intended to be licensed can only be expensed.
2. Capitalize software cost are reported on the balance sheet at cost, regardless of market value.
3. Amortization begins once technological feasibility is establish.
4. Coding and testing cost after technological feasibility is establish can be capitalized.
4. Coding and testing cost after technological feasibility is establish can be capitalized.
67
Which other following cost should not be included in research in development?
1. Facility costs
2. Personnel cost
3. Indirect cost
4. Administrative cost
4. Administrative costs
68
In 1/1/1, John purchased equipment for use in developing a new product. John uses straight line straight-line depreciation method. The equipment could provide benefits over 10 year period. However the new product development is expected to take five years, and the equipment can be used only for this project. John’s current your expense equals?
1. Zero
2. One-tenth of the cost of the equipment
3. One-fifth of the cost of the equipment
4. The total cost of the equipment
The total cost of equipment
(Since equipment can only be used for this product it should be expensive immediately, even though the project is expected to take five years. It will be capitalize over the useful life, only if the equipment had an alternative use).
69
What falls under the R&D expenses category?
Personnel & design/testing/construction both fall under expense
70
Legal fees incurred to apply for a patent is considered
Capitalized
71
Successfully defending the patent rights are
Capitalized as an asset
72
Equipment should be ……. when it’s used solely for development of a product. The equipment has no other use use and the has an estimated useful life?
Expenses immediately
(If the equipment had an alternative use, it would’ve been capitalized).
73
An intangible asset such as a copyright or patent is amortized over ……. of it’s estimated life or remaining legal life.
The shorter of
74
Subsequent reversal of an impairment loss is ……. Under US GAAP (unless asset is held for disposal
Prohibited
75
Goodwill is not
Disposable
76
When should a long lived asset be tested for recoverability?
1. When events or changes in circumstances indicate that it’s caring amount may not be recoverable.
2. When external financial statements are being prepared
3. When the assets carrying amount is less than its fair value
4. When the assets fair value has decreased and the decrease is judged to be permanent
1. When events or changes in circumstances indicate that it’s caring amount may not be recoverable.
77
Which of the following is an intangible asset that is subject to the recovery test when testing for impairment?
1. Goodwill
2. A patent
3. R&D costs for a patent
4. A trademark with indefinite useful life
2. A patent
| It’s an intangible asset that has limited useful life
78
When it comes to impairment, what two values are compared?
Fair value to carrying value
79
For impairment, if the carry value is higher than fair value & I discounted expected future cash flows by $25,000. What is the impairment amount?
0
80
Available for sale items will never be stated in the?
Income statement
81
A loss for held to maturity can be recorded only when amortized cost is
Above present value
