F3

Question 1

what is 2/10? n/30?

Answer 1

2/10 means a 2% discount if paid in 10 days.

n/30 means that payment is due in 30 days (net 30)

*when there are multiple discounts, they are calculated one at a time. First discount then subtotal, then second discount

Question 2

lower of cost or NRV

Answer 2

used with FIFO and weighted average

NRV = selling price - cost of completion
find the lower of cost or NRV per item
valuation of inventory method

Question 3

lower of cost or matket

Answer 3

LIFO or retail

valuation of inventory method. choose the lower of 1 or 2:
1. choose the middle value of the following:
a. ceiling (NRV=selling price - cost of completion)
b. floor (NRV-profit)
c. replacement cost
2. cost

Question 4

Periodic inventory

Answer 4

inventory is determined by physical count at least annually & one JE is recorded at a time. COGS for the period is determined after physical inventory.

Question 5

Perpetual inventory

Answer 5

inventory is updated with each purchase & 2 JE are recorded at time of sale. Actual COGS is determined & recorded with sale.

sale:
DR cash CR sales
DR COGS CR inventory
purchase:
DR inventory CR cash

Question 6

weighted average & moving weighted average (moving average)

Answer 6

WA - total cost of goods AFS / total units AFS = cost per unit

moving WA - calculate WA after each purchase

Question 7

sum of years depreciation method

Answer 7

yr1 1 depreciation = 3/6 *(cost-salvage)
yr2 2 depreciation = 2/6 *(cost-salvage)
yr3 3 depreciation = 1/6 *(cost-salvage)

Question 8

units of production depreciation method

Answer 8

depreciable base/estimated units or hrs = rate per unit or hr
rate * usage = depreciation

Question 9

double declining depreciation method

Answer 9

salvage value is ignored initially
yr 1 = (2/depreciable yrs)* cost
yr2 = (2/depreciable) *(cost-PY expense)

Question 10

nonmonetary transactions

Answer 10

FV of asset given up is assumed to be equal to the FV of assets received when there is commercial subtense & no boot.

Question 11

when recording nonmonetary transactions, do you consider BV of FV of the asset given up? How to calculate g/l?

Answer 11

FV of the asset given up - BV of asset given up = g/l
follow this when there is commercial substance
ignore boot when there is commercial substance

Question 12

calculate g/l in nonmonetary transactions lacking commercial substance

Answer 12

FV of asset given up - (fv of asset received +cash received)
1. find % of boot = cash / total consideration(fv received+cash received)
2. total gain = consideration - BV of asset given up
3. gain recorded = % boot * total gain

DR cash
DR new asset (plug = old asset +gain - cash)
CR gain
CR old asset