F3

Question 1

What happens when we factor ARs without recourse?

Answer 1

It would work like a regular sale we wont have any liabilities.
Dr cash
Dr holding by the factor
Dr Loss on ARs
Cr AR

Question 2

Without recourse?

Answer 2

Liability on the seller

Question 3

Formuola for cash received from bank?

Answer 3

Maturity value of the note (Face value on Note + interest on note)
- Discount by bank (bank% X How long it was outstanding for)

Question 4

What do we do when we declare pledge receivables?

Answer 4

Only a disclosure is required.

Question 5

Freight cost are

Answer 5

Included in inventory

Question 6

Temporary declines on increase in inventory are?

Answer 6

Not recorded in interim FS (Permanent changes are recorded)

Question 7

What do inventory costs include?

Answer 7

Any cost required to get the inventory ready for sale

Raw materials
Direct labor
Factory overhead

Question 8

Lower of cost or market?

Answer 8

We use the middle value between

replacement cost
market ceiling = NRV = Sales price - cost to sell
market floor = NRV - (Profit margin = Sales value X % of sale)

Once we have the middle value we use the lower of the middle value and the cost of the inventory.

Question 9

When an insurance company pays for a part of a loss?

Answer 9

This acts as a deduction from the total/overall loss

Question 10

Markup cost or higher cost?

Answer 10

Are the cost over a base amount so we must devide the final amount by (1+%)

Question 11

Gross profit?

Answer 11

Simply multiply by the % given if not divide by it depending on the situation.

Question 12

When you have a purchase commitment.

Answer 12

Losses are recorded immediately in the IS, nature of the loss is disclosed in a foot note, and recognize a liability for the accrued loss.