F3 Flashcards
1
Q
checkbook balance determines:
A
cash on balance sheet
2
Q
a legal right of offset requires:
A
a company with different bank accounts to offset overdrawn accounts with positive balances in other accounts of the SAME BANK to arrive at cash
3
Q
cash is:
A
unrestricted (petty cash, anything that matures within 3 months)
4
Q
cash in bond sinking fund is:
A
restricted
5
Q
overdraft in separate bank should be reported as _____ on the balance sheet
A
current liability (not in cash)
6
Q
NSF check stands for:
A
non sufficient funds (dont include in checkbook balance)
7
Q
the reconciling items for the balance per the bank statement:
A
deposits in transit, outstanding checks, bank errors
8
Q
the reconciling items for the balance per books:
A
service charges, NSF checks, credit memos (customer collections via wire transfer), interest income, and errors made by the company
9
Q
bank draft should be included in:
A
cash and cash equivalents
10
Q
estimating bad debts on the aging analysis of AR balances focuses on the BS and emphasizes the valuation of assets. It results in:
A
good matching of revenue and expense
11
Q
the specific write off method overstates the collectible amount of AR by not allowing for those that become uncollectible. It results in:
A
poor matching of revenue and expense
12
Q
Estimating bad debts based on sales emphasizes the income statement and results in:
A
good matching of revenue and expense
13
Q
after year end adjustment, the uncollectible accounts expense calc and JE:
A
beginning balance AFUA + provision for year (uncollectible accounts expense)+ recovery of previous write-offs - uncollectible AR written off = ending balance AFUA before adjustment - estimated uncollectible accounts per aging = difference
JE to reflect difference
provision for uncollectible accounts expense
AFUA
answer: provision + adjustment
14
Q
discounting annual note after holding for 6 months:
A
face of note * interest rate on note = maturity value of note - (maturity value of note * discount by bank (new interest rate * 1/2) ) = proceeds from bank
15
Q
calculation of bad debt in AFUA account:
A
Beginning AFUA + bad debt expense - actual bad debt writeoff = ending AFUA
16
Q
Factoring receivables without recourse is a sales transaction that:
A
transfers the risk of uncollectible accounts to the buyer
17
Q
Factoring receivables with recourse is a sales transaction that:
A
leaves the risk of uncollectible accounts with the seller
18
Q
Assigning receivables is the process of:
A
obtaining a loan by transferring to the lender the debtor’s right to cash collected on receivables
19
Q
Pledging receivables is the process of:
A
obtaining a loan using the receivables as collateral
20
Q
during an accounting period using the direct writeoff method, cash collections from customers would equal sales adjusted by:
A
deducting AR written off and deducting the increase in AR balance
21
Q
under the direct write off method, how is net income and working capital affected?
A
both decreased
Bad debt expense
AR
22
Q
under allowance method, how is net income and working capital affected?
A
neither affected (net AR remains the same)
AFUA
AR
23
Q
a collection of a previously written-off account receivable would ____ the allowance account. JE?
A
increase
Cash
AFUA
24
Q
approach 1 net proceeds at discount:
A
face of note * interest rate on note = maturity value of note - (maturity value of note * discount by bank for remaining months = proceeds from bank
25
approach 2 net interest revenue (expense)
interest revenue on note - interest expense from bank = net interest income (expense)
26
calculate total interest revenue on 5 year note with present value of ordinary annuity:
note / PVOA (interest rate, 5 periods) = annual payments * number of payments (5) = total payments - (discounted note payments (annual payment * (PVOA(yield rate, 5 periods))) = total interest over 5 years
27
under the aging method of calculating uncollectible accounts, the balance in the allowance account is determined by:
multiplying receivables by the uncollectible percentage
28
under the percentage of receivables method the ending balance in the allowance account is equal to:
total estimated uncollectible amount
29
Substance over form:
choice relates to reliability, which is a primary quality of decision usefulness. info must be valid, and economic substance is more important than legal form
30
the JE for a write off of a specific account receivable under the allowance method is:
AFUA
AR
(no effect on total assets)
31
the lower of cost or market method should be applied to inventory in:
interim FS
32
________ declines in inventory market value should be reflected in interim FS in the period incurred
Permanent never temporary
33
Agricultural products and precious metals may be stated at above cost by using net selling price less cost of disposal because:
1. there is a ready market for such items
| 2. there is unit interchangeability
34
for Agricultural products and precious metals revenue is recognized at:
time of production (not time of sale)
35
FOB destination means that tile passes when received by the buyer, and that packaging, shipping, and handling are costs of:
the seller
36
FOB shipping point means that title passes when the goods leave the seller's location and that shipping is a cost of:
the buyer
37
Under GAAP, LIFO most closely approximates the current:
COGS
38
FIFO most closely approximates the current:
ending inventory
39
the moving average method assumes the company has perpetual records. A new weighted average cost is computed after:
each purchase and issues are priced at the latest weighted average cost
40
During periods of rising prices, when the FIFO inventory method is used, a perpetual inventory system results in an ending inventory cost that is:
the same as in a periodic inventory system
41
Companies generally use a ______ flow of goods to prevent keeping old inventory on hand
FIFO
42
dollar value LIFO most likely gives the:
lowest ending inventory when product lines are subject to specific price increases
43
Dollar value LIFO calculation:
end of year cost / base year cost = annual cost index * annual layers = dollar value LIFO
44
consignor must include consigned goods in his own inventory, at his cost plus:
warehousing costs of consignor before goods are transferred to consignee plus shipping costs to consignee
45
lower of cost or market rule:
step 1: compare floor with ceiling and replacement cost (use middle amount)
step 2: compare middle amount with cost. use lower of the two
ceiling: selling price
floor: net selling price = selling price - cost of disposal
46
a disadvantage of the periodic inventory system is that the COGS amount used for financial reporting purposes includes both:
the cost of inventory sold and inventory shortages
(at year end perpetual records can be compared to actual inventory per physical count and inventory shortages can be identified)
47
average pricing method is another phase for:
weighted average pricing (total cost / total units)
48
when the current market value of the inventory is less than the fixed price in a purchase commitment, the loss must be recognized at the time of:
the decline in price, a liability must be recognized on the BS and a description of the losses must be described in the footnotes
49
net realizable value is:
selling price - costs to complete and sell
lower cost or market celing
50
lower cost or market floor:
Net realizable value - profit margin
51
freight in is a cost of inventory and expensed when:
inventory is sold
52
IFRS requires the use of __________ to value inventory
lower of cost or net realizable value
53
a loss is only recorded under purchase commitment in which the purchaser is:
obligated to purchase a fixed number of units
54
Under _____, reverasals of inventory write-downs are prohibited.
GAAP
55
Under ____, reversals of an inventory write-down for subsequent recoveries of inventory value
IFRS
56
A company using a ______ inventory system must estimate inventory and COGS in interim FS because they do not continously update inventory amounts throughout the year
periodic
57
the _______ method is a way to estimate values under a periodic system using gross profit percentages from previous reporting periods and applying that percentage to current period sales revenue
gross profit method
estimates COGS and backs into EI
58
The proper amount to capitalize to land, includes:
cost of land + cost to raze the building - sale of scrap materials + cost to demolish building (anything to get the land ready for use)
59
excavation costs are treated as:
part of the cost of the building
60
any cost incurred to ________ a plant asset is capitalized
acquire and make ready (insurance, testing and prep for use, shipping)
61
capitalized interest equals:
the smaller of the total interest incurred or the avoidable interest
62
avoidable interest equals:
the interest on the weighted average amount of accumulated expenditures
63
Since the carrying value of the damaged portion of the building is known and is uninsured, the component method is used and:
- a loss in the amount of the carrying value of the damaged portion of the building must be recognized
64
the refurbishing costs create:
a new asset and must be capitalized
65
Interest costs incurred during the construction period of machinery to be used by a firm as a fixed asset should be:
capitalized as part of the historic cost of acquiring the fixed asset
66
Interest costs on the fixed asset subsquent to the construction peirod as well as all interest costs on the routine manufacture of machinery for sale to customers should be:
expensed in the IS for the period incurred
67
The cost of equipment includes:
costs related to:
- invoice price - cash discounts and other discounts
- freight-in
- installation charges
- sales
- federal excise taxes
- necessary to get asset to proper place, at the intended time and in condition for its intended use
68
leasehold improvements are capitalized and then amortized over:
the lesser of the life of the improvements or the remaining term of the lease
69
when capitalizing a note in the cost of equipment, all notes payable are required to be reported at the present value of the payments to be made, computed using:
the market rate of interest
70
Under IFRS, revaluation gains and losses are calculated as the difference between:
fair value and carrying value (cost - AD)
only revaluation surplus would be reported in OCI
revaluation loss would be reported in NI
71
calculation for amount of interest to be capitalized:
weighted average expenditures = payment * number of months related to the year / 12 + etc.
weighted average expenditures * interest rate = amount of interest to be capitalized
total interest on construction loan > amount of interest to be capitalized : the full amount of interest to be capitalized is used
72
Under IFRS, if a revalued asset becomes impaired, the impairment is recorded by:
first reducing any revaluation surplus to zero, with further impairment losses reported on the income statement
73
impairment loss is considered when:
carrying value of building > the recoverable amount
74
Under IFRS, if an individual fixed asset is revalued, then the entire class of fixed assets to which that asset belongs must be:
revalued
75
if borrowings are not tied specifically to the construction of an asset, the weighted average interest rate for the:
other borrowings of the company should be used
(face value note 1 / note 1+2) * interest rate) + (face value note 2 / note 1+2) * interest rate) = capitalized interest
76
if borrowings are tied to the specific construction, the rate on:
those borrowings would be used
77
interest should only be capitalized in connection with:
discrete manufacturing activity
78
interest incurred to acquire land should be:
expensed when incurred
79
architect fees are charged to:
building
80
a sewage system is a:
land improvement
81
total expenditures must be divided by two to arrive at:
average accumulated expenditures
82
if the average accumulated expenditures outstanding > amount of the specific borrowing, interest on the excess is computed based on:
the interest rate for other borrowings of the company
83
under the revaluation model of IFRS, the reversal of a revaluation is recognized in:
profit or loss (if it was a loss in prior period that was recognized in NI)
OCI (if it was a surplus in prior period that was recognized in OCI)
remaining would be recognized in:
NI if loss
OCI if surplus
84
the lump sum purchase price must be allocated among the assets based on:
the portion of the total fair value
85
Capitalize costs that improve _________ of a fixed asset
quality, efficiency, or productive capacity
86
total purchased price of assets includes:
any apprasial costs
87
base for depreciation using sum of the years digits method:
purchase price - salvage value = base (doesnt change in dep calc)
88
depreciation schedule for sum of the years digits method (4 years):
year 1: fraction (4/10) * base = depreciation expense
year 2: fraction (3/10) * base = depreciation expense
year 3: fraction (2/10) * base = depreciation expense
year 4: fraction (1/10) * base = depreciation expense
(base doesnt change in dep calc)
89
salvage value is not included in the calculation for:
double declining
90
accumlated depreciation calc:
beginning AD + depreciation for the year - retirements = ending AD
91
both _________ are based on the straight line depreciation method
group and composite depreciation
92
the group method depreciation is for:
groups of similar assets
93
the composite method depreciation is for:
a collection of dissimilar assets
94
calculation of depletion amount per unit
total cost / estimated tons = per unit depletion amount
depletion amount per unit would be the same
95
depletion amount per unit would be the same every year unless:
additional expenditures were incurred
96
questions indicating that a certain number of units is produced and a different amount is sold, ask about the depreciation expense for the period. in those questions, you would use:
the number of units sold
97
IFRS requires ______ depreciation
component
98
under component depreciation, the machinery, component, and inspection cost are recognized and depreciated:
separately
99
depletion base equals:
purchase price + development costs + estimated restoration costs - expected salvage value = depletion base
100
when an impairment occurs, what is the JE?
impairment loss
| AD
101
composite life calculation:
estimated cost - salvage value = depreciable cost
total depreciable cost / total annual depreciation = composite life of assets
102
Gains or losses on disposal of fixed assets are recognized during:
the period incurred based on recorded amount (NBV) + accrued costs for installed engine = adjusted NBV - insurance proceeds = gain or loss on disposal
(repairs are expensed and not included in NBV calc)
103
in all depreciaton methods except declining balance, salvage value is subtracted from an asset's cost in arriving at the depreciation base. If salvage value is improperly excluded from the depreciation computation, depreciation will be ______ and net income ______ for straightline method and the production or use method and sum of years digits method
overstated, understated
104
sum of the years digits depreciation starts at a level higher than straight line and declines at:
a constant rate to the depreciation base
105
double-declining depreciation starts at a level higher than sum of years digits and declines:
rapidly to the depreciation base, but not at a constant rate
106
depreciable property constructed on leased land is depreciated over:
the life of the property or the term of the lease
whichever is shorter
107
under the units of production depreciation method, the cost of a fixed asset is allocated to expense based on:
the number of units produced during the period relative to the total number of units expected to be produced over the asset's life. the total number of units over the asset's life must be able to be estimated
108
a transaction of a nonmonetary exchange that lacks commercial substance under US GAAP is an exception to the general rule of:
basing the measurement value of the exchange on fair value
109
Because cash is less than 10% of the total consideration, a proportional amount of:
the gain is recognized, (losses have never been calculated by a proportion)
110
when there is no boot, transactions that lack commercial substance are recorded at: carrying value and no gain is recognized
carrying value and no gain or loss is recognized
111
when there is boot, transactions that lack commercial substance are recorded at:
a proportional amount of the gain
112
in order to have commercial substance, either:
1. the risk, timing, and amount of the expected future cash flows from the asset transferred differs significantly from the risk, timing, and the asset received or
2. the entity specific value (based on the company's expectations of value of the asset and not that of the marketplace) of the asset received differs significantly (in relation to the fair values of the assets exchanged) from the asset transferred
113
under the rule of conservatisim, losses are recognized in all nonmonetary exchanges when:
BV exceeds the FV of the asset given up. an asset's cash equivalent price is the asset's fair value. assets should not be valued at more than fair value, so when BV exceeds FV, the asset should be recorded at the lower fair value. when a loss is recorded, the asset received is recorded at the BV of the asset given up plus any cash paid minus any cash received minus the loss recognized
114
in any exchange, all realized losses are __________ in accordance with the principle of conservatism.
fully recognized
115
if boot is received in an exchange of similar assets, realized gains are:
partially recognized
116
under IFRS, exchanges of dissimilar assets are regarded as exchanges that generate revenue and:
all gains and losses are recognized.
117
under IFRS, _____ are recognized on nonmonetary exchanges of similar assets.
no gains, only losses
118
a portion of a gain can only be deferred for nonmonetary exchanges that don't contain commercial substance, meaning the amount and timing of future cash flows did not change as a result of this exchange, and only if:
boot is received as a minor component (less than 25%) of this transaction
119
if a nonmonetary exchange has commercial substance, the transaction is accounted for using:
the fair value of the asset surrendered or received, whichever is more evident
120
when a fixed asset is sold (voluntarily or involuntarily), :
gain or loss is recognized as part of income from continuing operations
121
Gains or losses on fixed assets (including involuntary conversions are recognized during the period incurred based on:
recorded amount (net book value) + any costs associated with the transaction
122
When a transaction involving a nonmonetary exchange lacks commercial substance, the reported amount of the nonmonetary asset surrendered is used to:
record the newly acquired asset
123
when a transaction has commercial substance, the___________ approach is used to record the newly acquired asset
the fair value
124
when the entity's future cash flows are expected to change as a result of the exchange of nonmonetary assets, this exchange is:
having commercial substance
125
the timing of future cash flows of the asset received differing significantly from the configuration of the future cash flows of the asset transferred is evidence of:
an exchange with commercial substance
126
goodwill acquired in an arms-length transaction is ________, but internally created goodwill is ________ because an objective measure of its value is difficult to obtain
capitalized, expensed
127
for software developed internally, costs incurred in the preliminary project stage are:
expensed under US GAAP
128
for software developed internally, costs after the preliminary project stage are:
capitalized and depreciated over the economic life of the product
129
If the sum of undiscounted expected future cash flows is less than the carrying amount, __________ needs to be recognized
an impairment loss or expense
130
legal costs related to the unsuccessful defense of a patent must be:
expensed
131
legal costs related to the successful defense of a patent must be:
capitalized
132
Under IFRS, if the patent has been granted, it is generally appropriate to capitalize:
the related design costs (NOT GAAP)
133
intangible assets should be amortized over the lesser of:
the useful economic life (cash flows) or the legal life
134
under GAAP, the only acceptable method of accounting for research and development is a direct charge to expense, except for: ___________________ that are capitalized and depreciated over their useful life
materials, equipment, or facilities that have alternate future uses
135
software maintenance costs are ______ and software modification costs are ______
expensed, capitalized and amortized
136
goodwill is recognized in the balance sheet when:
it has been created from a business acquisition
137
under the acquisition method, goodwill is a representation of ________________________ and is not recognized solely because:
an acquired company's fair value over the fair value of the entity's net assets , the fair market value of a company's assets exceeds the book value of the company's assets
138
under GAAP, unless the tangible assets associated with the research and development (R&D) expenses have __________________-, the costs associated with R&D expenses are direct charged as an expense on the income statement
alternative future uses or the work is undertaken on behalf of others under a contractual agreement
139
under the revaluation model, if one asset within a class is accounted for using this model, then:
all assets within the same class must follow this model
140
exceptions to the R&D expensed when incurred rule:
1. materials, equipment, or facilities that have alternate future uses
2. research and development costs are undertaken on behalf of others under a contractual arrangement
141
since the equipment can only be used for this project it should be:
expensed immediately
142
costs related to the planning, design, coding, and testing of software that are incurred until tech feasibility has been reached will be recorded as:
R&D expense
143
once a company has achieved tech feasibility, any subsequent costs are:
captialized
144
Under GAAP, subsequent reversal of intangible asset impairment losses is prohibited unless:
the intangible asset is held for sale
145
at a reporting unit level, when the fair value is less than the carrying amount, a loss on impairment is booked on:
the income statement (debit) and a reduction in goodwill (credit) booked to BS
146
the recoverability test is only performed on:
intangible assets with a limited life (patents)
147
the recoverability test compares undiscounted future cash flows to the carrying value of the asset. if:
the carrying value is greater, than a fair value test would be performed
if undiscounted future cash flows are greater, there is no impairment
148
under IFRS, impairment exists when:
the carrying value of a fixed asset exceeds the fixed asset's recoverable amount.
149
what is the recoverable amount?
the greater of the asset's fair value less costs to sell and the asset's fair value in use (present value of future cash flows)
150
the carrying amount of fixed assets should be tested for recoverability at least annually or:
whenever events or changes in circumstances indicate the carrying amount may not be recoverable
151
Under GAAP, long lived assets that are impaired can only have their carrying value restored if:
they are held for disposal
152
subsequent reversal of an impairment loss is prohibited under:
GAAP
153
reversal of impairment loss is permitted under
IFRS
