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FAR > F3 > Flashcards

F3 Flashcards

1
Q

What is the definition of cash and cash equivilant

A

short term, highly liquid investments that are both readily convertable 90 days or less from date of purchase

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2
Q

What is the difference between restrcted and unrestricted cash

A

restricted cash is cash that is being set aside for a specific use or purpose while unrestricted cash is just there to be used in general operations

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3
Q 
During a reconciliation from Bank to GL what is added/subtracted
Deposits in transit
Outstanding Checks
Service Charges
Bank Collections
Errors 
NSF funds
Interest income
A 
ADD: Deposits in transit LESS: Outstanding Checks
LESS: Service Charges
ADD: Bank Collections
EITHER: Errors 
DEDUCT: NSF funds
ADD: Interest income
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4
Q

When you are asked to list the cash or cash equivalents, and have a negative amount in one bank and postiive in another, how do you handle it? What if they are at the same bank

A

if they are in seperate banks, one will be cash, they negative amount will be a liability.

If they are at the same bank they can be netted

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5
Q

What are the two types of accounting for write offs and the related journal entries for actaully writing stuff off

A

Direct write off: Not GAAP
D: Bad Debt Expense C: AR

Allowance Method: GAAP
D: Allowance for uncollectible accounts
C: AR

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6
Q

Using the Allowance Method give two journal entries to provide for and then to write off an uncollectable account

A

Provide For/initial entry:
D: Bad DEbt Expense
C: Allowance for doubtful accounts

Write off:
D: Allowance for uncollectable accounts
C: AR

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7
Q

What value should non-interest bearing promissory note be recorded

A

at the PV of all future payments, payments should be discounted at market interest rate

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8
Q

Notes can be disocunted with or without recourse what is the difference

A

Discounting with recourse means the holder remains contingently liable

Discounting without recourse means the holder assumes no further liability after discounting

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9
Q

What are the 4 steps to discounting a note

A
  1. compute maturity value
  2. compute the ‘discount’
  3. get proceeds by subtracting discount from the maturity value
  4. compute interest income as the difference between proceeds and face of the note
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10
Q

When does the title of goods pass for each of the following
FOB destination
FOB shipping point
combined goods

A

FOB Destination-When received by the buyer
FOB shipping point-When given to UPS
Consigned Goods: when sold to a third party by consignee

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11
Q

How is NRV calculated in the lower of cost and NRV method

A

NRV = Net Selling Price MINUS completion and disposal costs

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12
Q

What is the difference between perpetual and periodic inventory methods

A

Periodic: determined by physical count, and Ending Inventory is acutally counted and priced

Perpetual: Inventory is updated for each purchase and for each sale, a running balance is constantly tracked

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13
Q

In periods of rising prices, what is the effect on the value on inventory using LIFO instead of FIFO, which of these is prohibited by IFRS

A

Both Ending inventory and Net income will be lower in times of rising prices when using LIFO

LIFO is also not allowed using IFRS.

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14
Q

How is fixed-asset carrying value computed under GAAP and IFRS

A

Carrying Value = Historical Cost - Accumulated Depreciation - Impairment

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15
Q

Give examples of costs to be capitalized as land

A

acquisition price
closing costs such as broker commissions, legal fees, and title insurance
any mortgages
preparation costs such as surveying costs

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16
Q

What is the proper accounting treatment for ordinary versus extraordinary repairs

A

ordinary repairs are expensed as repair and maintenance

extra ordinary repairs extend the products life or utility of the asset, and is recorded by accumulated depreciation. If it increases the utility, it is capitalized

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17
Q

What is the difference between depreciation under IFRS and US GAAP

A

IFRS: depreciation method should match the expected pattern of fixed asset consumption, and component depreciation is required (both are not required under GAAP)

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18
Q

How do you compute the sum of the years digits method of depreciation

A

(Cost - Salvage) x (Years remaining) / (Sum of Years)

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19
Q

How do you compute the Double Declining Balance method of depreciation

A

2 x Straightline rate x NBV of asset

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20
Q

How do you compute the sum of the Units of Production method of depreciation

A

(Cost - Salvage) / Estimate hours x Actual hours for the period

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21
Q

State the rules for computing depletion on natural resources

“Remember its REAL property”

A

Residual Value (subtract
Extraction/development cost
Anticipatied restoration cost
Land purchase price

depletion = ((Cost of Land + Extraction cost + Anticipated restoration cost-Residual value) / Estimated Recoverable units ) x Units extracted

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22
Q

How are trade discounts applied, combined or sequentially

A

Sequentially, like if they say discounts of 40% and 10%, multiply by the 40% and then that result by 10%

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23
Q

What kind of account is allowance for uncollectable account

A

Contra Asset

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24
Q

How do you find the NRV of AR

A

Gross AR LESS Allowance

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25
Q

How do you record amount paid on a previously written off account under the Direct Write Off Method

A

D:Cash
C: Uncollectable Accounts REcovered (this is a revenue account)

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26
Q

How do you record amount paid on a previously written off account under the Allowance Method

A

2 part:
D: AR
C: Allowance for uncollectable account

THEN

D: Cash
C: AR

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27
Q

What is factoring

A

its where my business sells our AR to a third party right now for cash. and the third party goes out to collect.
If it is with recourse, the third party can come back to me and say fuck you they never paid. BUT if non recourse then the third party cant do shit if they have a loss by no payment

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28
Q

Whats the JE on a non-recourse factor

A

D: Cash
D: Due from factor (may not get)
D: Loss on sale of receivable
C: AR

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29
Q

What is pledging

A

Your AR is held as collateral in return of a loan

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30
Q

How do you find the face value of a note receivable? What about the maturity value

A

Face value = principle

Maturity Value = Principle + Interest

31
Q

Inventory Is USUALLY kept at cost, except for these two things which are carried at NRV

A

Precious Metals and Farm Products

32
Q

When do we use Lower of Cost and NRV

A

IFRS, and FIFO and Weighted Average

33
Q

When do you use Lower Cost or Market

A

GAAP only, LIFO or Retail

34
Q

In the lower cost or market method, think about Ken Smiths box, how do yu know what market price to use, and then what do you do with that number

A

Middle Value between
Replacement Cost, NRV (which is Net Selling Price MINUS Cost to Complete), and NRV - Profit

THEN once you have the middle number, take the lower of the market and the cost

35
Q

Under the periodic inventory system, what is the huge formula using ending inventory, cogs and all that shit

A 
Beg Inv
\+ Purchases
=COGS available for sale
- Ending  Inv 
=COGS
36
Q

Under Periodic inventory how many JE’s are recorded during a sale? How does that differ from what is recorded during a perpetual method sale

A

under periodic you literally just do D: Cash and C: Sales, but under Perpetual, you do D:Cash and C: Sales AND recognize COGS through D:COGS and C: Inventory

37
Q

Under US GAAP does your cost flow assumption need to match the relation inventory count?

A

NO

38
Q

Under what inventory method is the Ending Inventory and COGS the same for perpetual and periodic method

A

FIFO YO

39
Q

Weighted average method relates to what? and Moving average relates to what

A

Weighted average relates to Periodic, and Moving average relates to perpetual

40
Q

There is a method called Dollar-Valiue LIFO, what is the Price Index Equation? How do you use that equation to find what is purchased in order to find Ending Inventory

A

You find PRice Index by doing (Ending Inventory at current year cost / Ending Inventory at base year cost)
and take that Price Index multiplied by the Base Year Layer (addition) and that is added to the beginning amount to find the Ending Inventory

41
Q

When is the GRoss Profit method of inventory evaluation used? How do you use it?

A

it is used during quarterly or interim reporting. You take the Gross Profit % and do 1-% to find COGS and then use the Inventory Equation to find the Ending inventory

42
Q

What are the two methods of valuing PPE in IFRS

A

Cost Model (like the US) and Revaluation Model

43
Q

What is the equation for the Cost Model of valuation of PPE

A

Historical Cost - Acc. Depreciation - Impairment

44
Q

What is the equation for the Revaluation Model of valuation of PPE

A

Fair Value at Revaluation date - Subsequent accumulated depreciation - subsequent impairment

45
Q

What are the 2 main rules concerning capitalized interest

A
  1. only capitalized interest on the monet actually spent not the total amount borrowed
  2. the amount of capitalized interest is the lower of the actual interest incurred or the computed capitalized interest
46
Q

What are the two rules to ACTUALLY BE ABLE TO CAPITALIZE INTEREST

A

has to be DURING THE TERM OF CONSTRUCTION AND MONEY HAS TO HAVE BEEN SPENT

47
Q

What do you capitalize for an asset

A

all necesarry costs to put an asset in place, that improve quality, efficiency, or capacity

48
Q

If you dispose of an asset which is part of a group or composite is there a gain or loss?

A

NOOOOOO, you record accumulated depreciation in the JE instead

49
Q

What is the general equation for finding the sum of the years digits amount which is used as the denominator in the depreciation expense formula of sum of years digits method

A

N * (N +1) / 2

where N is the estimated useful life

50
Q

What is the firmula for the depreciation expense of sum of years digits method

A

(Cost - Salvage) x ((Remaining Life of asset) / Sum of years digit figure))

51
Q

What are the two parts of the units of production depreciation method

A

part 1: (Cost - Salvage) / Estimated units or hours = rate per unit or hour

Part 2: Rate per unit or hour x number of units produced or hours worded = depreciation expense

52
Q

Declining Balance Method depreciation expense equation

A

2 x (1/N) x (Cost -Accumulated Depreciation)

53
Q

When doing double declining balance method, what is NOT included in the computation

A

dont consider salvage value

54
Q

IF you see the words ‘future cash flows will significantly change” what will there be what? and does the transaction have commercial substance?

A

a gain or loss! and yes there is SUBSTANCEEE

55
Q

If something is lacking commercial substance, what is not expected to change

A

projected cash flows arent projected to change

56
Q

if something is exchanged lacking commercial substance what is step 1 and step 2 to seeing if a gain is recognized

A

step 1: FV old - BV Old = “Math” Gain or loss on transaction
Step 2: follow the rules to see if gain is recognized
No cash (boot) is received = No Gain
Cash (boot) is paid = no gain if the boot is less than 25% of total consideration (that means boot / Fv of old asset has to be less than 25%)
Cash (boot) is received = Recognize proportional gain if less than 25%
Cash (boot) is received and over 25% = gains and losses are accounted for in full

57
Q

if you have a lacking commercial substance exchange, and boot is received but less than 25%. how do you find the proportional gain recognized

A

Realized gain x (Boot received / FV Received)

Realized gain is the FV of old asset - BV of old asset

58
Q

If there is an involuntary conversion, how much of the gain or loss is recognized

A

ALLLL OF THE GAIN OR LOSS

59
Q

in all nonmonetary transactions at arms length how much is the FV of the goods received? can a loss be recognized?

A

its the same as the Fv of the shit you gave up, always. and yes a loss is always recognized in full

60
Q

if an exchange lacks commercial substance do you record at FV or BV

A

BOOK VALUE BITCH

61
Q

So intangible assets right? if you purchase an intangible do you capitalize or expense the cost? what if you delevop it internally, is the cost expensed or capitalized?

A

If it is purchased, you capitalize the cost

if it is internally developed, you expense it

62
Q

Under IFRS for intangible assets, if you have research costs that were internal are capitalized or expensed?

A

expensed

63
Q

Under IFRS there are 2 ways to value intangible, cost model and the revaluation model can yo explain both

A

Cost Model is just cost - amortization

revaluation model is = Fv on revaluation date - subsequent amortization - subsequent impairment

64
Q

Under IFRS what statement are revaluation losses recorded? what about revaluation gains

A

revaluation losses are reported on the IS

revaluation gains are reported in OCI

65
Q

If you are a franchisor, how do you treat initial franchise fees and then continuing franchise fees

A

initial fees are capitalized

Continuing fees are expensed

66
Q

at what point in time are start up costs expensed? What is the tax rule?

A

when incurred :)

5000 deduction immediately, then remainder hits the BS for 15 years being amortized

67
Q

How is research and devlopment handled under GAAP, capitalized or expensed? Is there an exception for things with alternative uses?

A

it is expensed!

EXCEPT for PPE which could have alternative future use and other R&D costs undertaken on behalf of others (inventory) these are capitalized

68
Q

Under GAAP for computer software, the costs BEFORE technoloical feasibiility are either capitalized? or are they expensed? What about AFTEr tech. feasibility?

A

they are expensed before, and the coding and testing costs are capitalized if after tech. feasibility

69
Q

are legal fees capitalized or expensed

A

they are capitalized:)

70
Q

when developing software, is producing masters of the software expensed or capitalized? what about other costs incurred after the release of the product?

A

capitalize EVERYTHINGGGGG

71
Q

Under IFRS how do you handle internally generated goodwill

A

it is not an asset, it is expensed in the period incurred

72
Q

for intangible assets with a finite life, how do you perform the two step method inpairment test?

if it has a FINITE life what do you do

A

1: determine the impairment, if the net carrying value > undicsounted future cash flows, there is impairment, so go to…
2: the amount of impairment loss is the difference between FV and the caryying value

If its FINITE, only do step 2

73
Q

what is the IFRS method of finding impairment

A

the amount of impairment loss is the difference between recoverable amount and the caryying value

the recoverable amount is the greater of the FV less costs to sell or the PV of future cash flows

74
Q

How do you do impairment for PPE

A

Step 1: impairment is f the net carrying value > undicsounted future cash flows, there is impairment, so go to…
Step: FV or PV net cash flows LESS the net carrying amount

FAR (15 decks)

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