F3 Flashcards
What is the definition of cash and cash equivilant
short term, highly liquid investments that are both readily convertable 90 days or less from date of purchase
What is the difference between restrcted and unrestricted cash
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
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
ADD: Deposits in transit LESS: Outstanding Checks LESS: Service Charges ADD: Bank Collections EITHER: Errors DEDUCT: NSF funds ADD: Interest income
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
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
What are the two types of accounting for write offs and the related journal entries for actaully writing stuff off
Direct write off: Not GAAP
D: Bad Debt Expense C: AR
Allowance Method: GAAP
D: Allowance for uncollectible accounts
C: AR
Using the Allowance Method give two journal entries to provide for and then to write off an uncollectable account
Provide For/initial entry:
D: Bad DEbt Expense
C: Allowance for doubtful accounts
Write off:
D: Allowance for uncollectable accounts
C: AR
What value should non-interest bearing promissory note be recorded
at the PV of all future payments, payments should be discounted at market interest rate
Notes can be disocunted with or without recourse what is the difference
Discounting with recourse means the holder remains contingently liable
Discounting without recourse means the holder assumes no further liability after discounting
What are the 4 steps to discounting a note
- compute maturity value
- compute the ‘discount’
- get proceeds by subtracting discount from the maturity value
- compute interest income as the difference between proceeds and face of the note
When does the title of goods pass for each of the following
FOB destination
FOB shipping point
combined goods
FOB Destination-When received by the buyer
FOB shipping point-When given to UPS
Consigned Goods: when sold to a third party by consignee
How is NRV calculated in the lower of cost and NRV method
NRV = Net Selling Price MINUS completion and disposal costs
What is the difference between perpetual and periodic inventory methods
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
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
Both Ending inventory and Net income will be lower in times of rising prices when using LIFO
LIFO is also not allowed using IFRS.
How is fixed-asset carrying value computed under GAAP and IFRS
Carrying Value = Historical Cost - Accumulated Depreciation - Impairment
Give examples of costs to be capitalized as land
acquisition price
closing costs such as broker commissions, legal fees, and title insurance
any mortgages
preparation costs such as surveying costs
What is the proper accounting treatment for ordinary versus extraordinary repairs
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
What is the difference between depreciation under IFRS and US GAAP
IFRS: depreciation method should match the expected pattern of fixed asset consumption, and component depreciation is required (both are not required under GAAP)
How do you compute the sum of the years digits method of depreciation
(Cost - Salvage) x (Years remaining) / (Sum of Years)
How do you compute the Double Declining Balance method of depreciation
2 x Straightline rate x NBV of asset
How do you compute the sum of the Units of Production method of depreciation
(Cost - Salvage) / Estimate hours x Actual hours for the period
State the rules for computing depletion on natural resources
“Remember its REAL property”
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
How are trade discounts applied, combined or sequentially
Sequentially, like if they say discounts of 40% and 10%, multiply by the 40% and then that result by 10%
What kind of account is allowance for uncollectable account
Contra Asset
How do you find the NRV of AR
Gross AR LESS Allowance
How do you record amount paid on a previously written off account under the Direct Write Off Method
D:Cash
C: Uncollectable Accounts REcovered (this is a revenue account)
How do you record amount paid on a previously written off account under the Allowance Method
2 part:
D: AR
C: Allowance for uncollectable account
THEN
D: Cash
C: AR
What is factoring
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
Whats the JE on a non-recourse factor
D: Cash
D: Due from factor (may not get)
D: Loss on sale of receivable
C: AR
What is pledging
Your AR is held as collateral in return of a loan
How do you find the face value of a note receivable? What about the maturity value
Face value = principle
Maturity Value = Principle + Interest
Inventory Is USUALLY kept at cost, except for these two things which are carried at NRV
Precious Metals and Farm Products
When do we use Lower of Cost and NRV
IFRS, and FIFO and Weighted Average
When do you use Lower Cost or Market
GAAP only, LIFO or Retail
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
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
Under the periodic inventory system, what is the huge formula using ending inventory, cogs and all that shit
Beg Inv \+ Purchases =COGS available for sale - Ending Inv =COGS
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
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
Under US GAAP does your cost flow assumption need to match the relation inventory count?
NO
Under what inventory method is the Ending Inventory and COGS the same for perpetual and periodic method
FIFO YO
Weighted average method relates to what? and Moving average relates to what
Weighted average relates to Periodic, and Moving average relates to perpetual
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
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
When is the GRoss Profit method of inventory evaluation used? How do you use it?
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
What are the two methods of valuing PPE in IFRS
Cost Model (like the US) and Revaluation Model
What is the equation for the Cost Model of valuation of PPE
Historical Cost - Acc. Depreciation - Impairment
What is the equation for the Revaluation Model of valuation of PPE
Fair Value at Revaluation date - Subsequent accumulated depreciation - subsequent impairment
What are the 2 main rules concerning capitalized interest
- only capitalized interest on the monet actually spent not the total amount borrowed
- the amount of capitalized interest is the lower of the actual interest incurred or the computed capitalized interest
What are the two rules to ACTUALLY BE ABLE TO CAPITALIZE INTEREST
has to be DURING THE TERM OF CONSTRUCTION AND MONEY HAS TO HAVE BEEN SPENT
What do you capitalize for an asset
all necesarry costs to put an asset in place, that improve quality, efficiency, or capacity
If you dispose of an asset which is part of a group or composite is there a gain or loss?
NOOOOOO, you record accumulated depreciation in the JE instead
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
N * (N +1) / 2
where N is the estimated useful life
What is the firmula for the depreciation expense of sum of years digits method
(Cost - Salvage) x ((Remaining Life of asset) / Sum of years digit figure))
What are the two parts of the units of production depreciation method
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
Declining Balance Method depreciation expense equation
2 x (1/N) x (Cost -Accumulated Depreciation)
When doing double declining balance method, what is NOT included in the computation
dont consider salvage value
IF you see the words ‘future cash flows will significantly change” what will there be what? and does the transaction have commercial substance?
a gain or loss! and yes there is SUBSTANCEEE
If something is lacking commercial substance, what is not expected to change
projected cash flows arent projected to change
if something is exchanged lacking commercial substance what is step 1 and step 2 to seeing if a gain is recognized
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
if you have a lacking commercial substance exchange, and boot is received but less than 25%. how do you find the proportional gain recognized
Realized gain x (Boot received / FV Received)
Realized gain is the FV of old asset - BV of old asset
If there is an involuntary conversion, how much of the gain or loss is recognized
ALLLL OF THE GAIN OR LOSS
in all nonmonetary transactions at arms length how much is the FV of the goods received? can a loss be recognized?
its the same as the Fv of the shit you gave up, always. and yes a loss is always recognized in full
if an exchange lacks commercial substance do you record at FV or BV
BOOK VALUE BITCH
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?
If it is purchased, you capitalize the cost
if it is internally developed, you expense it
Under IFRS for intangible assets, if you have research costs that were internal are capitalized or expensed?
expensed
Under IFRS there are 2 ways to value intangible, cost model and the revaluation model can yo explain both
Cost Model is just cost - amortization
revaluation model is = Fv on revaluation date - subsequent amortization - subsequent impairment
Under IFRS what statement are revaluation losses recorded? what about revaluation gains
revaluation losses are reported on the IS
revaluation gains are reported in OCI
If you are a franchisor, how do you treat initial franchise fees and then continuing franchise fees
initial fees are capitalized
Continuing fees are expensed
at what point in time are start up costs expensed? What is the tax rule?
when incurred :)
5000 deduction immediately, then remainder hits the BS for 15 years being amortized
How is research and devlopment handled under GAAP, capitalized or expensed? Is there an exception for things with alternative uses?
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
Under GAAP for computer software, the costs BEFORE technoloical feasibiility are either capitalized? or are they expensed? What about AFTEr tech. feasibility?
they are expensed before, and the coding and testing costs are capitalized if after tech. feasibility
are legal fees capitalized or expensed
they are capitalized:)
when developing software, is producing masters of the software expensed or capitalized? what about other costs incurred after the release of the product?
capitalize EVERYTHINGGGGG
Under IFRS how do you handle internally generated goodwill
it is not an asset, it is expensed in the period incurred
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
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
what is the IFRS method of finding impairment
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
How do you do impairment for PPE
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
