Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

FAR > F3 - Assets and Related Topics > Flashcards

F3 - Assets and Related Topics Flashcards

1
Q

What items are not cash or cash equivalents?

A
  1. CDs >90 days.
  2. Restricted deposits.
  3. Marketable equity securities (this is investment, not cash).
  4. Marketable debt securities (this is investment, not cash).
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is restricted cash?

A

Cash that has been set aside for a specific purpose.

Ex. Bond sinking fund account.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What are the components of Bank Reconciliations?

A

Book items:

  1. Bank collections (+).
  2. Interest income (+).
  3. Bank charges (-).
  4. NSF checks (-).

Bank items:

  1. Deposits in transit (+/-).
  2. Outstanding checks (+/-).
  3. Bank errors (+/-).
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

How do you reconcile bank vs books?

A

Books:
Book balance
(+/-) Book items
(=) Book adjusted cash balance.

Banks:
Bank balance
(+/-) Bank components
(=) Bank adjusted cash balance.

Proof
Book adj cash balance = Bank adj cash balance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

How do you account for allowance for doubtful accounts? (Estimate)

A

Dr. Bad Debt Expense

Cr. Allowance for doubtful accounts

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

How do you account for allowance for doubtful accounts? (Write off)

A

Dr. Allowance for doubtful accounts

Cr. Accounts Receivable

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

How do you account for allowance for doubtful accounts? (Debt becomes collectible/Reverse writeoff)

A

Dr. Accounts Receivable

Cr. Allowance for doubtful accounts

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

How do you account for allowance for doubtful accounts? (Collections - Allowance method GAAP)

A

Dr. Cash

Cr. Accounts receivable

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is the Aging of receivables method?

A

One of the allowances methods.

When used, it means that the ending balance of allowance accounts is the sum of aged AR times its estimated %.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is the Percentage method?

A

One of the allowances methods.

When used, it means that the ending balance of allowance accounts is a % of Ending AR.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What happens when a question gives me Ending AR, NRV of AR but no Ending uncollectible accounts balance?

A

Ending uncollectible accounts balance = Ending AR - NRV of AR

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What happens when a question gives me Ending AR, NRV of AR but no Ending uncollectible accounts balance?

A

Ending uncollectible accounts balance = Ending AR - NRV of AR.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is to factor AR?

A

A process in which AR can be converted to cash.
With recourse: Seller keeps the risk.
WO recourse: Buyer keeps the risk.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

How do you calculate the amount that a bank pays you for a note receivable when you factor it?

A
  1. Calculate maturity = Note * Interest %
    (adjust interest % as needed; interest % is always annual).
  2. Calculate bank discount = Maturity * Discount %
    (adjust discount % as needed; discount % is always annual).
  3. Calculate what bank pays you = Maturity - Bank Discount
  4. Calculate Interest income (expense) = What bank pays you - Note
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

When do you use Lower of Cost and NRV?

A

When inventory is valued at FIFO.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

When do you use Lower of Cost or Market?

A

When inventory is valued at LIFO.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

How do you calculate Lower of Cost and NRV? COCk/CASH ON DELIVERY!!!

A

NRV = Selling price - Costs to complete - Cost of Disposal

Choose lowest between Replacement Cost and NRV.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is another definition for NRV?

A

Market ceiling.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

How do you calculate Lower of Cost or Market?

A
  1. Calculate market ceiling (NRV).
  2. Calculate market floor (NRV - Normal Profit Margin)
  3. Compare Market, Ceiling, and Replacement Cost, choose middle amount.
  4. Compare middle amount with Cost (market), and choose lower of the 2.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is the formula for market floor?

A

Market floor = NRV - Normal Profit Margin

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

When do you make valuation adjustments to inventory?

A

When Inventory cost > NRV
Calculation is:
Valuation Adjustment = Inventory on Hand * (NRV - Inventory cost)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

How do you calculate ending inventory and COGS with the Weighted Average Method?

A

End Inventory = Weighted Average Cost per Unit * Units not sold
COGS = Weighted Average Cost per Unit * Units Sold

*Weighted Average Cost per Unit = Total Units Purchased / Total Inventory Cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

How do you calculate ending inventory and COGS with the Weighted Average Method?

A

Similar to Weighted Average Method, but you have to total everytime something happens.

Beg Inventory
Purchases
= Total, and calculate price per unit in similar way to WAM.

End Inventory = Calculated Cost per Unit * Units not sold
COGS = Calculated Cost per Unit * Units Sold

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What is the formula for Price Index?

A

Price Index = End Inventory at CY cost / End Inventory at Base Yr Cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

How do you calculate the Dollar-Value LIFO layer added to Beg Inventory?

A

Price Index * CY Activity on Base Year Inventory

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

When do you recognize losses on a firm purchase commitment?

A

When price declines.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

What is the JE to record losses on a firm purchase commitment?

A

Estimated Loss on Purchase Commitment

Estimated Loss on Purchase Liability

28
Q

How long do you capitalize Leasehold Improvements?

A

Lesser of:
- Useful life of improvements

OR

  • Remaining term of the lease.
29
Q

What is included in Land value?

A
  • Purchase price
  • Commissions
  • Title and recording fees
  • Legal fees
  • Things to clear up the land
  • Demolitions
  • Filling a hole (filling hole for the purpose of building the foundation, is a building cost)

NOTE!!! Don’t forget!
- Substract proceeds of sale on things that were in the land when you got it.

30
Q

What is a building cost that may look like a land cost?

A

Filling a hole for the purpose of building the foundation.

  • Makeup (foundation) = Building
  • No Makeup (bare face) = Land
31
Q

What do you capitalize when you build something?

A
  • DM, DL, OH
  • Repairs and Maintenance (if adds value to the asset
  • Construction period interest.
32
Q

How do you capitalize interest cost?

A

Based on the Weighted average of accumulated expenditures.

33
Q

What is the Weighted average of accumulated expenditures?

A

WAOAE = Construction expenses * (# of months outstanding/12)

*If Interest is evenly spent through the year, then average is divided by 2

Avoidable Interest = WAOAE * Interest Rate on construction loan

34
Q

What are the two basic bitches of capitalized interest?

A
  1. Only capitalize interest on expenditures, not amount borrowed.
  2. Capitalize lower of actual interest incurred, or computed capitalized interest.
35
Q

What happens when your expenditures are more than what you borrowed for a construction loan?

A

Capitalized interest is lower of:

Avoidable Interest = WAOAE * Interest Rate on construction loan

OR

Actual Interest = A + B

A. Construction Loan Amt * Loan Int %

B. Other debt * Interest % on other debts

36
Q

How do you calculate the interest rate for capitalized interest?

A

Loan A amt/ Total Loans * Interest Rate for Loan A

(+) Loan B amt/ Total Loans * Interest Rate for Loan B

37
Q

How do you calculate “composite life” of assets?

A

Composite Life = Depreciable Cost / Total Annual Depreciation***

***Depends on the original depreciation method.

38
Q

What is the formula of Sum-of-the-Years’-Digits depreciation expense?

A

SYD Depr Exp = Cost - Salvage Value * (Remaining life/SYD)

39
Q

What is the formula of DDB depreciation expense?

A

DDB Depr Exp = SL (ignore salvage value) * 2

40
Q

What is a key thing to know about Impairment losses?

A

They are always credited to Accum Depr.

41
Q

What is the formula for depletion expense?

A

Depletion Exp = Unit depletion rate * # units produced

42
Q

What is the formula for Unit Depletion Rate?

A

Unit depletion rate = Depletion base / Estimated recoverable units

43
Q

What is the formula for Depletion Base?

A

Cost
(+) Development Cost (to prepare land for extraction)
(+) Restoration Cost (to bring back land to initial state)
(-) Residual (salvage) value
(=) Depletion Base

44
Q

What is the difference between accounting for depletion and depreciation expense?

A

Depletion goes to COGS and Inventory as DM.

Depreciation has its own line, and is charged to accum depr.

45
Q

What is the fair value approach?

A

FV of assets given up = FV of assets received.

46
Q

How do you calculate gain on a transaction that has commercial substance?

A 
FV of asset given up
(-) NBV 
(+) Cash Received
(-) Cash Paid
(=) Gain (Loss)

Similar to Like-Kind Exchanges!!!

47
Q

How do you calculate basis of acquired asset on a transaction that has commercial substance?

A

Basis = FV of assets given up or received + Cash Paid + Cash Received

48
Q

How do you calculate gain on a transaction that DOES NOT HAVE commercial substance?

A 
No boot received = No Gain.
Boot paid (<25%) = No Gain.
Boot received (<25%) = Prorata gain is recognized.
Boot received (>25%) = 100% gain is recognized.
49
Q

How do you calculate Prorrata Gain to be recognized?

A

Recognized Gain = Realized Gain * (Boot received / FV Received)

50
Q

How do you calculate basis of acquired asset on a transaction that DOES NOT HAVE commercial substance?

A

Basis = FMV of asset given up - Deferred gain - Cash Received

Similar to Like-Kind Exchanges!!!

51
Q

How do you calculate gain on an involuntary conversion?

A

Gain = FV - NBV

52
Q

What is the useful life in which you should amortize a patent?

A

Lesser of estimated life or remaining legal life.

53
Q

What happens if the life of an intangible asset is modified?

A

The NBV is amortized over new life.

54
Q

How do you calculate the gain (loss) on a sale of an intangible?

A

Gain (loss) = FV - NBV

55
Q

How do you record an intangible asset in the BS?

A

At cost, which may include down payments + PV of payments to be made.

56
Q

What’s the JE when recording an intangible that has PV and a down payment?

A

Intangible (Down payment + PV)
Discount on intangible (Plug)
Note Payable (what is owed)
Cash (Down payment)

57
Q

What is not allowed to be expensed in full as R&D?

A

Cost for equiment that will have other uses in the future.

However, depreciation expense will be charged to R&D during R&D period.

58
Q

What is not allowed to be expensed in full as computer software development costs?

A

Costs incurred AFTER technological feasability has been established. This must be capitalized.

59
Q

How do you amortize computer software development costs?

A

Greater of:
1. Percentage of revenue
OR
2. SL

60
Q

What is the formula for % of revenue?

A

Capitalized amount * (CY Actual Gross Revenue / Lifetime Estimated Gross Revenue for Product)

61
Q

How do you account for goodwill?

A

Goodwill acquired is capitalized.

Goodwill created is expensed.

62
Q

What happens with intangibles with indefinite cash flows or indefinite renewals?

A

There are no amortization expenses. Amortization is only recorded for intangibles with a definite life.

63
Q

What happens if you have legal fees to succesfully defend a patent?

A

The legal fees are added (debited) to the Patent, and amortized for the lesser of intangible estimated life or remaining legal life.

64
Q

When is an intangible with finite useful life tested for impairment?

A

Whenever events or circumstances indicate that the carrying amount may not be recoverable.

65
Q

What is the two-step impairment test for an intangible with finite useful life?

A
  1. Check if NBV > undiscounted (not PV) cash flows. if so, then:
  2. Impairment Loss = FV - NBV (Assets held for use)
66
Q

How do you calculate an impairment loss on an intangible with indefinite life that if the asset is held for diposal?

A

Impairment loss (from 2-step test) + Cost of disposal

67
Q

What does GAAP say about restoration of old impairment losses?

A
  1. It is prohibited.

2. Restoration is only allowed if the the asset is held for disposal.

FAR (12 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions