F3 Assets and Related Topics

Question 1

If depreciation was missed for first year of a 5 year asset, what is the rule?

Answer 1

That first year depreciation will be treated as a prior year adjusting entry and accounted for tax adjustments. The second year depreciation is the straight line amount of depreciation for the one year.

Question 2

Capitalized interest includes: the construction loan interest and the interest on average expenditures. true/false

Answer 2

true.

Question 3

LCM: Lower cost or market tiers are:

Answer 3

Ceiling, net realizable value = 67,000
Replacement cost = 65,000
Floor, NRV less profit (67,000- (tax of price)) = 44,500

In this scenario, the replacement cost is the LCM = 65,000

Question 4

Cash and cash equivalents should be assets that have maturity less than how many days?

Answer 4

90 days.

Question 5

Impairment analysis begins with recoverability test when the net carrying value of the asset is compared to the undiscounted cash flows expected from the asset. When would impairment loss be reported/recorded?

Answer 5

Impairment loss reported when the undiscounted future cash flows are less than the carrying value. if it’s over then there is no impairment and there would be no loss.

Question 6

__________ of a long lived asset happens when the carrying amount of the asset is greater than it’s fair value. An _______ loss would be then recognized for the amount of the difference between book value and fair value.

Answer 6

impairment, impairment

Question 7

Gains from selling an old building to buy a new building would be reported as a 1) part of continuing operations or 2) gain from discontinued operations?

Answer 7

1) part of continuing operations in the income statement under other revenues and gains.

Question 8

Formula for COGs

Answer 8

Beginning inventory + purchases = Goods available for sale less ending inventory = COGS

Question 9

Working capital turnover formula

Answer 9

= Sales / average working capital. where working capital = current assets - current liability.

Question 10

current ratio formula

Answer 10

= current assets / current liability

Question 11

If the company uses LIFO for inventory, would they use LCM or LCNRV to calculate the carrying value of inventory?

Answer 11

LCM - Lower Cost or Market

Question 12

When prices are rising using FIFO, COGS is lower/higher?

Answer 12

lower COGS = higher net income, and higher ending inventory

Question 13

when prices are rising using LIFO, COGS is lower/higher?

Answer 13

higher COGS - lower net income and lower ending inventory

Question 14

Under FIFO, costs are the same or different under both perpetual and periodic system?

Answer 14

same

Question 15

Under LIFO, in a perpetual system, LIFO will same same or different inventory values than a period system because a cost is assigned after each sale.

Answer 15

Different.

Question 16

Which method gives the company a tax advantages due to causing a lower net income? LIFO or FIFO

Answer 16

LIFO