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FAR > F3 - Assets and Related Topics > Flashcards

F3 - Assets and Related Topics Flashcards

1
Q

Overdraft at the bank is considered what and does what?

A

Doesn’t affect cash balance and will be recorded as a liability

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2
Q

Cash equivalents = what?

A

Items without “original” maturities greater than 90 days

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3
Q

Allowance for un-collectibles balance =

A

Beg Bal

+Provision for Bad debts

-Bad debt write offs during the year

= End Bal before adjust

Take difference between estimated per agin

= End Bal after adjust

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4
Q

Writing off un-collectibles does what to net income?

A

Has no effect

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5
Q

Factoring Receivables w/o recourse does what?

A

Sales transaction that transfers the risk of uncollectible accounts to the buyer

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6
Q

Direct Method: Cash Collections =

A

Sales

-Difference in beg and end A/R

= Cash collected

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7
Q

Starting with value of a note –> get to the annual payments =

A

= Value / PV Factor

then -

Discounted Amount x Annual Payments

*PV Factor

=Total Interest

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8
Q

When note receivables get discounted.. what do you do with the discount?

A

Subtract it from the maturity value to get to overall proceeds from the bank

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9
Q

Determining A/R before Allowance for Uncollectibles

A 
B:   Beginning A/R
A:   Additions
       Credit Sales
       Recoveries
S:   Subtracts
       Collections
       Collection of recoveries
       Write offs
       Returns
E: Ending Balance
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10
Q

Who keeps control of A/R that is pledged in return for a loan?

A

Assigning company (asking for the loan)

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11
Q

What happens to NI and Total Assets when an account is written off?

A

Nothing. Canceling each other out.

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12
Q

Inventory losses during interim

A

MP declines are recognized in period occurred. If they recover, the recognized gains are only to the extent of the original loss

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13
Q

Agricultural products and precious metals may be sold at what? And when is the revenue recognized?

A

Above market cost and at production not necessarily time of sale.

=lbs produced / market price

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14
Q

Understated Beg Inventory and Overstated Ending Inventory does what to COGS?

A

Understated: Beg Inv = Understated: COGS (leads to overstatement of GAFS)

Overstated: End Inv =
Understated: COGS

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15
Q

What inventory method most closely approximates inventory costs for COGS and Ending Inventory?

A

COGS: LIFO (most recently purchased is first out)

Ending Inventory: FIFO (oldest inventory is first out, most recent purchases stay in inventory)

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16
Q

During periods of rising inventory prices: FIFO method under periodic vs perpetual? Ending inventory cost higher/lower?

A

Same ending inventory costs (always).

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17
Q

Inventory: When given GP to get to COGS

A

Sales
*(1-GP%)
=COGS

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18
Q

Inventory prices increasing: what method gives you the lowest ending inventory?

A

LIFO (highest value products being expensed to COGS while lower value ones stay in inventory) also NI decreases as higher values item are being expensed

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19
Q

Dollar value LIFO:

A

(EOY Inventory Cost / BY Inventory Cost)

*Annual increments

+Years together to get value at 12/31

(first year increment is total value)

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20
Q

COGS =

A 
Beg Inv
\+Purchases
-Purchase Discounts
\+Freight In
\+Transportation to consignees
-End Inv held by consignees
-End Inv
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21
Q

Lower of cost or Net Realizable Value Inventory Costing

A

Basis vs Realizable value

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22
Q

Who’s ending inventory is consigned inventory in?

A

Consignor (they retain title and risk)

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23
Q

NRV - Profit Margin =
(Market Value)

(used in Lower of cost and Market)

A

(SP - Cost to sell) - (SP *Profit Margin %)

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24
Q

IFRS requires use of what method to value inventory?

A

Lower of NRV or Cost

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25
Q

LIFO Perpetual

A

Use last inventory amounts and values

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26
Q

Purchase commitments and losses

A

Losses are only recorded if the purchaser is obligated to buy a “fixed” number of units

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27
Q

Asset Capitalization: Machine

A

Any cost incurred to make the machine factory ready is capitalized

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28
Q

Interest Capitalized for PPE

A

The smaller of: Total interest incurred and avoidable interest (interest on the weighted-average amount of accumulated expenditures)

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29
Q

If the carrying amount amount of a building is known and uninusured what method of accounting for refurbishments is used?

A

Component and a loss in the amount of the carrying value of the damaged portion of the building must be recognized (capitalize the cost of refurbishing)

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30
Q

Interest capitalized in PPE

A

During the construction period: capitalized as part of historic cost

Subsequent to construction: (routine manufacture of machinery) expensed in current period

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31
Q

How are Leasehold improvements capitalized?

A

Over the lesser of amortized life and remaining term

32
Q

IFRS: Gains on revaluation of machinery(PPE), where do these flow?

A

OCI

33
Q

Revaluation rule for IFRS:

A

If one asset is revalued, that entire asset class must be revalued

34
Q

Interest incurred to purchase land is what?

A

Expensed immediately (interest capitalized has to be “connected to a discrete manufacturing activity”

35
Q

How does a lump-sum purchase of land/buildings/inventory work as far as reporting cost?

A

%FV for each item compared to the total FV between them all.

36
Q

What is the only interest that can be capitalized on construction projects?

A

Interest during construction (using the rate given for financing the project)

37
Q

What all costs can be assigned to land?

A

All costs incurred to put it in place including costs to ready it for a building.

-Proceeds from sale of salvaged materials

38
Q

IFRS Machinery rule:

A

Freight cost are capitalized as part of machinery historical cost

39
Q

When asset are purchased requiring fixed payments extending beyond one year, how should they be valued?

A

PV of all future payments

40
Q

Computing weighted average accumulated expenditures:

A

Expenditure amount

*Portion of the year O/S

=Weighted Average

(do for all expenditures)

if less than borrowed amount.

*Interest rate by that amount

> interest calculated on borrowed amount?
-use original interest

41
Q

Sum of years digits depreciation:

A 
(4+3+2+1 =10)
Year 1: (4/10) * Base  (4 yr ul)
Year 2: (3/10) * Base
Year 3: (2/10) * Base
Year 4: (1/10) * Base

=Total Depreciation Expense

Purchase Price - (AD) = Carrying Value

42
Q

Double Declining Balance

A

(Straight Line % * 2)

calculate as (% * CV) for each period

salvage value doesn’t matter!!!

43
Q

A/D Note:

A

Add depreciation expense to YE accumulated depreciation than subtract next A/D to see YE retirements

44
Q

Group vs Composite Depreciation

A

Both based on SL but group is for similar assets where composite is for dissimilar

45
Q

Depletion

A

Sum to the purchase price:

Cost of mine
+Preparation
-Sales Price (salvage value)
=Total Cost

/Production Estimate for UL

=Depletion per unit

*amount sold/extracted

=Depletion Expense

46
Q

IFRS Component Depreciation

A

Machinery, Components and Inspection Costs are depreciated separately

Make sure.. subtract inspection costs/component costs from original costs

47
Q

Calculation for Composite life:

A

Total Cost

-Salvage Value

=Total Depreciation

/Life in Years

=Annual Depreciation

Total / Annual

=Component life

48
Q

If depreciation is recorded in one period how is that corrected?

A

Don’t double Depreciation expense!!! Normal amount depreciated!

Prior period adjustment because of an error

49
Q

Leased Property Depreciation Note:

A

Depreciated over the life of the property or lease (whichever is shorter)

50
Q

Unites of Production Depreciation

A

Reflects that an asset’s service potential declines with time.

51
Q

Non-monetary transactions: Receiving cash <10% of total consideration received.

A

Recognize a gain in the amount determined by the ratio of cash received to total consideration

52
Q

Rule for when a transaction has commercial substance and assets are being exchanged:

A

(FV of Asset Given - BV) = Gain/Loss

53
Q

Transaction lacks commercial substance, what is done with gains?

A

If boot collected is >25% of consideration (gain is recognized) if boot collected is not or no boot is collected, find value of new property as plug in JE..

dr New Equipment**(Plug)
dr AD
cr Old Equipment
cr Cash Received

54
Q

When land/property is sold: what happens to the replacement property?

A

Its carrying amount is equal to the FV of the consideration given for it.

55
Q

When should an exchange be measured by the reported amount of the non-monetary asset surrendered?

A

When it lacks commercial substance.

56
Q

IFRS non-monetary exchanges: Dissimilar Assets

A

Seen as exchanges to produce revenue (cash and asset given up) so you recognize gains/losses

57
Q

R&D Expenses include

A

Costs to develop products, services performed by 3rd parties, pre-production prototypes and model costs and searching for new products or new process alternatives, Salaries of lab employees

58
Q

Trademark Amortization

A

Amortized over economic life

59
Q

What costs are capitalized for Patents?

A

Legal Fees and other costs associated. R&D costs are expensed

60
Q

R&D and depreciation:

A

Don’t depreciate equipment used only for project. Depreciate equipment used for now and the future

61
Q

Goodwill

A

Goodwill acquired is capitalized but generated internally is expensed

62
Q

Franchise Fees:

A

Expensed (aren’t capitalized with the Franchise, only depreciation is)

63
Q

Under GAAP how are costs associated with software development accounted for?

A

Costs during preliminary project stage are expensed and costs afterwards are capitalized and depreciated over the economic life of the product

64
Q

How are start-up costs treated?

A

Expensed w/o/e

65
Q

IFRS Payment Expenses/Capitalized Costs

A

Capitalized costs = Purchase price
+VAT Taxes
+Legal Costs

66
Q

R&D Expenses Exclude (capitalization):

A

Legal fees for patent application, Engineering follow-up early stage of commercial production and marketing, producing product masts for training materials

67
Q

Goodwill is created when:

A

A business is acquired.

68
Q

Costs incurred between the time technological feasibility is reached and the product is released, are what?

A

Capitalized. Any before or after TF are expensed.

69
Q

Subsequent reversal of impairment losses are what under GAAP?

A

Prohibited unless the intangible is held for sale/asset is held for disposal.

IFRS: impairment losses can be reversed (and are booked to the CY income statement)

70
Q

Goodwill at the reporting unit level and FV:

A

Companies should determine whether the FV of the reporting unit is less than the CV, if so record an impairment loss to the I/S and reduce goodwill on the B/S

71
Q

What kind of assets can the recover-ability test be applied?

A

Assets with limited life-spans

72
Q

What happens when there is a permanent impairment loss on a piece of machinery? With a recoverable amount?

A

Depreciate the recoverable amount over the remainder of the useful life.

73
Q

How to determine if there is an impairment loss:

A

FIRST: Compare carrying value to expected future cash flows. CV < PVFCF (undiscounted) = no impairment
CV>FV = impairment

74
Q

IFRS and impairment loss:

A

Impairment loss has occurred when:

CV < Recoverable amount (Greater of the (FV - Costs to sell) or PVFCF)

CV - Recoverable Amount = Impairment Loss

75
Q

What long-lived assets can have their values recovered?

A

Held for disposal (not held for use)

FAR (10 decks)

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