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FAR OVERALL > F4 > Flashcards

F4 Flashcards

1
Q

Working Capital Formula

A

Current Assets - current liabilities

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2
Q

Current Ratio Formula

A

Current Assets / Current Liabilities

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3
Q

Quick Ratio Formula

A

(Cash + Net Receivables + Marketable Sec) / Current Liabilities

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4
Q

Bank Reconciliations

  1. Deposit in Transit
  2. Outstanding Checks
  3. Service Charges
  4. Bank Collections
  5. Errors
  6. NSF
  7. Interest Income
A

1.Add to Bank
2. Subtract from bank
3. Subtract from books
4. Add to Books
5. It can be either side that needs adjusting
6. Subtract from books
7. Add to books
=True Balance

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5
Q

T- Account for AR

A 
Debit                    Credit
Beg Bal                 Write Off 
                             Convert note
Credit Sales          Cash Coll
=End Bal
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6
Q

AR: Base Formula

A 
Beg Bal
\+Credit Sales
=Subtotal
- Cash collected
- AR converted to Note receivable (rare)
- AR written off
= Ending Balance
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7
Q

Valuation with AR J/E

  1. Sale
  2. Payment received w/n the discount period
  3. Payment is not received in discount period
A 
Sale
DR: AR
CR:        Sales
If payment is received w/n the discount period
DR: Cash
DR: Sales Disc Taken 
CR:         AR
If payment is not received w/n discount period
DR: Cash
CR:         AR
CR:         Sales Disc not taken
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8
Q

J/E for Sales Returns

A

DR: Sales Returns & Allowances (contra sales)
CR: AR

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9
Q

J/E for Direct Write off

A

NOT GAAP

DR: Bad Debt Exp (up) (=NI down)
CR: AR (down) (=Asset down)

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10
Q

Allowance method - 3types

J/E for Allowance Method

A
  1. % of Sales
  2. % of AR
  3. Aging of Receivables

DR: BDE
CR: Allowance for uncollectibles

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11
Q

J/E when receivable is uncollectible

A

DR: Allowance for doubtful accts (goes down)
CR: AR (goes down)

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12
Q

Subsequent Collection of AR Written off

Direct Method J/E

A

NOT GAAP

DR: Cash
CR: Uncollectible Accts Recovered

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13
Q

Subsequent Collection of AR Written off

Allowance Method GAAP
2-step and J/e

A
  1. Restore acct previously written off (reverse write off)
    DR: AR (goes up)
    CR: Allowance for Uncoll (goes up)
  2. Cash Collection on the acct (offset AR)
    DR: Cash
    CR: AR (goes down)
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14
Q

Subsequent Collection of AR Written off

Allowance for Doubtful accounts analysis format

A

Use T-Account

J/E for adjustment
DR: Allow for uncoll (down) -NRV up
CR: BDE (down) profit up

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15
Q

Pledging?

A

Company uses existing AR as collateral for a loan

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16
Q

Factoring?

A

Can convert it receivables into cash by assigning them to a “factor”

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17
Q

Factoring w/o recourse?

J/E for factoring AR w/o recourse

A

True sale- sale is final and that the assignee (the factor) assumes the risk of any losses on collections

DR: Cash
DR: Due from factor (factors margin)
DR: Loss on sale of receivable
CR: AR

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18
Q

Factoring with recourse?

A

Sale or loan/AR collateral = factor has the option to re-sell any collectible receivable back to seller

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19
Q

Notes Receivable?

  1. Valuation & Presentation?
  2. With Recourse?
  3. W/o recourse?
A

Are written promises to pay debt

  1. unearned interest & finance charges are deducted from the face amt of the related promissory note
  2. With Recourse: Holder remains contingently liable
  3. W/O recourse: No further liability
    .
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20
Q

J/E to write off a specific account under allowance method

A

DR:Allowance for uncollectible accts (down)
CR: AR (down)

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21
Q

Discounting a note at a bank

A

Face Value + int rate on note (face x time x int rate) = Payoff at maturity

Payoff at maturity - Discount by bank (discount x time x payoff at mat) = cash received from bank

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22
Q

Inventory - who accounts for
FOB Shipping
FOB Destination

A 
Shipping = buyer
Destinations = seller
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23
Q

Who accounts for consigned goods?

A

Consignor

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24
Q

GAAP : Valuation of Inventory

A

At Cost

Exceptions
~Lower of Market or Cost: when utility of goods is no longer as great as their cost
~Precious metals & farm products=NRV=Selling Price - Cost of disposal

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25
Q

How to calculate lower of cost or market for inventory?

A
  1. Recognize loss in current period
    ~GAAP=Market means current replacement cost if not higher than NRV (market ceiling) or lower than NRV - profit margin (market floor)
  2. GAAP= Reversals of inventory write-downs are prohibited
  3. Market Ceiling = NRV
    Market Floor = NRV - Profit Margin
    Replacement Cost = Cost to purchase on valuation date
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26
Q

IFRS Valuation for Inventory

A

Lower of cost or NRV (selling price - cost to complete and dispose)
~Reversal is limited to original write-down

27
Q

Inventory

J/E to write-down to a separate account:

A

DR: Inventory loss due to decline in market value
CR: Inventory

28
Q

Periodic Inventory System Formula

A 
Beginning Inventory 
\+ Purhcases (net of returns or discounts)
= COG available for sale
- EI (Physical Count)
= COGS
29
Q

Periodic Inventory System J/E

  1. Sale under periodic system
  2. Purchase under periodic system
A

Sale under periodic system:
DR: Cash
CR: Sales

Purchase under periodic system:
DR: Purchases
CR: Sales

30
Q

Perpetual Inventory System J/E

  1. Sale under perpetual method
  2. Purchase under perpetual method
A 
Sale under perpetual method:
DR: Cash
CR:        Sales
DR: COGS
CR:        Inventory

Purchase under perpetual method:
DR: Inventory
CR: Cash

31
Q

FIFO

During Rising Prices?

A

~First in first out
~Rising prices: FIFO results in the highest EI, Lowest COGS, Highest NI (curr costs not matched with curr rev)
~EI and COGS are the same with periodic & perpetual

32
Q

Weighted Average Formula

A

Total cost of inventory available / Total # of units of inventory available

Periodic

33
Q

What is moving average method?

A

Perpetual

Computes weighted average after each purchase

34
Q

LIFO?

Rising Prices?

A

LIFO: Last In, First Out = Not permitted under IFRS

~Rising prices: LIFO method generally results in the lowest EI, highest COGS, lowest NI (Remember=LIFO Lowest)

35
Q

Dollar Value LIFO

A

-Estimate of Change in price levels required

~Inventory is measure in dollars and is adj for changing price levels

36
Q

Price Index Formula

A

EI at CY cost / EI at base year

37
Q

Firm Purchase commitment

A

Legally enforceable agreement to purchase a specified amount of goods at some point in the future.

~If the contracted price exceeds the market prices → loss should be recognized at the time of decline

~Disclosure of loss = required

38
Q

J/E to record loss on a purchase commitment

A

DR: Est loss on purchase commitment
CR: Est liab on purchase commitment

39
Q

Characteristics of FA

A

~Acquired for use in operations and not for sale
~LT in nature and subject to depreciation
~Physical Substance

40
Q

Classification of FA

A

~Land (property)
~Buildings (plant)
~Equipment
~Accum Dep (contra-asset)

41
Q

Valuation of FA under GAAP

A

Historical Cost

42
Q

J/E for Donated FA

A

DR: FA (FMV)
CR: Gain on nonreciprocal transfer (unusual or infrequent)

43
Q

Valuation of FA under IFRS

A

~Cost: Cost Model CV = Historical Cost - Accm Dep - Impairment
~Revalaution: Revalued to FV
Revaluation model CV = FV at Revalue date - Subseq Accum Dep - Subseq Impairment
~Revaluation Loss = IS (FV < CV before revaluation)
~Revaluation Gain = OCI (FV > CV before revaluation)
~Impairment = OCI down to zero then less on IS

44
Q

Cost of Equipment

A

All expenditures related directly to their acquisition or construction

45
Q

J/E for Additions to FA

A

DR: Asset
CR: Cash/AP

46
Q

J/E for Replacements of FA

A

~CV of old asset is known = removie it and recogn g/l
~CV unknown = increase NBV
DR: Accum Dep
CR: Cash/AP

47
Q

How to account for Repairs on FA

A 
~Ordinary = Expense
~Extraordinary = Capitalize
48
Q

Cost of Land? Decipherable?

A

All costs incurred to excavation (digging/building)
~Land Cost = Not depreciable
~Land Improvements = Depreciable

49
Q

Investment Property IFRS~

Capitalize or Expense

A

Capitalize
~Cost incurred to subsequently add to the property
~Cost to replace part of property
~Cost to service property

Expense
~Day to day servicing
~Repairs and maintenance
~Labor & Minor parts

50
Q

Two models used for Investment property under IFRS

A

Cost Model
BS at historical cost less accum depreciation

FV Model
BS at FV and not depreciated

51
Q

When do you capitalize construction interest?

A

During

~Based on weighted average of accum expenditures

52
Q

What construction interest do you not capitalize?

A

~Inventory routinely manufactured
~FA held before or after construction period
~Intentional delays in construction

53
Q

What are the 2 rules with construction interest capitalization?

A
  1. Only capitalize interest on money actually spent, not the total amt borrowed
  2. Amt of capitalized interest is the lower of:
    ~Actual interest cost incurred, or
    ~Computed capitalized interest (avoidable interest)
54
Q

SL Formula

A

(Cost - SV) / Estimated useful life

55
Q

Double Declining Balance

A

= 2 x (1/N) x (Cost - Accum Dep)

*Ignore SV

56
Q

Sum of years Digits Formula

A

= (Cost - SV) X (remaining life of asset / sum of years digits)

57
Q

Units of Productions Formula

A
  1. (Cost -SV) / Est Units = Rate per unit

2. Rate per unit X # of units produced = Dep Exp

58
Q

Disposals: J/E

Sale of Asset during useful life

A

DR: Cash Received from sale
DR: Accum Dep of sold asset
CR: Sold asset at cost
DR/CR: G/L (Plug)

59
Q

Disposals: J/E

Write off Fully dep asset

A

DR: Accum Dep (100%)
CR: Old Asset at full cost

60
Q

Disposals: J/E

Total & Perm impairment

A

DR: Accm Dep
DR: Loss due to impairment (diff)
CR: Asset at full cost

61
Q

When is depletion used?

A

For natural resources

62
Q

Cost/Unit Depletion Formula

A

Base / Recoverable units = rate

63
Q

Depletion Base Formula

A 
Purchase Price
\+ Develpment Cost
\+ Restoration Cost
- Residual Value
= Depletion Base
64
Q

IFRS: Partial Goodwill Method

Calculation for Goodwill and NCI

A

Partial goodwill = FV of net assets X ownership %

NCI = FV of net assets X NCI %

FAR OVERALL (18 decks)

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