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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
How to calculate lower of cost or market for inventory?
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
26
IFRS Valuation for Inventory
Lower of cost or NRV (selling price - cost to complete and dispose) ~Reversal is limited to original write-down
27
Inventory | J/E to write-down to a separate account:
DR: Inventory loss due to decline in market value CR: Inventory
28
Periodic Inventory System Formula
``` Beginning Inventory + Purhcases (net of returns or discounts) = COG available for sale - EI (Physical Count) = COGS ```
29
Periodic Inventory System J/E 1. Sale under periodic system 2. Purchase under periodic system
Sale under periodic system: DR: Cash CR: Sales Purchase under periodic system: DR: Purchases CR: Sales
30
Perpetual Inventory System J/E 1. Sale under perpetual method 2. Purchase under perpetual method
``` Sale under perpetual method: DR: Cash CR: Sales DR: COGS CR: Inventory ``` Purchase under perpetual method: DR: Inventory CR: Cash
31
FIFO | During Rising Prices?
~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
Weighted Average Formula
Total cost of inventory available / Total # of units of inventory available Periodic
33
What is moving average method?
Perpetual Computes weighted average after each purchase
34
LIFO? | Rising Prices?
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
Dollar Value LIFO
-Estimate of Change in price levels required ~Inventory is measure in dollars and is adj for changing price levels
36
Price Index Formula
EI at CY cost / EI at base year
37
Firm Purchase commitment
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
J/E to record loss on a purchase commitment
DR: Est loss on purchase commitment CR: Est liab on purchase commitment
39
Characteristics of FA
~Acquired for use in operations and not for sale ~LT in nature and subject to depreciation ~Physical Substance
40
Classification of FA
~Land (property) ~Buildings (plant) ~Equipment ~Accum Dep (contra-asset)
41
Valuation of FA under GAAP
Historical Cost
42
J/E for Donated FA
DR: FA (FMV) CR: Gain on nonreciprocal transfer (unusual or infrequent)
43
Valuation of FA under IFRS
~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
Cost of Equipment
All expenditures related directly to their acquisition or construction
45
J/E for Additions to FA
DR: Asset CR: Cash/AP
46
J/E for Replacements of FA
~CV of old asset is known = removie it and recogn g/l ~CV unknown = increase NBV DR: Accum Dep CR: Cash/AP
47
How to account for Repairs on FA
``` ~Ordinary = Expense ~Extraordinary = Capitalize ```
48
Cost of Land? Decipherable?
All costs incurred to excavation (digging/building) ~Land Cost = Not depreciable ~Land Improvements = Depreciable
49
Investment Property IFRS~ | Capitalize or Expense
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
Two models used for Investment property under IFRS
Cost Model BS at historical cost less accum depreciation FV Model BS at FV and not depreciated
51
When do you capitalize construction interest?
During | ~Based on weighted average of accum expenditures
52
What construction interest do you not capitalize?
~Inventory routinely manufactured ~FA held before or after construction period ~Intentional delays in construction
53
What are the 2 rules with construction interest capitalization?
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
SL Formula
(Cost - SV) / Estimated useful life
55
Double Declining Balance
= 2 x (1/N) x (Cost - Accum Dep) *Ignore SV
56
Sum of years Digits Formula
= (Cost - SV) X (remaining life of asset / sum of years digits)
57
Units of Productions Formula
1. (Cost -SV) / Est Units = Rate per unit | 2. Rate per unit X # of units produced = Dep Exp
58
Disposals: J/E | Sale of Asset during useful life
DR: Cash Received from sale DR: Accum Dep of sold asset CR: Sold asset at cost DR/CR: G/L (Plug)
59
Disposals: J/E | Write off Fully dep asset
DR: Accum Dep (100%) CR: Old Asset at full cost
60
Disposals: J/E | Total & Perm impairment
DR: Accm Dep DR: Loss due to impairment (diff) CR: Asset at full cost
61
When is depletion used?
For natural resources
62
Cost/Unit Depletion Formula
Base / Recoverable units = rate
63
Depletion Base Formula
``` Purchase Price + Develpment Cost + Restoration Cost - Residual Value = Depletion Base ```
64
IFRS: Partial Goodwill Method Calculation for Goodwill and NCI
Partial goodwill = FV of net assets X ownership % NCI = FV of net assets X NCI %

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