F4 Flashcards
What is the journal entry for direct write-off method of accounts receivable?
DR Bad debt expense
CR Accounts receivable
Note this method is NOT GAAP
What is the journal entry for the Allowance Method for estimating uncollectible AR?
DR Bad debt expense
CR Allowance for uncollectible accounts
This is the same entry for % of sales method; % of y/e receivables in AR method; and the Aging of Receivables Method
What is the journal entry for writing-off a specific accounts receivable under the Allowance Method?
DR Allowance for doubtful accounts (which decreases the acct)
CR Accounts receivable (which decreases AR)
Note this is GAAP. This entry is done when it is formally determined that a receivable is uncollectible.
What is the journal entry for subsequent collection of a previously written off AR when you used the Direct Method to write-off?
DR Cash
CR Uncollectible accounts recovered
Note this is NOT GAAP. This is what you would do for tax though.
What is the journal entry for subsequent collection of previously written off AR when you used any of the 3 Allowance Methods?
Step 1: restore the receivable previously written off & reverse the write-off
DR AR
CR Allowance for uncollectible accounts
Step 2: record the cash collection:
DR Cash
CR Accounts Receivable
Inventory LCM: how do you calculate the “market ceiling”?
= Selling Price - Discounts - cost to complete - cost to dispose
Inventory: LCM how do you calculate “market floor”?
= NRV less normal profit margin
NRV = selling price - discounts - cost to complete - cost to dispose
Inventory LCM: what is “market”?
=Replacement cost
“Lower of Cost or Market” is GAAP. What is the IFRS terminology?
Lower of cost or NRV.
When using the moving average method of inventory, how often do you update unit cost of inventory?
Under moving average method, weighted average cost is updated after each PURCHASE.
Under IFRS, where do you report revaluation losses on revaluation of machinery?
Revaluation losses occur when fair value is LESS THAN carrying value before revaluation. The loss is reported on the income statement unless the loss reverses a previously recognized revaluation gain. If the loss does reverse a previously recognized gain, then the loss is recognized in other comprehensive income and reduces revaluation surplus in accumulated OCI.
Under IFRS, where do you report revaluation gain when you revalue machinery?
Revaluation gains occur when fair value is GREATER THAN carrying value before revaluation. These gains are reported in comprehensive income and accumulated in EQUITY as revaluation surplus, unless the gain reverses a previously recognized revaluation loss. If it does reverse a previously recognized revaluation loss then it is reported on the income statement
What’s the formula for annual depreciation expense using Sum of Year’s Digits?
=(Cost - Salvage value) x (Remaining Life / Sum of Yrs Digits)
Numerator = [N ( N + 1)] / 2
With Double Declining Balance, do you need to include salvage value in your formula?
No! Salvage value is not considered in DDB.
With Sum of Yrs Digits, do you need to include salvage value in your formula for annual deprec expense?
Yes. The formula is:
= (Cost - Salvage Value) x (Remaining Life / SYD)
where SYD = (N(N+1))/2
