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F4 Flashcards

1
Q

How are factoring receivables without recourse treated?

A

Sales transaction because they transfer the risk of uncollectible accounts to the buyer

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2
Q

What is pledging/assigning receivables?

A

process of obtaining a loan using the receivables as collateral where company retains control of receivables

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3
Q

For factoring receivables without recourse, what are the requirements to be considered a sale? What if these requirements are not met?

A
  • seller’s obligation for uncollectible accounts reasonably estimated
  • seller surrenders control of future economic benefits to buyer
  • seller not required to repurchase receivables, but may be required to replace
  • considered loan if conditions are not ALL met
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4
Q

Under the allowance method of recognizing uncollectible accounts, what is the JE to record the write-off of an account?

A

DR: Allowance for Doubtful Accounts, CR: A/R

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5
Q

if a check is not disbursed by the end of the year, how should it be treated in determining the reconciliation balance?

A

Added back into the checkbook balance

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6
Q

What are cash equivalents?

A

investments with original maturities 3 months or less

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7
Q

how do we calculate adjusted cash balance?

A

unadjusted cash balance +/- bank errors +credit memos -service charges

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8
Q

What is factoring receivables?

A

process where a company converts its receivables to cash by assigning them to a factor with or without recourse

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9
Q

When can a ST obligation be excluded from current liabilities and included in non-current debts?

A

company has both intent and ability to refinance on a LT basis as shown by either actual financing before the F/S are issued or if a non-cancelable financing agreement exists from a lender who has financial resources to complete financing

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10
Q

Under the allowance method, when an account previously written off is subsequently collected, what are the journal entries to restore the previously written-off account and to record the cash collection?

A

Restore:
DR: A/R, CR: Allowance for Uncollectible Accounts
Record:
DR: Cash, CR: A/R

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11
Q

Differentiate between unrestricted and restricted cash

A

Restricted cash is cash set aside for a specific purpose or use, unrestricted cash is cash used for all current operations

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12
Q

What is working capital?

A

Current assets - current liabilities

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13
Q

What is the quick ratio?

A

(cash + net receivables + marketable securities) / current liabilities

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14
Q

What is the journal entry to write off a specific A/R under the allowance method?

A

Debit allowance for doubtful accounts, credit accounts receivable

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15
Q

How can we tell if payment is a non-current asset?

A

Transaction is expected to result in realization of cash in the future and cash will be realized at a time beyond the normal operating cycle of one year

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16
Q

What is market under lower of cost or market?

A

The middle value of replacement cost, net realizable value, and net realizable value - normal profit

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17
Q

How was inventory valued under IFRS?

A

Lower of cost or net realizable value

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18
Q

What type of inventory valuation will always result in the same dollar valuation ending in the toy regardless of whether periodic or perpetual is used?

A

FIFO

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19
Q

How is inventory valued under GAAP?

A

Lower of cost or market

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20
Q

What do we do with dollar-value LIFO?

A

Adjust inventory retail prices and ending inventory cost for price level changes

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21
Q

Which lower of cost or market real application is most conservative?

A

Separately, each item

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22
Q

What is the LIFO reserve?

A

Difference between inventory on LIFO method versus any other cost method

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23
Q

When a company’s goods are out on consignment, what does the consignor still own?

A

The selling price of the goods, not the marked up amount

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24
Q

What is net realizable value?

A

Selling price - cost of disposal

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25
Q

What is a disadvantage of the periodic inventory system?

A

COGS amount includes both cost of inventory sold and inventory shortages

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26
Q

What are the advantages of LIFO?

A

Lower tax liability, lower ending inventory

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27
Q

What are the advantages of FIFO when prices rise?

A

Lower COGS, maximize profits

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28
Q

How are shipping cost to obtain company goods associated with inventory valuation?

A

Allocated to COGS and inventory based on proportion of inventory to purchases

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29
Q

What do we do when current market value of inventory is less then the fixed purchase price in a purchase commitment?

A

Lost recognized at time of price decline, liability recognized on the balance sheet and description of losses must be described in the footnotes

30
Q

FOB shipping point. FOB destination

A

Transfer ownership of goods when shipped, transfer ownership of goods when they arrive at the destination

31
Q

How does the consignor treat their goods?

A

Includes them in ending inventory because they still retain title and risk of loss

32
Q

Under IFRS, how are fixed assets valued?

A

Together as an entire class, not alone

33
Q

What costs incurred in connection with a manufacturing machine can be capitalized?

A

Any cost to acquire and make ready a plant asset

34
Q

How is the amount of capitalized interest calculated?

A

LOWER OF actual interest cost incurred or computed capitalized interest (avoidable interest)

35
Q

What is included in the machines cost?

A

Cost reasonable and necessary to get the asset in the condition or location for its intended use

36
Q

How do we account for repairs from damages to fixed assets?

A

Capitalize cost of repair and record a loss in the current period equal to the carrying amount of the damaged portion of fixed asset

37
Q

How are interest costs on fixed assets treated before the construction period and interest costs with the routine manufacture of machinery treated?

A

Expense on the income statement in the period incurred

38
Q

How do we account for interest costs incurred during the construction period of fixed assets?

A

Capitalize based on weighted average of accumulated expenditures as part of fixed assets cost

39
Q

What types of interest costs on fixed assets are expensed?

A

Interest costs incurred before or after the construction period and intentional delays in construction

40
Q

IFRS, how do we book an impairment?

A

Impairment first recorded by reducing any reevaluation surplus to zero and then reporting further impairment losses on the income statement

41
Q

IFRS, what is investment property?

A

Land and buildings held by an entity to earn rentals for capital appreciation

42
Q

When investment property is reported it cost less depreciation, what must be disclosed?

A

Fair value

43
Q

When is the weighted average interest rate used to calculate capitalized interest on fixed assets?

A

If borrowings are not tied specifically to construction of asset

44
Q

Machinery recorded at the transaction date?

A

Fair value

45
Q

When is units of production depreciation most appropriate?

A

When assets service potential declines with use

46
Q

How is the depreciable base calculated?

A

Costs - salvage value

47
Q

What do we do with restoration costs in depletion?

A

Add to depletion base

48
Q

What do we do when a permanent impairment has occurred?

A

Book value reduced with credit to accumulated depreciation

49
Q

What is the U.S. GAAP impairment process for fixed assets?

A

Step 1: determine if they caring value is greater then the undiscounted future cash flow’s. If so, and impairment loss exists, step 2: fair value OR present value of future cash flows - net caring value is our impairment loss

50
Q

What is the IFRS impairment process for fixed assets?

A

One step: fixed asset recoverable amount (greater of the value and use (present value of future cash flows) or net realizable value (fair value - cost to sell)) - carrying value. If negative, we record this amount as our impairment loss

51
Q

Are US GAAP and IFRS’s views on subsequent reversal of impairment losses?

A

Prohibited under GAAP, permitted under IFRS

52
Q

When should long-lived assets be tested for recoverability?

A

When changes in events or circumstances indicate its carrying amount may not be recoverable

53
Q

Under US GAAP, when can long-lived assets that are impaired have their carrying value restored?

A

When held for disposal

54
Q

What is the focus of the aging analysis of A/R balances?

A

Focuses on balance sheet and asset valuation resulting in good matching of revenue and expense

55
Q

What is the entry to write off an uncollectible accounts under the allowance method?

A

Debit: Allowance for uncollectible accounts, Credit: Accounts Receivable –> no effect on net income (I/S) or working capital (B/S)

56
Q

What is the entry to collect a previously written off balance?

A

Debit cash, credit allowance for doubtful accounts

57
Q

Which GAAP costing methods best approximate current cost of goods sold and ending inventory?

A

LIFO for COGS, FIFO for EI

58
Q

Which inventory method best reflects current costs and is more affected by changes in prices?

A

Perpetual

59
Q

How long should the aggregate amount of payments to be made on unconditional purchase obligations be disclosed?

A

For five years following the latest balance sheet date

60
Q

How was the index calculated in the dollar value LIFO method?

A

Ending inventory at current year cost / ending inventory at base year cost

61
Q

Long-term debt that matures within one year should be classified as a ___________ unless __________ is going to happen with other than current assets

A

current liability, retirement

62
Q

What is avoidable interest?

A

Interest that would not have been incurred if the project had not taken place

63
Q

What is the relationship between interest capitalized and actual interest incurred?

A

Capitalized interest incurred (interest for all borrowings) cannot exceed actual interest incurred (avoidable interest)

64
Q

How do we determine interest expense?

A

Difference between total interest and capitalized interest

65
Q

What do we do with physical assets in the trader business having a useful life greater than one year?

A

Capitalize and depreciate

66
Q

How do we treat ordinary repair and maintenance activities?

A

Expense at the time incurred

67
Q

How do we account for intangible assets?

A

Capitalize and amortize over their useful life

68
Q

How do we treat extraordinary repairs?

A

Capitalize if life is extended or efficiency is increased as a result

69
Q

How are land improvements treated?

A

They are excluded from the cost of land because they are depreciable assets and land is not

70
Q

How was interest during the construction period treated?

A

Capitalized

71
Q

What do you capitalized cost of new machines include?

A

All costs necessary to acquire machine and get it to the location and condition for its intended use

FAR (10 decks)

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