FAR 3.1 Flashcards
Bank Rec
Bank balance adjustments?
Add - Deposits in transit
Subtract - Outstanding checks
+/- Errors
Bank Rec
Book balance adjustments?
Add - EFT's Add - Earned Int Subtract - Service charges Subtract - NSF checks \+/- Errors
JE for Recovery of previous write offs?
Dr. AR
Cr. Allow
Dr. Cash
Cr. AR
How to calculate an allowance under the % of sales method?
“YE Plug” Solve for the allowance credited during the year, NOT the ending Allowance amount (as would be the case for the % of receivables approach).
% Receivables - BDE Plug
JE to write off a AR account?
Dr. Allowance
Cr. AR
What is the AR T-Account setup?
\+Beg \+Credit sales -w/o's -AR converted to note rec -money collected
Inventory: Should permanent declines in market value of inventory be recognized in interim f/s?
yes
Revenue for agriculture & precious metals when a company has agreed to purchase entire production amount, even if spread over multiple years?
recognize revenue in its entirety at market value
and only if a fixed number is required to be purchased
Dollar value LIFO equation?
current year cost / base year cost = index to be multiplied by the annual layer
next add the layers together to get the year end inventory cost
Capitalized cost of equipment purchased on a note payable
When given the note payable amount, payment amount 6,000, int rate 8%, ordinary annuity factor three years 2.58, and PV for the future single sum for three years, .735?
What part of the note payable is capitalized?
PV of the note payable = 6,000 x 2.58 (PV of an ordinary annuity factor for three years at 8% is 2.58)
Interest is capitalized when machinery is…
self-constructed and not purchased
How to calculated the amount of interest to be capitalized?
Step 1: Calculate the WAvg accumulated expenditures
Step 2: Compute the capitalized interest by multiplying the appropriate interest rate times the WAvg accumulated expenditures. 170*.10
Step 3: Compare the capitalized interest to the actual interest cost. 30k > 17k, and take the lesser
Depreciation
When a permanent impairment occurs, the BV is reduced and a loss is recorded, should the loss be debited or credited to accumulated depreciation?
Credited. In addition, the current year’s depreciation expense should be added. The NEW book value is depreciated over the new life.
Component depreciation
How to treat component costs?
First subtract them from the cost of the equipment, then separately depreciate them.
Nonmonetary exchange
Loss, how to treat?
recognize immediately
Nonmonetary exchange
Gain, how to treat if Commercial Substance, and No Commercial Substance?
Yes commercial substance - recognize entire gain, using FV approach
No commercial substance, No cash received = No Gain
No commercial substance, Cash paid = No Gain
No commercial substance, Cash received, then if
less than 25%, recognize pro-rata gain @ (cash received/total FV received including cash)
if greater than 25%, then recognize entire gain on BOTH SIDES
How to treat legal fees and other costs associated with registering a patent?
Capitalize
If equipment has alternative future uses, should you expense or capitalize?
capitalize
How to treat internally created goodwill?
expense
Impairment loss, IFRS
How to calculate Impairment loss?
CV 12,500
FV 11,200
Costs to sell 600
PV of FCFs 10,950
FV less costs to sell or value in use, whichever is greater, (not undisc. FCF) - Carrying Value
