FAR 4

Question 1

What does factoring without recourse mean?

Answer 1

It means that the transfer of risk of uncollectible accounts to the buyer

Question 2

What are included in cash and cash equivalents?

Answer 2

Coin and currency, checking and savings accounts, money market funds. (anything with an original maturity of 90 days or less).
Not cash equivalent= time certificate of deposit and legally restricted compensated balances.

Question 3

Which method of uncollectible accounts is consistent with cash accounting?

Answer 3

the direct write-off method
Dr: Cash
CR: uncollectible accounts receivable

Question 4

what is the quick ratio?

Answer 4

(Cash + Net receivables + Marketable securities)/ Current liabilities
net receivables= A/R + allowance for uncollectibles

Question 5

What happens when a company pledges receivables in return for a loan?

Answer 5

The assigning company will retain title to the receivables and will use the proceeds collected from the receivables to repay the loan.

Question 6

what would you qualify paying the equivalent of 3 months of sales taxes on a projected retail sales in satisfaction of the licensing requirements that is fully refundable after 5 years>

Answer 6

Noncurrent asset

Question 7

In a period of rising prices how do you treat LIFO?

Answer 7

lowest Net income and Ending Inventory. and COGS is higher

Question 8

What is the lower of cost Method?

Answer 8

Market ceiling is the NRV-selling cost (selling price - disposal cost)
Market floor-market ceiling - profit margin

Question 9

When can you recognize revenue?

Answer 9

When you can reasonably estimate returns.

Question 10

what is a firm purchase commitment?

Answer 10

A legally enforceable agreement to purchase a specified amount of goods at a future time.

Question 11

What amount should you capitalize in land account/

Answer 11

capitalize the cost of land, the cost to raze the building and subtract the sale of scrap material.

Question 12

What amount of interest should be capitalized?

Answer 12

the smaller of the total interest incurred or the avoidable interest.
usually capitalized based on weighted average amount of acc. expenditures

Question 13

What is included in the total cost of land?

Answer 13

the purchase price of land, the demolition fees, legal fees, insurance title, subtract salvage materials, removal of old building

Question 14

what is investment property defined as under IFRS?

Answer 14

its land and buildings held by an entity to earn rentals or for capital appreciation.
ex- buildings held for capital appreciation, land held for rental income.

Question 15

When would be a good situation to use units-of-production method?

Answer 15

if the asset’s service potential declines with use

Question 16

When should the long-lived assets be tested for recoverability?

Answer 16

at least annually or whenever events or changes in circumstances indicate the carrying amount may not be recoverable.

Question 17

When can long lived assets that are impaired have their carrying value restored under US GAAP?

Answer 17

Only if they are held for disposal.

Question 18

what is the method of estimating uncollectible accounts that emphasizes asset valuation rather than income measurement?

Answer 18

Aging the receivables

focuses on the BS and emphasizes the valuation of assets (good matching of revenue and expenses)

Question 19

What type of exchanges will decrease the amount of sales recognized?

Answer 19

Estimated exchanges.

estimated exchanges will not be recognized until incurred.