FAR 5-5 - Sheet1 Flashcards
Q2001. What are the two ways to ESTIMATE inventory?
A2001. 1. Gross Margin Method (Not GAAP). 2. Retail Method.
Q2002. What 3 things need to be known when using the Retail Method to estimate inventory?
A2002. 1. Beginning inventory & purchases at cost & retail. 2. Additional markups & markdowns. 3. Sales for the period.
Q2003. What are the 3 methods of the retail method to estimate inventory?
A2003. 1. Weighted Average, LCM. 2. LIFO Retail 3. D-V LIFO Retail
Q2004. How does the Retail Method estimate ending inventory?
A2004. Using a cost/retail ratio, ending inventory is converting from retail dollars to cost dollars.
Q2005. Why are markdowns not included in the Weighted Average, LCM retail calculation?
A2005. It results in a larger denominator for the ratio to help approximate lower of average cost or market.
Q2006. How is the Weighted Average, LCM retail calculated?
A2006. Sum of beginning inventory, net purchases, and net markups.
Q2007. LIFO Retail requires 2 cost/retail ratios be calculated, what are they?
A2007. 1. Beginning inventory 2. Net purchases
Q2008. How are PP&E recorded?
A2008. At acquisition cost, plus all reasonably necessary cost to bring it to the location & make it ready for use.
Q2009. What is the basis of a PP&E purchased on a Deferred Payment Plan?
A2009. At its cash equivalent price, or an imputed interest rate to obtain the PV of payments to be made.
Q2010. What is the basis of a PP&E purchased by Issuance of Securities?
A2010. At the assets FV or the FV of the securities issued, whichever is more clearly determinable.
Q2011. What is the basis of PP&E that are Self-Constructed?
A2011. All directly related costs: DM,DL, & OH.
Q2012. What 3 types of PP&E assets qualify for interest capitalization?
A2012. 1. Constructed or produced for self-use on a repetitive basis. 2. Acquired for self-use through arrangements requiring down or progress payments. 3. Constructed or produced as discrete projects for sale (RE or ships).
Q2013. How are donated PP&E assets recorded?
A2013. At FV along w/ any incidental costs.
Q2014. How is a nonreciprocal transfer of PP&E recorded?
A2014. At FV, and a G or L is recognized on the disposal.
Q2015. What is the accounting for nonmonetary PP&E exchanges?
A2015. The acquisition is recorded at FV of either the asset surrendered or received, whichever is more clearly determinable. A G or L should also be recognized.
Q2016. What are the 3 exceptions when a nonmonetary PP&E exchange should be based on recorded amounts (rather than FV)?
A2016. 1. The FV of the asset received or surrendered is not clearly determinable. 2. PP&E held for sale in ordinary course of business for asset to be sold in same line of business to facilitate sales. 3. Transaction lacks commercial substance.
Q2017. What is commercial substance?
A2017. The future cash flows are expected to change significantly if: 1. Configuration of future cash flows of new assets differs from those transferred. 2. Entity-specific value of new assets differs from those transferred in relation to FV of assets exchanged.
Q2018. What is the formula for the portion of BV sold when receiving boot? And what is the carrying amount of the new asset?
A2018. BV of old asset x [boot / (boot + BV of new asset)] New asset = BV of old asset - portion of BV sold
Q2019. When an exchange involving boot indicates a loss, how much of the loss is recognized?
A2019. The entire loss.
Q2020. How would the entity paying boot record the new asset?
A2020. The new asset’s basis is boot + recorded amount of old asset No gain should be recognized.
Q2021. What is the Sum-of-Years’-Digits (SYD) formula for depreciation?
A2021. (Cost - Salvage) x (Life / SYD) For n years, SYD = n x (n + 1) / 2
Q2022. What is the Double-Declining-Balance (DDB) formula for depreciation?
A2022. 2 x (Cost - Accumulative Depreciation) ————————————- Life
Q2023. What is the Variable Charge Method formula for depreciation?
A2023. (Cost - Salvage) x Current Use ——————————————– Total Expected Usage
Q2024. What are the 3 categories of impaired assets?
A2024. 1. Held for Sale 2. Assets Held for Use 3. Disposals Other Than by Sale
Q2025. How often are intangible assets tested for impairment?
A2025. At least annually.
Q2026. When is an impairment loss recognized on intangible assets?
A2026. When the carrying amount is not recoverable and it exceeds its FV.
Q2027. What are Research & Development (R&D) Costs?
A2027. Research - discovery of knowledge that will be useful in developing or improving products. Development - Translating research findings into plans or designs.
Q2028. What is the accounting for R&D activities? What is the exception?
A2028. They are expensed in the period in which acquired. Unless the item has an alternative future use.
