FAR 5.1 - Payables & Accrued Liabilities

Question 1

This method of accounting for payables and liabilities recorded the purchase without regard to the discount

Answer 1

Gross method

Question 2

Under this method of accounting for payables and liabilities, purchases and accounts payable are recorded net of the discount

Answer 2

Net method

Question 3

If invoices are paid within the discount period using the gross method, what account is credited?

Answer 3

Purchase discount

Question 4

If payment is made within the discount period using the net method, what journal entry is needed?
If payment is made after the discount period, using the net method, what account is debited?

Answer 4

1. No adjustment neeeded
2. Purchase discount loss account is debited

Question 5

Current obligations expected to be refinanced are taken out of what account and put into what account?

Answer 5

Taken out of short term liability
Pu int long-term liability

Question 6

Costs associated with exit and disposal activities include:

Answer 6

1. Severance pay to fired employees
2. Cots to terminate a contract that is not a lease
3. Costs associated with moving employees or equipment

Question 7

A footnote associated with an exit or disposal activity should be recorded when?
A liability associated with an exit o disposal activity should be recorded when?

Answer 7

1. When they are planning
2. When they announce

Question 8

Future operating losses expected to be incurred as part of an exit or disposal activity is:

Answer 8

Recognized in the period it is incurred

Question 9

Losses due to exit or disposal activities are recognized where?

Answer 9

In continuing operations unless if it is a major strategic shift then it is discontinuing operations

Question 10

An Asset Retirement Obligation (ARO) qualifies for recognition when:

Answer 10

1. Law requires
2. Contract requires
3. Promissory estoppel (CFO of company))

Question 11

AROs are initially measured at:

Answer 11

Fair value (PV of future obligation)

Question 12

The increase in the ARO liability due to the passage of time that is added to the ARO liability each period

Answer 12

Accretion expense

Question 13

At the end of the accretion period, the ARO liability reported on the balance sheet should be equal to:

Answer 13

The asset retirement obligation to be paid

Question 14

Depreciation expense of an ARO decreases what account?

Answer 14

ARC asset

Question 15

At the end of the accretion period, the asset retirement cost should be:

Answer 15

Fully depreciated

Question 16

Cumulative accretion expense + cumulative depreciation expense =

Answer 16

ARO

Question 17

When estimated cash flows used to calculate the discounted ARO liability are revised, what discount rate is used for an upward revision or a downward revision?

Answer 17

Upward - current discount rate
Downward - historical or weighted average discount rate