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Accounting Law > Final Exam > Flashcards

Final Exam Flashcards

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1
Q

ASSETS

Increase & Decrease

A

Increase: DEBIT
Decrease: CREDIT

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2
Q

Liabilities

Increase & Decrease

A

Increase: CREDIT
Decrease: DEBIT

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3
Q

Equity

Increase & Decrease

A

Increase: CREDIT
Decrease: DEBIT

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4
Q

Revenue

Increase & Decrease

A

Increase: CREDIT
Decrease: DEBIT

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5
Q

Expense

Increase & Decrease

A

Increase: DEBIT
Decrease: CREDIT

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6
Q

CPA vs. Accountant

Difference

A

CPA has Auditing ability

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7
Q

The Four Basic Financial Statements

A
  1. Balance Sheet
  2. Income Statement
  3. Statement of Changes in Owner’s Equity
  4. Statement of Cash Flow
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8
Q

Fundamental Accounting Equation

Three Formulations

A 
Equity = Assets - Liabilities
Assets = Equity + Liabilities
Liabilities = Assets - Equity
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9
Q

Assets

Definition & Requirements

A

Ownership or Control of Future Economic Benefits

  1. Entity Control
  2. Expected Future Benefit
  3. Measurability (Usually via a Transaction = Historical Cost)
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10
Q

Non-Assets

Three Examples

A
  1. Employees (without Contracts)
  2. Managerial Talent
  3. Goodwill (if not acquired via Transaction)
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11
Q

Outside Sources: Liabilities

3 Characteristics

A
  1. Present Duty
  2. Obligation
  3. Measurable
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12
Q

Inside Sources: Equity

3 Types of Ownership Equity

A
  1. Sole Proprietorship: Proprietorship
  2. Partnership (Unlimited Personal Liability): Partners’ Equity/Capital
  3. Corporation (Limited Liability): Shareholder’s Equity
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13
Q

Balance Sheet Fundamentals

4 Main Points

A
  1. Total Assets = Sum of Liabilities & Equity
  2. Snapshot in Time
  3. Assets = Historical Cost
  4. Only certain Assets/Liabilities Shown (Meeting Criteria)
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14
Q

4 Asset Classifications on the Balance Sheet

A
  1. Current Assets (Convertible into Cash/Use within 1 Year)
  2. Long-Term Investments (After 1 Year)
  3. Fixed Assets (PPE)
  4. Intangible Assets
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15
Q

2 Liability Classifications

A
  1. Current Liabilities (Due Within 1 Year)

2. Long Term Liabilities (Due Over 1 Year)

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16
Q 
Income Statement (2 AKAs)
4 Main Features & Note
A

Statement of Earnings or Statement of Operations

  1. Shows Revenues & Expenses
  2. Addresses Company’s Ability to Earn Profit
  3. Covers a PERIOD of Time (Not a Snapshot like the B/S)
  4. Non-Prospective

Always Prepared Prior the Balance Sheet

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17
Q

Revenues vs. Gains

Definition/Distinction

A

Revenues = Activities from Main Operations Resulting in Increase in Assets (or Decrease in Liabilities)

Gains = Perpherial or Subsidiary Increases in Assets (or Decreases in Liabilities)

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18
Q

Expenses vs. Losses

Definition/Distinction

A

Expenses: Decreases in Assets (or Increases in Liabilities) from USING Goods or Services to PRODUCE Revenue

Losses: Peripheral or Subsidiary Decreases in Assets (or Increases in Liabilities) that do NOT involve Distributions to Owners

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19
Q

Recognition of Revenue Test

Products vs. Services

A

When Earnings are Substantially Complete

  1. Products = Upon Delivery
  2. Services = Substantial Completion
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20
Q

Statement of Changes in Owner’s Equity (O/E)

Function & 3 Subaccounts

A

Track Changes in Equity (similar to revenues in the I/S)

Typically, Subaccounts for:

  1. Capital Account
  2. Drawings Account
  3. Retained Earnings
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21
Q

Owner’s Equity: Capital Account

A

Represents Owners’ Investment into the Enterprise

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22
Q

Owner’s Equity: Retained Earnings

A

Represents the Net of Income (or Loss) and Distributions or Dividends to Owners

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23
Q

Shareholder’s Equity Overview
3 Categories
(Accounting Nomenclature)

A
  1. Capitol Stock (Common or Preferred)
  2. Additional Paid-In Capital
  3. Retained Earnings (Net Income - Dividends)
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24
Q

Shareholder’s Equity Overview
3 Categories
(Legal Nomenclature)

A
  1. Stated/Legal Capital
  2. Capital or Donated Surplus
  3. Earned Surplus (Net Income - Dividends)
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25
Q

Shareholder’s Equity Comparison
Corresponding Legal Names

  1. Capitol Stock
  2. Additional Paid-In Capital
  3. Retained Earnings
A

Corresponding Legal Nomenclature:

  1. Stated/Legal Capital
  2. Capital/Donated Surplus
  3. Earned Surplus
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26
Q

Shareholder’s Equity Comparison
Corresponding Accounting Names

  1. Stated/Legal Capital
  2. Capital/Donated Surplus
  3. Earned Surplus
A

Corresponding Accounting Nomenclature:

  1. Capitol Stock
  2. Additional Paid-In Capital
  3. Retained Earnings
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27
Q

Accrual Definition

A

Recording a Revenue or Expense during Current Period even though no Payment occurred.

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28
Q

Deferral Definition

A

Delays an Event Involving Cash or Cash’s Worth in the Current Period until a Subsequent Accounting Period.

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29
Q

Accrual Accounting: Revenues

Recognition & 2 Notes

A

Recognized when Done or Substantially Completed

  • Regardless of Cash Receipt
  • Requires an Event or Transaction
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30
Q

Accrual Accounting: Expenses

A

Recognized when Incurred

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31
Q

Accrual Accounting

The 4 Assumptions

A
  1. Economic Entity (Separate Activities of Business from Owners)
  2. Monetary Unit (Valuation is Best Method for Communicating Economic Info)
  3. Periodicity (Economic Activity can be Subdivided into Periods)
  4. Going Concern (Business Continues Indefinitely)
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32
Q

7 Basic Principles of Accrual Accounting

A
  1. Historical Cost
  2. Objectivity/Verifiability
  3. Revenue Recognition
  4. Matching (Revenues-Expenses)
  5. Consistency (Over Periods)
  6. Full Disclosure
  7. Emerging Fair Value or Relevance (FMV for Some Assets, but Not All)
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33
Q

3 Modifying Conventions & Their Effect

A
  1. Materiality (Quantitative & Qualitative): Disregard Qualifying Data
  2. Conservatism: Recognize Potential Losses, Anticipate No Gains
  3. Industry Practices (Variable)
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34
Q

Materiality & Full Disclosure

Definition & Requirement

A

Any fact important enough to influence an informed reader’s judgment

If Material –> Disclose

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35
Q

Deferral: Occurrence (Cash) & Definition

A

Follows Cash Transaction

Cash Spent or Received is Recorded in a Subsequent Period

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36
Q

Deferral: Resulting Effect
Expenses & Revenues
(Corresponding Debit/Credit)

A

Expenses: Prepaid Expenses = Assets
-Credit to Create

Revenues: Prepaid Revenues = Liabilities
-Debit to Create

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37
Q

Accrual: Occurrence (Cash) & Definition

A

Precedes Cash Transaction

Allocates Expense or Revenues to Period in which they Occur (Regardless of Cash Receipt or Expenditure)

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38
Q

Accruals: Resulting Effect
Expenses & Revenues
(Corresponding Debit/Credit)

A

Expenses: Account Payable = Liability
-Debit to Create

Revenue: Account Receivable = Asset
-Credit to Create

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39
Q

Depreciation Accounting

A

Allocating an Asset’s Useful Life (less its Salvage Value) over Time.

Fixed Assets: Depreciation
Intangibles: Amortization

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40
Q

Depreciation Expense

Calculation & Accounts

A

(Cost - Salvage Value) ÷ Use Life

Depreciation: Credit
Accumulated Depreciation ("Contra Asset"): Debit
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41
Q

Inventory

A

Goods held for the Re/Sale in the Ordinary Course of Business

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42
Q

Inventory: Profit Analysis

2 Stages & 2 “Profits”

A

(Net) Sales
Less: Cost of Goods
= Subtotal (Gross Profit)

Gross Profit
Less: Operating Expense
= Total (Profit)

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43
Q

The Four Sales Accounts

A
  1. Sales Returns
  2. Sales Allowances (Discounts)
  3. Sales Revenue
  4. Net Sales (3 - 1&2)
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44
Q

Calculating Gross Profit

A

Net Sales - Cost of Goods = Gross Profit

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45
Q

Cost of Goods Sold (COGS)

Two Methods

A
  1. Perpetual Inventory System: Continuously Records Quantity and Cost of Goods Sold
  2. Periodic Inventory System: Takes Inventory at End of Period
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46
Q

Inventory Accounting Methods

3 Types

A
  1. First In First Out (FIFO)
  2. Last In First Out (LIFO)
  3. Weighted Average
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47
Q

Statement of Cash Flow

Function

A

Provides information about an Enterprise’s in/out flow of cash and current (cash) position.

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48
Q

Statement of Cash Flow

The 3 Sections

A
  1. Operating
  2. Investing Activities (Fixed Assets & Marketable Securities)
  3. Financing Activities (Borrowings & Paid-In/Draws)
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49
Q

Statement of Cash Flow

2 Methods

A
  1. Direct (Uncommon)

2. Indirect

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50
Q

Statement of Cash Flow

Indirect Method

A

Reconcile Net Income to Net Cash Operations

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51
Q

Statement of Cash Flow

3 Disclosures

A
  1. Interest Paid
  2. Taxes Paid
  3. Non-Cash Transactions
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52
Q

Statement of Cash Flow

3 Areas of Manipulation

A
  1. Net Income Modifications
  2. Vendor Financing
  3. Prepays: Treating Loans as Cash (Enron and Tyco)
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53
Q

Non-Cash Investing & Financing Activities

3 Examples

A
  1. Converting Debt to Equity
  2. Acquiring Assets by Assuming Liabilities
  3. Entering a Lease to Acquire Capital Asset
54
Q

3 Functional Differences between Lawyers & CPAs

A
  1. CPA = Independent (Lawyer = Client’s Advocate/Loyalty Duty)
  2. CPA = Duties to Public (Lawyer = Duties only to Client)
  3. CPA = No Work Product Immunity (Lawyers = Privileges)
55
Q

AICPA

A

American Institute of Certified Public Accountants

  • Administer the CPA Exam
  • Functionally Similar to ABA
56
Q

Sarbanes Oxley Act

A
  1. Pertains Only to Publicly Traded Companies
  2. Creates PCAOB (Public Company Accountant Oversight Board)
  3. Expanded Financial Controls (extending even to Lawyers)
57
Q

Auditor Permissions under Sarbanes Oxley

2 Permitted Services

A
  1. Auditing Financial Statements

2. Preparing Tax Returns

58
Q

Auditor Prohibitions under Sarbanes Oxley

8 Prohibited Services

A
  1. Bookkeeping Services
  2. Designing Financial Info Systems
  3. Appraisal or Valuing Services, Fairness Opinions, Etc.
  4. Actuarial Services
  5. Internal Audit Outsourcing Services
  6. Management or HR Functions
  7. Broker/Dealer or Investment Advising
  8. Legal Services
59
Q

FASB

Name/Status & 3 Functions

A

Financial Accounting Standards Board (Non-Governmental)

  • Assists in Developing GAAP with AICPA
  • Typically Reactive in Nature
  • Serves a Broader Financial Community (e.g., Banks)
60
Q

ASC

Definition & Function

A

Account Standards Codification

Source of GAAP Rules

61
Q

GAAP vs. GAAS

A

Generally Accepted ACCOUNTING Procedures

Generally Accepted AUDITING Standards

62
Q

APB

Name & Function

A

Accounting Procedures Board

-Precursor to FASB

63
Q

GASB

Name & Function

A

Government Accounting Standards Board

-Priority Set of Standards for Governmental Entities

64
Q

SEC & SAB

2 Points

A

Securities and Exchange Commission

  • Publishes Staff Accounting Bulletins (SABs) (SEC’s Standards)
  • Addresses ACCOUNTING Standards
65
Q

PCAOB

3 Points

A

Public Company Accounting Oversight Board

  • Created by Sarbanes Oxley
  • Concerns AUDITING Standards
  • All CPAs Must Register with Board
66
Q

Attorney Liability under Sarbanes Oxley

A
  1. May Not Mislead CPA in a way that would render Statements Materially Misleading
  2. Must Report Evidence of Material Violations of Securities Laws
67
Q

Three Phases of Auditing

A
  1. Planning
  2. Implementation
  3. Reporting
68
Q

Phase 1 of Auditing

3 Planning Activities

A
  1. Assess Internal Controls
  2. Vouching (Determine if Data supports a randomly selected Transaction)
  3. Tracing (Determine if Properly Procedure was Followed)
69
Q

Phase 2 of Auditing

3 Implementation Activities

A
  1. Establishing Auditing Plan (involves Statistical Sampling)
  2. Develop Working Papers
  3. Preliminary Materiality Judgment & Risk Assessment
70
Q

Phase 3 of Auditing

2 Reporting Activities

A
  1. Prepare Audit Report

2. Express Opinion in Report

71
Q

Audited Financial Statements

5 Asserted Representations

A
  1. Existence (of Assets & Liabilities)
  2. Complete
  3. Ownership (Represent Actual Rights or Liabilities)
  4. Valuation (Correct Recordation)
  5. Classification (Proper Categorization and Disclosure)
72
Q

Independent Auditor

SCOTUS Case

A

US v. Arthur Young: Auditors lack confidentiality privileges (unlike lawyers)

  1. Auditors hold a position of Public Responsibility & Trust (Watchdogs)
  2. Honest in Appearance
73
Q

Four Types of Auditor Opinions

A
  1. Clear or Unqualified Opinion (Nothing Amiss)
  2. Qualified Opinion (Acceptable, Except X)
  3. Adverse Opinion (Co. is Wrong)
  4. Disclaimer (Lack of Info)
74
Q

Degree of Audit Assurance

A 
Reasonable Assurances (Not Absolute) that Statements are Free of Material Misstatements
-Designed to Close Expectation Gap
75
Q

Auditor Liability to Shareholders

2 Possibilities

A
  1. Complicit in Misstatements

2. Failure to Follow GAAS

76
Q 
Auditing Standards (10)
Three Basic Groups
A
  1. General Standards
  2. Standards of Fieldwork
  3. Standards of Reporting
77
Q

Auditing Standards

3 General Standards

A
  1. Proficiency (Training/Skill)
  2. Independence
  3. Professional Care (& Skepticism)
78
Q

Auditing Standards

3 Standards of Fieldwork

A
  1. Plan & Supervise
  2. Study & Evaluate
  3. Obtain Competent Evidence
79
Q

Auditing Standards

4 Standards of Reporting

A
  1. Compliance with GAAP
  2. Consistent
  3. Informative Disclosures
  4. Wholistic
80
Q

6 Interest Rate Factors

A
  1. Pure Rate of Interest
  2. Inflation Risk
  3. Inflation Premium
  4. Maturity Premium
  5. Default Premium
  6. Illiquidity Premium
81
Q

Compounding Interest Rate Formula

A

(1 + R)^n
R = Rate of Interest
N = Number of Periods

82
Q

Annuity

Definition & 2 Types

A

Sequence of Periodic and EQUAL Amounts

  1. Ordinary Annuity (Annuity in Arrears): Payments made at End of Each Period
  2. Annuity Due (Annuity in Advance): Payments made at Beginning of Each Period
83
Q

Future Value

A

Determines how much an Amount today is worth in the future

84
Q

Present Value

A

Determines the value of a future amount in present day dollars

85
Q

Perpetual Annuity

A

Annuity Continues Indefinitely

-Withdrawals from Earned Interest (Not Principal)

86
Q

Calculating Market Value of Bonds

2 Rights & Calculation

A
  1. Right to Periodic Interest Payments (Annuity)
  2. Right to Repayment of Principal upon Maturity (Single Amount)

Value = PV of Interest Payments + PV of Principal

87
Q

Bond Premium vs. Bond Discount

A

Market Rate < Stated Interest Rate = Premium

Stated Interest Rate < Market Rate = Discount

88
Q

Three Analytical Procedures

A
  1. Trend Analysis
  2. Common-Sized Analysis
  3. Financial Ratios (4)
89
Q

Trend Analysis

A

Compares F/Ss for an Enterprise over Several Periods

90
Q

Common-Sized Analysis

A

Reduces a F/S (eg, I/S or C/F) to a Series of Percentages

Then, Compare Base Percentages

91
Q

Four Financial Ratios

Purpose & 4 Ratio Types

A

Used to Assess Financial Health

  1. Liquidity Ratio
  2. Leverage Ratio
  3. Activity Ratio
  4. Profitability Ratio
92
Q

Liquidity Ratios

3 Methods

A
  1. Current Ratio = Capital Assets / Capital Liabilities
  2. Working Capital = Capital Assets – Capital Liabilities
  3. Acid Test (Quick Assets: Short Term Analysis) = Cash + (Short Term) Investments + AR/Capital Liabilities
93
Q

Leverage Ratios

3 Methods

A
  1. Debt to Equity
  2. Debt to Assets
  3. Net Book Value (Owner’s Equity to Common Shares Outstanding)
94
Q

Activity Ratios

2 Methods

A
  1. Receivable Turnover

2. Inventory Turnover

95
Q

Working Capital

A

Excess of Current Assets Less Current Liabilities

96
Q

Legal Capital System vs. Solvency Based System

Relevance & Prevalence

A

Relates to Shareholder Equity and affects Distributions & Lending.

Legal Capital: Increasingly Uncommon

Solvency Based System: Growing Majority (Based on Model Business Corporation Act)

97
Q

Legal Capital System

2 Features

A
  1. Issued Shares Must Equal/Exceed Par Value

2. Restricts Ability to Distribute Assets to SHs

98
Q

Restrictions on Distributions

5 Applicable Tests (Summary)

A
  1. Surplus Test
  2. Earned Surplus Test
  3. Retained Earnings Test
  4. Equity Insolvency Test
  5. Balance Sheet Test
99
Q

Distributions to Shareholders
Surplus Test
(Permissible Distribution)

A

Capital Surplus + Earned Surplus > Distribution

100
Q

Distributions to Shareholders
Earned Surplus Test
(Permissible Distribution)

A

Earned Surplus > Distribution

*Earned Surplus = Retained Earnings

101
Q

Distributions to Shareholders
Retained Earnings Test
(Permissible Distribution)

A

Retained Earnings > Distribution

*Retained Earnings = Earned Surplus

102
Q

Distributions to Shareholders
Equity Insolvency Test
(Permissible Distribution)

A

Liquidity Based: Corporation must be able to pay its obligations as they become due.

Inability to Pay = Insolvent (Ineligible for Distribution)

103
Q

Distributions to Shareholders
Balance Sheet Insolvency
(Permissible Distribution)

A

Assets >/= Liabilities

Eliminates the “Cushion” (Part of the Stated Capital Test)

104
Q

Distributions to Shareholders
Asset Value Consideration
(Historical vs. Present Value Case)

A

For Distribution purposes, a court permitted using the current value of assets, but held that it had to be consistently applied.

Write Ups/Downs Were Permitted upon Distribution

(Randall v. Bailey)

105
Q

Legal Document Drafting
Top Line vs. Bottom Line
Manipulatability

A

Bottom Line = More Susceptible to Manipulation
(Good for Controller)

Top Line = Less Susceptible to Manipulation
(Good for Non-Controller)

106
Q

Revenue Recognition

Requirement vs. 5 Improper Recognitions

A

Bona Fide transaction with an Outsider.

  1. Fraudulent Transfers (No Intent to Re/Pay) (Lincoln Savings & American Solar King Cases)
  2. Premature Delivery
  3. Delivery to Warehouses
  4. Retroactive Modifications (Backdating)
  5. Consignment (Deceptive Deliveries)
107
Q

The Five Illusions in Revenue Recognition

A
  1. The Big Bath
  2. Merger Madness
  3. Cookie Jar Reserves
  4. Immateriality (Individually Immaterial –> Collectively Material)
  5. Premature Revenue Recognition
108
Q

Exception to Bona Fide Transaction Requirement in Revenue Recognition
Two Circumstances

A
  1. Passive Investments

2. Other Than Temporary Decline in Value (May or May Not be Permanent)

109
Q

Contingent Liability vs. Unliquidated Liability

A

Possibility of Loss vs. Amount of Loss

CL: Uncertainty = Whether Loss Will Occur

UL: Loss Has Occurred, but Amount = Uncertain

110
Q

Gain vs. Loss Contingencies

A

Gain: Unrecorded until Realized (Disclosure Permissible)

Loss Contingencies: Disclosure & Accrual (Where Applicable)

111
Q

Reporting Contingencies on Statements

4 Part Overview

A
  1. Qualifies as a Contingency?
  2. Material?
  3. Timing? (Affects Disclosure vs. Accrual)
  4. Probability (Affects Disclosure vs. Accrual)
112
Q

Accrual of a Contingency

Two Pre-Conditions

A
  1. Probable Impairment of an Asset

2. Reasonable Estimation of Loss

113
Q

Disclosures

2 Occasions & 2 Elements in Disclosure

A
  1. Prevent Misleading F/S
  2. If either Probable Impairment or Reasonable Estimation is Unavailable (No Accrual, but Disclosure)
  3. Nature of Contingency
  4. Some Estimation of Loss
114
Q

Unasserted Legal Claims or Assessments

Disclosure 2 Part Requirement Analysis

A

Unnecessary, Unless:

  1. Probable that Claim WILL Be Asserted, and
  2. Reasonable Possibility of Unfavorable Outcome
115
Q

Disclosure of Guarantees

A

Always

116
Q

Asserted Legal Claims
Reporting Requirements Overview
(2 Prerequisites, 3 2-Part Outcomes)

A
  1. Material
  2. Timing (Or or Before Balance Sheet Date)

Unfavorable Outcome Possibilities

  1. Probable (Estimate vs. None)
  2. Reasonably Possible (Estimate v. None)
  3. Remote (Estimate v. None)
117
Q

Asserted Legal Claims
Probable Likelihood of Unfavorable Outcome
(2 Options)

A
  1. Reasonable Estimate of Loss: Accrue & Disclose

2. No Reasonable Estimate: Disclose Contingency & Range of Possible Loss

118
Q

Asserted Legal Claims
Reasonable Possibility Likelihood of Unfavorable Outcome
(2 Options)

A
  1. Reasonable Estimate of Loss: Disclose
    - No Accrual
  2. No Reasonable Estimate: Disclose (including Range of Loss)
119
Q

Asserted Legal Claims
Remote Likelihood of Unfavorable Outcome
(2 Options)

A
  1. Reasonable Estimate of Loss: NEITHER
    - Unless Guarantee (Recorded as a Liability)
  2. No Reasonable Estimate: NEITHER
    - Unless Guarantee (Above)
120
Q

Auditor Inquiry Letters

Lawyer’s Opinion & Failure to Respond

A

Judgment of Outcome: If Unfavorable Outcome is Probable or Remote (EXTREME Doubt or Certainty Instances)

Failure to Respond –> Qualified Opinion

121
Q

ABA v. Auditing Terminology

Difference in Meaning: Remote & Probable

A

ABA = Smaller Extremes (More Middle Ground)

Auditing: Evenly Distributed (Thirds)

122
Q

Accountant-Client Privilege

A

Federal: Non-Existent
States: Varies

Attorney Work Product Privilege may attach if Accountant prepares documents in preparation for Litigation (Deloitte Case)

123
Q

Long Lived Assets

Definition & 2 Types

A

Asset Benefiting Multiple Periods

  1. Tangible Fixed Assets (PPE)
  2. Intangibles (Patents, etc.)
124
Q

Amortization vs. Depreciation

Function & Distinction

A

Systematic and Rational Allocation of Cost over Periods

Amortization = Intangibles
Depreciation = Tangible
125
Q

Asset or Expense?

Five Considerations

A
  1. Create a New Asset?
  2. Restore Existing Asset to Original Condition?
  3. Expense Yields Greater Productivity (Quality or Quantity)?
  4. Extend Useful Life of an Asset?
  5. Frequency of Recurrence?
126
Q

Repairs vs. Capital Expenditures

A

Repairs: Maintain Existing Operations/Expectations

Capital Expenditure: Additions (Increases), Improvements (Substitutes), Replacements (Supplants)

127
Q

3 Depreciation Methods

A
  1. Straight Line
  2. Group Method (Treating Multiple Items as a Collective Unit)
  3. Accelerated Methods (Sum of the Years Digits or Declining Balance Methods)
128
Q

Depreciation: Straight Line Method (& Modified Version)

A

Most Common Method

(Cost - Salvage Value)/Useful Life

If Values Change:

((Cost - Depreciation*) - Salvage)/Useful Life

*Depreciation Already Used (Previous Periods)

129
Q

Sum of the Years’ Digits

A

(Years of Remaining Useful Life*)

*Inclusive (of Current Year)
Remaining Balance = Salvage

130
Q

Declining & Double Declining Balance Methods

A

Cost/(Useful Life x %)

131
Q

Intangibles: Expense vs. Capitalize

Identifiable: Definite vs. Indefinite Life

A

Definite Life

  • If Purchased: Capitalize & Amortize
  • If Internally Developed: C&A OR Expense

Indefinite Life

  • If Purchased: Capitalize & No Amortize
  • If Internally Developed: Expense
132
Q

Intangibles: Expense vs. Capitalize

Unidentifiable Intangibles

A

If Purchased: Capitalize & NO Amortize

If Internally Developed: Expense

Accounting Law (1 decks)

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