Here We Go AgAiN

Question 1

WHERE would any “Unrealized Gains or Losses” be reported for Trading Securities?

Answer 1

On the Income Statement (I/S)

NOTE: The Income Statement would also report any “Realized Gains/ Losses” as well as Interest and Dividend Income

Question 2

WHAT type of account (Other than the Investment account) can you use to Increase/ Decrease your Trading Securities?

Answer 2

An “Valuation Allowance Account”

i. e. Market Adjustment - Trading Security
- A Debit (Increase) is a “Gain”
- A Credit (Decrease) is a “Loss”

Question 3

HOW do you Calculate the Amortized Cost for a Held-to-Maturity Security?

Answer 3

THE Face Value Amount Net of the Unamortized Discount or Premium

Question 4

HOW are Unrealized Gains/ Losses reported for Available-For-Sale (AFS) Securities when the Fair Value Option is elected?

Answer 4

AS a Component of Net Income

i.e. Which is the opposite of how they are usually reported on the (B/S) under Other Comprehensive Income

Question 5

WHAT are examples of election date events requiring Fair Value reporting?

Answer 5

(1) Business Consolidations
(2) Consolidation or deconsolidation of a VIE
(3) Significant Debt modifications

Question 6

WHEN may the Fair Value Option be elected for eligible items?

Answer 6

ONLY on the Election Date

e.g. The Date the entity entered into an eligible firm commitment

Question 7

WHAT are required Disclosures when an entity elects the Fair Value Option?

Answer 7

(1) Management’s Reason(s) for the election
(2) Reasons for a partial election
(3) Differences between Fair Value amounts and principal balances of receivables or payables

Question 8

CAN an Impairment Loss be “recovered” under IFRS?

Answer 8

YES. If the Asset recovers in value

NOTE: The recovery must be an event occurring after the impairment

Question 9

HOW are Financial Instruments generally measured under IFRS?

Answer 9

AT Fair Value Through Profit or Loss (FVTPL)

Question 10

WHAT Inventory Costing Method would an entity that wishes to maximize profits use?

Answer 10

The First-In First-Out Inventory Method

WHY? - Because the FIFO cost flow assumption will result in higher ending inventory and lower cost of goods sold (COGS) during a period of rising prices

Lower COGS results in a higher gross profit margin (i.e. Sales - Cost of Goods Sold)

Question 11

HOW does the Moving Average Method work?

Answer 11

IT requires that a new unit cost be computed each time goods are purchased

Question 12

WHAT happens when inventory is shipped to a consignee?

Answer 12

THE consignor recognizes the cost of the inventory; and

• the cost of shipping it to the consignee

NOTE: This is reported as “consignment inventory” on the consignor’s Balance Sheet

Question 13

WHAT costing method would Income Statement (I/S) items use if the entity used the Translation Method?

Answer 13

THE Weighted Average Costing Method

Question 14

HOW is inventory recorded when using the “Periodic” inventory approach?

Answer 14

SALES are recorded only after all the purchases for a period are recorded

Question 15

HOW would you calculate your current year inventory cost (e.g. Your Inventory at dollar value LIFO)?

Answer 15

Take your current year Inventory “Layer” and Multiply it by [Inventory at current year cost Divided by Inventory at base year cost]

Question 16

HOW would you calculate your Ending inventory using dollar value LIFO?

Answer 16

Base year layer + The Following FY Layer + The Following FY Layer

Question 17

According to FASB, how should inventory be valued under the lower of cost or market method?

Answer 17

AT its “Replacement” Cost

Question 18

According to FASB, how should inventory be valued under the First-In, First-Out (FIFO) inventory method?

Answer 18

AT the lower of Cost or Net Realizable Value (NRV); This is considered the “net carrying value”

i.e. NRV is calculated as sales price - disposal costs

Question 19

HOW is inventory valued under IFRS?

Answer 19

AT the lower of Cost or Net Realizable Value (NRV);

This is considered the “net carrying value” (i.e. estimated selling price less estimated costs of completion and sale)

Question 20

WHAT Inventory Valuation Method produces the same dollar amount in ending inventory regardless if you use the Periodic or Perpetual inventory system?

Answer 20

The First-In, First-Out (FIFO) Inventory Method