M3 Pillars Flashcards
FOB Shipping
FOB Destination
Customer owns when its shipped
Customer owns when its delivered
Lower of Cost and NRV how is it applied to the different types of inventory and is it included together or separate?
Applied to total inventory not separate items. Applied to RAW, WIP and finished inventory - all inventory
Under/over of COGS
What is COGS?
Understated Beg Understated COGS
Overstated Beg understated COGS
Understated COGS = Overstated RE
DL + DM + Insurance costs+ Freight in
Lower of Cost and Market?
Basis RC
NRV
NRV - Sales (x) Margin
Reporting interim inventory: How do you report a decline?
Decline in value of inventory has to recognized
How is damaged inventory accounted for?
If insurance will reimburse it is NOT LOST
Agricultural and precious metals exceptions
We recognized the sale once its produced
Bank rec: checkbook balance a
bank statement
Checkbook: NFS fees, Bank fees, interest income, voided checks, forgotten deposits
Bank statement: Deposits in transit checks outstanding
Note: outstanding checks are cash disbursements
What is cash reportable?
How are CDs treated?
Checkbook balance (+) voided checks or checks that have not been cashed or dated next year
Original maturity of 90 days or less only
How do you discount a note?
Maturity value of the note (x) discount rate of the bank
Discount rate is what the bank will gives (x) the WASCO of months they will hold it for.
How do you capitalize equipment?
Anything paid to get the equipment running (+) PV of ordinary annuity (note payment) of the asset
What are capitalized cost of assets?
Land and building, if multiple assets have been purchased we have to use WASCO to get the weighed costs.
What is capitalized interest?
Actual interest cost incurred NOT WHAT IS borrowed. We can cap the interest incurred in building our assets but once ready we expense interest. If we have an asset to sell we expense the interest.
What depreciable basis?
Asset cost (-) salvage value regardless of ownership transfer.
It is not the cash paid for the asset - it is hte cash equiv cost of the asset.
Impairment of assets attributes?
How do we test?
What do we impair?
Can we write the asset up?
How do we DEP with impairment?
Shown in continuing operations before tax
To test: UNDISCOUNTED future cash flow compared to CV
If impaired: Fair value (-) CV
When asset is impaired we still DEP it
Once impaired always impaired
The only test is to determine the recoverability of the asset.
Once impairment has occurred and the life has not changed: Depreciation of the “remaining” balance is taken over the remaining life
