MT2 Slides/ Practice Questions Flashcards
What is the Journal entry at recognition of a note/loan receivable
Dr note receivable
Cr Cash
(recognize at fair value; PV of future cash flows)
What is the Journal entry at interest date of a note/loan receivable
Dr Cash (face value x stated interest rate)
Cr Interest revenue (CV x implicit int rate)
Dr/Cr note receivable (difference
What are the 3 categories of costs that can be capitalized to PP&E
- costs to acquire the asset
- bring the asset to its location
- get it ready for use
What is the journal entries for purchasing PP&E with ARO
Dr PP&E account
Cr Cash paid
Cr ARO
What are the rules surrounding non-monetary exchanges - share based payments
- use fair value
- if no fair value use value of shares
What are the two reasons to use the deferred method in terms of the contributed asset problems
- value of PPE contributed too low
- spikes in revenue
What are the 4 steps to derecognition under revaluation
- recognize depreciation
- revalue the asset
3.derecognize the asset - transfer AOCI: Revaluation surplus to RE
What is the stated vs the effective interest rate when calculating notes payable
- stated interest rate attached to the loan) is used to calculate the interest payments
- effective is the yield rate and is used to calculate the true time value of money
What is the formula for straight line depreciation
(cost-residual value)/ useful life
What is the formula for declining balance
NBV * (( 1/ useful life) *rate)
must be done every period
What is the formula for units of production depreciation
(cost-residual value)/ total expected usage
What are the 4 main causes of impairment in regards to market conditions
1.A significant change in the technological market, economic or legal environment
2. Market rates of return have increased, with a negative effect on the assets
3. evidence of obsolescence or physical damage of the asset
4.Significant changes with adverse effects have/expected taken place in how the asset is used
What are the steps of Impairment under ASPE (Cost recovery impairment model)
- non discounted estimate future cash flows, if less than NBV, impair
- find fair value of asset impair by the difference between that and the NBV
What are is the journal entry when suffering impairment
Dr Impairment Loss
Cr Accumulated Impairment Loss
What is the flow chart for the rational entity impairment model (IFRS) and when will impairment be required
The lower of carrying amount or recoverable amount.
Recoverable amount is the higher of the net selling price or the value in use
Impairment will be required when recoverable amount is lower than carrying amount
What are the general things that can be capitalized as R&D (in development stage out of research stage)
-materials and services used to generate the asset
-Direct labour costs
-fees to register a legal right
-amortization of other intangibles
-interest or borrowing costs
What are the general things that cannot capitalized as R&D
-indirect costs that are not directly attributable to preparing the asset for use
-employee training costs
-any cost after the asset is ready for use
