New Study Plan Deck 4 Chapter 6

Question 1

When a major entity business was incorrectly classified as held for sale and the components operating loss for the period on the income statement should be recovered?

Answer 1

As a gain or loss of the discontinued component

Question 2

Formula to calc the cost of goods manufactured equals work in progress?

Answer 2

Begin work in process plus current manufacturing costs
Direct materials + production overhead minus ending inventory

Question 3

What are disadvantages of periodic inventory system?

Answer 3

Shortage of inventory can be hidden due since the calc for COGS are

Begin inventory + Purchase - ending inventory

Question 4

Advantage of perpetual inventory system?

Answer 4

debits the actual costs of COGS 100

Credits the inventory 100

So whenever there is overage or shortage it’s separated identified by a credit or debit

Question 5

Under the FVO are dividends received and unrealized gains are reported in earnings?

Answer 5

Common Stock 35,000
Investment 32,000
Unrealized Loss 3,000
Received 1,800

Loss of 1,200

Question 6

Are discounts on the note receivable and prepaid purchase

Answer 6

Yes discounts on the note receivable and prepaid purchase are discounted

Question 7

Formula for COST OF GOODS MANUFACTURED

Answer 7

SALES 60,000
BEGIN INVEN (100,000)
ENDING INVEN 90,000

Cost of Goods Manufactured 50,000

Question 8

If there was a exchange rate used to value the payable for the transactions at year end when would the exchange rate be used?

Answer 8

At exchange rate at year end

Question 9

For FOB destination do we include packaging for shipment, shipping, special handing charges?

Answer 9

No bc FOB destination means the title passes upon delivery at the destination

Question 10

When an investor uses the equity method to account for an investment in common stock. After the acquisition the investment account of the investor is

Answer 10

after the acquisition the increased by the shares of earnings of the investee and decrease share of the losses of the investee

Question 11

Advantage of LIFO inventory method

Answer 11

most recent cost of acquiring or producing inventory are the expensed as part of COGS

Question 12

Methods to generate cash from Accounts receivable?

Answer 12

Assignment and factoring

Factoring is when an entity can sale it’s outstanding invoice accounts receivable to a 3rd party at a discount rate

Assignment is selling or tranferirng a invoice for an exchange for a upfront loan

Question 13

In a periodic system the COGS are determined in the end or beginning?

Answer 13

At the end

1/31 Sales at 20 per unit 50,000 units

1/23 40,000 x 17 = 680,000
1/20 30,000 x 15 = 450,000

830,000

Question 14

Periods of rising prices which inventory method will an entity use to max profits?

Answer 14

FIFO bc lower COGS and higher NI

Question 15

If you change from FIFO to LIFO what happens to ending inventory, COGS & Net Income?

Answer 15

Ending Inventory is lower
which in results cause COGS to increase
Net income is lower and tax payable is lower as well

Question 16

Is Inventory & COGS higher LIFO or FIFO

Answer 16

It’s inventory and COGS are both are inventory FIFO

Question 17

Why will the FIFO method produce a lower inventory turnover ratio in an inflationary economy?

Answer 17

FIFO has a higher ending inventory which will lead to lower COGS

Question 18

For LIFO inventory system, calc the inventory on the balance sheet?

Question 19

How are contract modification to be accounted for as a separate contract?

Answer 19

By the scope and change in price

Question 20

How are investments in equity security that do not result significant influence or control over the investee are reported?

Answer 20

Reported in FV with unrealized holding gains and losses recognized in earnings

Question 21

Under the FIFO method how is inventory measured?

Answer 21

Lower of cost or NRV which ever is smaller

Question 22

Using the LIFO and retail inventory method when should you use the NRV minus normal profit margin?

Answer 22

When original cost above this min

Question 23

When using the LIFO basis inventory. Under the Lower of cost or market (LCM) method the inventory item should be measured

Replacement cost is below NRV and above NRV profit margin. The original cost item is below the NRV profit margin normal profit margin

Answer 23

When Original cost is below NRV profit margin we would use the (Original Cost that would measure the inventory item)

Question 24

When the Lower of cost or market (LCM) and retail method the inventory the replacement cost is below the NRV but above NRV minus profit margin. The original cost is below NRV minus normal profit margin?

Answer 24

The original cost would be item measured

Question 26

Calc the net value of the investment of an investment in equity securities?

Answer 26

Add all the purchases and subtract all the sold which will give you a balance of share left then we multiply that by trade rate per share and we can we will get the finally answer Purchase 1100+2500+1400 = 5000 Sold - 750 + 4000 = 4750 = 250 shares x 10 per share = 2500

Question 27

Under the lower of cost or market method when inventory items original cost is above the net realize value.

Answer 27

Here we use the replacement cost bc inventory items is above the net realized value meaning cost is the highest

Question 28

What causes the COGS to be understated?

Answer 28

Begin inventory is (understated) and ending inventory is (overstated)

Question 29

When we calc the bank balance do we need to include the bank fees and check fee?

Answer 29

No since they're included on the bank statement balance

Question 30

Are Advanced commissions apart of inventory cost?

Answer 30

No since it's a receivable or prepaid expense

Question 31

Calc, the net profit (lOSS) for the sale of consignment inventory?

Answer 31

Step 1 - calc the COGS By using the cost of merch (mentioned on the problem) + Freight cost for merch 2/3 which is the value for the sales = COGS Step 2 - calc the gross profit Sales value of the inventory and minus the COGS which will give you "Gross Profit" Step 3 - calc the net income (Loss) Finally we need to calc the With gross profit subtract the total of adv paid and commissions due (given in the problem) which will give you Net income (loss)

Question 32

Items that are used to calc the price of the land?

Answer 32

legals fees title insurance recording fees Title search fees cost of building removal

Question 33

When revenue is recognized the cost incurred in the construction and only the incured amount is mentioned what is used?

Answer 33

Incured amount would be the only amount used