New Study Plan Deck 5 Chapter 7

Question 1

When an entity uses allowance method for recognizing credit losses on A/R. Ignoring deferred taxes the entry to record the write off is uncollectible account

Answer 1

It affects neither the net income nor working capital

Question 2

For the double decline method do we subtract the salvage value from the equipment cost?

Answer 2

No Sir

Question 3

For the sum of the year digit do we need to subtract the salvage value?

Answer 3

Yessir

Machinary 170,000 - 20,000 salvage value = 150,000

Question 4

When computing diluted DEPS convertible securities that are potential common stock are

Answer 4

recognized only if they are dilutive

Question 5

How to calc the disposal asset?

Answer 5

You need to know the cost - accumulated depreciation (which are given in the problem) this in result will provide the time of its disposition

Next we subtract the cash received and we get a final answer of disposal of asset

Question 6

When ending inventory is overstated by 1000 then would happen to retained earnings?

Answer 6

Overstated by 1000 since ending inventory is overstated and COGS is understated which results RE to be overstated

Question 7

Weighted AVG for the year inventory costs flow method is applicable for which inventory systems?

Answer 7

Periodic ONLY not perpetual

Perpetual is more applies to moving AVG method

Question 8

Calc for operating income?

Answer 8

Revenue which includes Sales revenue - COGS = Gross Profit

Operating Expenses

=

Question 9

Formula for depreciable base?

Answer 9

Purchase used equipment 135,000 - 15,000 salvage value = 120,000 depreciation base

Question 10

Methods of depreciation will result in the lowest reported net income in the earl life of a depreciation asset?

Answer 10

Sum of the year digit

Question 11

Calc the interest expense for income statement?

Answer 11

reported cash paid interest 70,000

Accrued interest payable is a (Liability) 17,000 decrease

Prepaid interest is a (Asset) so it 23,000 decreased ago we add

70,000 - 17,000 + 23,000 = 76,000

Question 12

Are general administration expenses

Answer 12

NO for interest and Advertising

Question 13

If NP has no stated interest rate then how should it be presented in the statement of financial position?

Answer 13

At the face amount minus a discount calculated at the imputed interest rate

Question 14

level 2 observable

Question 15

Are impairment loss that are reversal. Are they recognized or not?

Answer 15

They are prohibited

Question 16

A failure to record the credit affects assets or liabillites?

Answer 16

it usually affects the liabilities not assets

Question 17

How to recognize revenue for license and arrangements and license commencement date?

Answer 17

By the Present Value of calc and payments?

Question 18

How are revenue recognized for Royalty revenues?

Answer 18

based on the usage and sales

Question 20

How are equity and liabilities increased?

Answer 20

By crediting it and decreased by debits