Payable and Accrued Liabilities Flashcards

1
Q

What are costs associated with exist and disposal acitivities?

A

1- Cost to relocated employees
2- Benefit related to involuntary and (not voluntary) employee termination. Golden Hand Shake
3- Cost to terminate a contract that is not a capital lease.

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2
Q

Are costs to terminate a capital lease an exit and disposal activities

A

NO - cost to terminate a lease that is not capital is an exit and disposal activity. Capital lease termination costs are accounted for separately from exit and disposal costs.

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3
Q

Is the cost of retiring a fixed asset considered an exit and disposal cost?

A

No. It is not considered an exit and disposal cost.

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4
Q

Are benefits related to involuntary employees termination?

A

Yes. Involuntary benefits related to voluntary employee termination are costs associated with exit and disposal activities.

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5
Q

Are benefits related to voluntary employees termination?

A

No. Voluntary benefits related to voluntary employee termination are not exit and disposal activities.

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6
Q

Is commitment to an exit plan is a liability

A

No

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7
Q

In a question of compensated absnese, What are key notes to remember?

A

1- Sick pay days can’t be estimated so they are not reported, only vacation day liability is reported.
2- When they say there is an unadjusted balance of liability on Dec 31, and what amount needs to be reported on FS. The answer is the amount for the current period only. Unadjusted Balance is a Distractor.

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8
Q

After the property is fully depreciated, how the change in decommissioning liability be recognized?

A

The change in liability is recognized in profit and loss

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9
Q

Should the current portion of refinance loan (that converted short term note to long term note) that in due on Jan 15 Year 3 (one year and 15 days). be included in the Current Liabilities? Year End FS are for 31/12/Y1

A

No.

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10
Q

What is ARO?

A

ARO stands for Asset retirement Obligation. That is a Present Value of Future lability. No Expense is recognized. The ARO will increase the value of the asset and depreciation expense will be recorded over the life of the asset which will include the expense related to ARP.

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11
Q

If you have a note that pays principle and Interest, how would you report the liability on the BS?

A

It will be payment due in 12 months plus the accrued interest. Note: Not the interest you pay in 12 months.

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12
Q

How ARO is recognized

A

An ARO qualifies for recognition when it meets the definition of a liability
1- Duty or Responsibility
2- Little or no Discretion to avoid
3- Obligation Event

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13
Q

In ARO recognition, does the uncertainty about whether performance will be required defer the recognition of a retirement obligation?

A

No uncertainty about whether performance will be required to defer the recognition of a retirement obligation, rather the uncertainty is factored into the measurement of the fair value of the liability through the assignment of probabilities to cash flow

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14
Q

What is Balance Sheet approach to measure the ARO?

A

An entity record an asset and liability on the balance sheet equal to the FAIR VALUE (PV) of the asset retirement obligation. FV is generally equal to PV. If reasonable estimate can’t be made then Asset and Liability is recognized when estimate could be made.

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15
Q

Wha is JE for recording the ARC and ARO?

A

Asset retirement cost
Asset retirement Obligation

Accretion Expense
Asset retirement Obligation

Depreciation Expense
    Accumulated Depreciation (ARC)
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16
Q

Pass key for ARO

A

Cumulative Accretion Expense
+ Add Cumulative Depreciation Expense
= Asset Retirement Obligation

17
Q

Explain ARO briefly

A

1- Mine is supposed to dismantle at the end of economic life of 4 years
2- The cost is 500,000 and PV of this cost is 341,505.
3- Set up a Asset ARC and Liability ARO.
4- Recognize Accretion expense at the rate of 10% and credit liability to increase ARO.
5- Asset ARC is depreciated against Accumulated Depreciation as credit that is ARC.
6- In last year if actual cost is more than estimated, expense as Mine Dismantling Expense.

18
Q

When Calculating the Current Liabilities, and Bond has payable of 300,00 is due within 12 months with a discount on bond payable. What do you add currently liabilities

A

Bond Payable Due within 12 months is Currently Liability. Discount is deducted not added into currently Liability.

19
Q

In Escrow What amounts are needed to pay attention?

A

1- Interest earned is added

2- Commission on interest expense is deducted

20
Q

Sales Tax Answer Key

A

1- Calculate the sales revenue if the sales tax is included in it and it will have a credit value
2- The debit Value will be shown as the sales tax paid
3- Add all the sales revenue and take out the sales tax from it. it is your sales revenue.
Real Entry Should have been
Cash 106
Sales revenue 100
Sales tax payable 6

21
Q

If you have written the checks on 29 Decemeber and mailed on Jan 05 next year. Could that amount be deducted from payables

A

No you can’t do that. If you have deducted that amount from Payables, Add back in.

22
Q

An important HINT about Sales Tax Question

A

Look for questions where it says that company records sales tax amount as revenue. There is a greater possibility that Credit amount of Sales revenue account are tax payment to IRS, as it might say that sales taxes paid are charged against sales revenue

Cash
Sales revenue

Sales revenue
Cash