Select Financial Statement Accounts Flashcards
Cash and cash equivalent
Cash and Cash equivalent golden rule is that it should be readily available and unrestricted or available with 3 months
Allowance method to record bad debt expense
JE to record bad debt expense when the allowance method is used is
Dr bad debt expense and
Cr Allowance for bad debt
Allowance for uncollectible
This amount is not deducted from AR when calculating cash basis sales
Cash basis sales and accrual basis sales
Beginning AR + Sales - write offs - cash collection = AR ending
Current expected credit Loss
Means to adjust historical uncollectible percentage for forecasted losses. Measured every year at balance sheet date.
CECL
Must be estimated over the life of the receivable even when likelihood of credit loss is remote.
Clues for allowance on AR method.
Look at the question and if asked for the adjustments or the end balance. The adjustments is the expense
Gross Margin estimate of inventory
Beginning Inv + Purchase= Ending inventory + COGS
Gross profit % of estimated COGS
Net sale - estimated gross profits.
Net sale= $50000, Gross profits rate= 30%. GP COGS is $2800000
Impairment loss
The recorded impairment loss is calculated as the difference between the assets FV and it’s CV.
Composite and group asset depreciation rules
Composite depreciation do not record gain or loss.
Investment - Stock dividend
Under any method used for an investment in common Stock, the investor records a Stock dividend only as a memorandum entry to increase the number of shares
Stock dividend rule
-It’s not revenue
- Its recorded only as a memorandum entry
Under any method, it’s not recorded as in the account as a receipt
Dividend from investment
A dividend never increases the investment account under any accounting method
AFS security
Interest income goes to net income/earnings
Change in FV of investment goes to OCI.
Trading debt securities
Valued at FV and changes in FV goes to net income as unrealized gains or losses until sold. Interest income goes to earnings too.
AFS assessed for impairment
When FV is less than CV, record a loss in OCI and assess for impairment
Credit loss on AFS
When the loss is due to credit loss ie entity specific, and the security will be sold before recovery of loss, the loss goes income statement.
D
Discount and Premium amortization.
For premium, add the unamortized amount to the cost of the investment to have the BS balance.
Or deduct the amortized amount from the CV to have the yr end number. The opposite for discount amortization
Stock splits and Stock Dividend
Adjust the per share price and not the CV of the investment. Stock dividend and Stock Split are not income but additional ownership of the investee
What is a liquidating dividend
The amount in excess of the Retained earning is the liquidating dividend.
