Test 1: Formula and JE

Question 1

Depreciable Base

Answer 1

Initial Cost - Residual Value

Question 2

Ending BV

Answer 2

Initial Cost - Acc. Dep (= Beg BV- Current Yr Dep)

Question 3

Depreciation

Answer 3

Depreciation Base / Useful Life in yrs

Question 4

Sum-of-the-year digits

Answer 4

n(n+1)/2

Question 5

Depreciation Rate

Answer 5

Reverse of year order/ Sum-of-the-years

Question 6

Double Declining Balance:
SL Rate

Answer 6

1/ useful life in yrs

Question 7

Double Declining Balance:
Dep Rate

Answer 7

Double SL Rate = 2 * SL Rate

Question 8

One Hundred sixty percent declining balance: Dep rate

Answer 8

use the 160% times the SL rate

Question 9

Units of production: Dep Rate

Answer 9

Depreciable Base/ Total units

Question 10

Gains or Loss

Answer 10

= Cash - BV - however:
~Negative amount: Loss (Debit)
~Positive Amount: Gain (Credit)

Question 11

JE for Disposition

Answer 11

Dr. Accumulated Depreciation-Old Asset
Dr. Cash received if any
Dr. Loss - if any

Cr. Old Asset Original Cost
Cr. Gain - if any

Question 12

Depletion: Natural Resource Steps

Answer 12

1) Depletion Base: Cost -Residual
2) Dep per unit: Depletion Base / Unit
3) Either sold or not sold:
-Sold: Depletion expense= Depletion per unit *# Units extracted
-Unsold: Depletion per unit * #Units extracted
Label it as Depreciation 202

Question 13

Depletion: Natural Resources - JE

Answer 13

Dr. Depreciation Expense @ Extracted Sold

or

DR . Inventory - Natural Resources. @ Extracted NOT Sold

W/: Cr. Amortization Expense

Question 14

Amortization for franchise & JE

Answer 14

-SL Amortization: Cost - Residual/ Life Yrs

JE:
Dr. Amortization Expense
Cr. Franchise or Patent

Question 15

Amortization: Record the sale JE

Answer 15

Dr. Cash
Dr. Loss if any

Cr. Patent or Franchise
Cr. Gain if any

*Remember: Gain/Loss Equation: Cash - BV

Question 16

Amortization (Software Development Cost):
Percentage of Revenue Method

Answer 16

Current Revenues/ ( Current Revenues + Anticipated Revenues)

Question 17

Amortization (Software Development Cost):: Straight Line Method:

Answer 17

(Initial Cost - Residual Value)/ Useful Life in yrs

Question 18

Amortization (Software Development Cost): JE

Answer 18

1. Decide which one is greater: Straight Line Method or Percentage of Revenue Method
2. When decided, use the greater one * Capitalized Amount
3. JE:
   Dr. Amortization Expense
   Cr. Software Development

Question 19

Impairment (Only if BV > FV)

Answer 19

1. BV vs Undiscounted CF
2. Impairment Loss: BV - FV
3. JE:
   Dr. Impairment Loss
   Dr. Acc Dep
   Cr. Equipment

Question 20

Impairment: BV<FV

Answer 20

1. BV- FV
2. Dr.Impairment Loss
   Cr. Goodwill (it says orginial assets idk)

Question 21

Simple Interest

Answer 21

Principal * Annual Interest Rate * Time Period (months, years)

Question 22

Compound Interest

Answer 22

current period interest is also accumulated to next period’s principal to earn interest

Question 23

Effective Interest Rate

Answer 23

Actual Interest earned each year / Original Investment

Question 24

FV Equation

Answer 24

PV * (1+ i ) ^n

Question 25

PV Equation

Answer 25

FV / (1 + i)^n

Question 26

FV Factor (i,n) =

Answer 26

(1 + i)n

Question 27

PV Factor (i,n) =

Answer 27

1/(1 + i)n

Question 28

Balance Equation

Answer 28

Investment * (1 + r) ^n

Question 29

PVA

Answer 29

Payment * PVA Factor (i,n)

Question 30

Bond Discount

Answer 30

Stated interest rate < Market interest rate

Question 31

Bond Premium

Answer 31

Stated interest rate > Market interest rate

Question 32

Bond sold at Par

Answer 32

Stated interest rate = Market interest rate

Question 33

Bond Price

Answer 33

PV of Principal (bond price *PV amount) + PVA of Interest (interest price * PVA Amount)

Question 34

JE of Bond Purchase

Answer 34

DR. Bond Receivable Cr. Discounted on Bond Cr. Cash

Question 35

JE of Selling HTM Investment

Answer 35

Dr Cash (@selling price) Dr. Discount (@remaining unamortized amount) Dr. Loss- if any (Selling price - Bond Outstanding balance) Cr. Gain -if any (Selling price - Bond Outstanding balance) Cr. Bond investment (@Face Value)

Question 36

Trading Securities : JE - Adjusting to FV

Answer 36

Dr. Fair Value Adjustment Cr/ Gain on investments- (unrealized, Net Income) FV Adj ------------- 0 - beg amount ------ end-amount

Question 37

Trading Securities : JE - Selling to FV

Answer 37

Dr. Fair Value Adjustment Cr/ Gain on investments- (unrealized, Net Income) FV Adj ------------- beg- ending amount from adjusting amount (subtract end from beg) ------- End - fv adj balance

Question 38

Sale of TS JE

Answer 38

Dr. Cash @ selling price Dr. Discount or Premium- @remaining unamort amount (if applicable) Cr. Investment z@face value FV Adj @ current balance - debit; if credit balance, then debit in JE

Question 39

JE Bond investment

Answer 39

Dr. Bond Inv @ Face Value Cr. Discount Cr. Cash @Purchase Price

Question 40

JE for reverse all previous fair value adjustments

Answer 40

Dr. Reclassification Adjustment (OCI) @(FV Adj Balance) Cr. FV Adj @(Balance)

Question 41

Record the sale transaction & Realize gain/loss to NI

Answer 41

Dr. Cash @ fair value Dr Discount @ Balance from 12/31/24 Cr. Investment @ face value Gain (Realized, NI ) = Cash minus Amortized Cost