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Becker FAR > F4 > Flashcards

F4 Flashcards

1
Q

At what value is life insurance valued?

A

cash surrender value

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2
Q

Indications that Debt is Being Refinanced

A

(will allow the liability to continue to be classified as long-term)

  1. actual refinancing prior to the issuance of the financial statements
  2. existence of a noncancelable financing agreement from a lender having the financial resources to accomplish the refinancing
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3
Q

Refinancing under IFRS

A

*existence of a financing agreement is not enough; it must have been refinanced

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4
Q

Cash and Cash Equivalents

A

*must have a maturity date of 30 days or less FROM THE DATE IT WAS PURCHASED

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5
Q

Are legally restricted deposits equivalents?

A

No

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6
Q

How to classify restricted cash

A

based upon the current or noncurrent asset/liability

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7
Q

Bank’s Side - Bank Reconciliation

A

Add: Deposits in Transit
Subtract: Outstanding Checks
Adjust: errors

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8
Q

Company’s Side - Bank Reconciliation

A 
service charges
bank collections
errors
NSF
interest income
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9
Q

Difference Between A/R and N/R

A

*notes are evidenced by a written promise

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10
Q

A/R Valuation Methods

A

Gross

Net

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11
Q

Are trade discounts reported gross or net?

A
  • they are always recorded net because it is a quantity discount, not a timing discount
  • do not add percentages together; take each percentage one at a time (40% and then 10%; not 50%)
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12
Q

Do expected exchanges affect sales, inventory, or COGS?

A

No

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13
Q

Accounts involved in Sales Return

A

DR: Sales Returns (contra-revenue)
CR: Accounts Receivable

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14
Q

Is the direct write-off method allowed for GAAP?

A

No

DR: Bad debt expense
CR: Accounts Receivable

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15
Q

3 Methods for Estimating Allowance for Doubtful Accounts

A
  1. % of sales
  2. % of A/R (balance sheet approach)
  3. aging (balance sheet approach)
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16
Q

Subsequent Collection under Direct Write-off Method

A

DR: Cash
CR: Uncollectible accounts recovered (revenue account)

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17
Q

Pledging (Assignment) vs. Factoring

A

pledging - disclosure only (collateral)

factoring - selling

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18
Q

Requirements for a Factoring with Recourse to be Considered a Sale

A
  1. seller’s obligation can be reasonably estimated
  2. transferor surrenders control of the future economic benefits
  3. transferor cannot be required to repurchase the receivables but may be required to replace the receivables with similar receivables

*otherwise it is treated as a loan (footnote)

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19
Q

Treatment of a Discounted Note Receivable with Recourse

A

DR: Cash

and

CR: note receivable discounted (contra-asset)
or
CR: not receivable and contingent liability

20
Q

How to compute interest income earned when discounting note

A
  • compare cash received to the face value of the note (difference is the interest income earned)
  • in reality, this is the interest earned on the note minus the loss due to discounting
21
Q

Should sales with the right to return be included in inventory?

A

Amount reasonably estimable? No

No reasonably estimable? Yes

22
Q

How are Precious Metals and Farm Products valued?

A

Net realizable value

23
Q

Where are inventory write-downs reflected?

A

Minor –> COGS

Material –> separate loss line item

24
Q

Can you reverse an inventory write-down under IFRS?

A

Yes, but only to the extent of the write-down

25
Q

Key to Perpetual Inventory System

A

COGS are recorded at the END of the period, not as each item is sold

26
Q

Which inventory method is prohibited under IFRS?

A

LIFO

27
Q

What is the LIFO conformity rule?

A

If you use LIFO for book purposes, then you must use LIFO for tax purposes

28
Q

Dollar Value Price Index

A

Price Index = (Ending inventory at current year cost)/(Ending inventory at base year cost)

29
Q

Firm Purchase Commitment Losses

A

*if the contracted price exceeds the market price and if losses are expected to occur when the purchase is made, the loss should be recognized at the time of decline in price

DR: Estimated loss on purchase commitment
CR: Estimated liability on purchase commitment

30
Q

Donated Fixed Asset (GAAP) Journal Entry

A

DR: Fixed asset (FMV)
CR: Gain on nonreciprocal transfer

31
Q

Two Methods for Valuing Inventory under IFRS

A
  1. cost
  2. revaluation (must be applied to all items in a class of fixed assets)
    * *impairments first reduce the revaluation account
32
Q

What must be disclosed if assets are reported at FMV or historical cost?

A

*the other choice (FMV if historical is reported)

33
Q

Improvements that increase life vs improvements that increase usefulness

A

Increase life: reduce accumulated depreciation
Increase usefulness: capitalize

*if the carrying value of the old asset is known, remove it an recognize any gain or loss and then capitalize the improvement

34
Q

Examples of land improvements

A
  • fences
  • water systems
  • sidewalks
  • paving
  • landscaping
  • lighting
35
Q

Two Methods for Measuring Investment Property under IFRS

A
  1. Cost Model = depreciation recorded

2. Fair Value Model = depreciation is not recorded

36
Q

If there are intentional delays in construction, can interest costs be capitalized?

A

No

37
Q

What should determine the amount of interest that can be capitalized?

A
  • weighted average of construction costs throughout the year
  • apply it first to construction loan
  • then use the average interest rate for remaining loans and capitalize that interest cost
38
Q

Can capitalized interest costs ever exceed actual interest costs?

A

No (good check on work)

39
Q

Most important item to remember for fixed assets and depreciation

A

CHECK THE DATES

40
Q

Which method of depreciation does IFRS require?

A

IFRS requires component depreciation (composite is not allowed)

41
Q

Composite vs Group Depreciation

A 
Composite = dissimilar assets
Group = similar assets
42
Q

What to record when one asset in a group or composite is sold?

A

*do not report a loss; plug the difference between cash and cost to accumulated depreciation

43
Q

How to compute average composite life

A

(Sum of Depreciable Cost)/(Sum of Annual Depreciation Expense)

44
Q

Do you include residual value when calculating depletion?

A

Yes

45
Q

Which method of depreciation does not directly take into account salvage value?

A

declining balance methods

46
Q

Does IFRS allow reversals of impairment losses?

A

Yes

Becker FAR (10 decks)

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