3

Question 1

cash

Answer 1

90 days or less

Question 2

DIT

Answer 2

not recorded by bank but before cutoff

Question 3

O/S

Answer 3

money going out that bank hasn’t received

Question 4

service charge

Answer 4

deducted by the bank

Question 5

sales returns

Answer 5

does not affect AR/Inv/COGS

Question 6

direct write off

Answer 6

-not GAAP
-AR is overstated
Dr BDE
Cr AR

Question 7

allowance method

Answer 7

% of sales (IS approach)
% of AR (BS approach)
Aging of AR (BS approach)

Question 8

% of sales

Answer 8

Dr BDE

Cr AFDA

Question 9

% of AR

Answer 9

use information to solve for ENDING BALANCE & then plug in to find the information

Question 10

Aging of AR

Answer 10

schedule w # of days/mo outstanding x %

record w/o:
Dr AFDA (dec)
Cr AR (dec)

Adjustment:
Dr AFDA
Cr BDE

Question 11

Factoring

Answer 11

w/o recourse (factor assumes risk)

w/ recourse (factor has option to resell)

Question 12

Rising $

Answer 12

FIFO has high End Inv & NI. Low COGS

LIFO has low End Inv & NI. High COGS

Question 13

Property

Answer 13

all costs incurred up to excavation

no depreciation

Question 14

equipment

Answer 14

capitalize: additions, improvements/replacements, extraordinary repairs
expense: ordinary repairs

Question 15

capitalize

Answer 15

direct materials/labor, repairs/maintenance that add value, overhead, construction interest

Question 16

capitalize interest

Answer 16

not amount borrowed,
weighted avg = avoidable interest
total interest = interest on construction debt + other borrowings
only capitalize interest on $ spent
take lower of: act interest incurred, avoidable interest

Question 17

machine

Answer 17

capitalize any cost incurred to acquire/make ready a plant asset

Question 18

leasehold improvement

Answer 18

use the lesser of life

Question 19

valuation

Answer 19

cost and revaluation method

Question 20

cost (like GAAP)

Answer 20

=NBV = cost - acc dep - impair

Question 21

revaluation

Answer 21

= FV - acc dep - impair
initial loss goes to IS (If not initial loss, then reverse to previous gain)
initial gain (If subsequent gain, some gain go to IS the extent it reversed a previous revaluation loss)

Question 22

component depreciation

Answer 22

separate (IFRS requires)

Question 23

exchange w commercial sub (FCF change)

Answer 23

gain or loss recognized

difference between FV old - BV old

Question 24

exchange lacking commercial sub

Answer 24

gain:
No boot received = no gain
Boot is paid = no gain ( <25% rule)
Boot is received = proportional gain ( <25% rule)
Boot is received = gain ( <25% rule)
(boot / total consideration) x gain = gain recog

Question 25

intangibles

Answer 25

IFRS - research = expense/ development = cap

Question 26

intangibles are capitalized at cost

Answer 26

cash @ FV PV of liar FV of stock

Question 27

amortization

Answer 27

finite life = use shorter of est. life or remaining legal life

Question 28

legal fees

Answer 28

if successful = cap

Question 29

start up cost

Answer 29

expensed

Question 30

R and D

Answer 30

expense - material/equip/facilities w alt future use are capitalized - taken on behalf of others is capitalized

Question 31

software development

Answer 31

``` expense (Idea) -planning, design -before tech feas. established capitalize (upgrade/enhancements) - coding, testing -after tech feas established ```

Question 32

impairment

Answer 32

annually test or with major event change

Question 33

finite life (2 step)

Answer 33

1) recoverability (If fail go to step 2) = undisc CF - CV 2) impair loss = FV - CV

Question 34

indefinite life (1 step)

Answer 34

1) impair loss | = FV - CV

Question 35

IFRS impair

Answer 35

CV- (greater of FV - cost to sell or PVFCF)

Question 36

restoration

Answer 36

prohibited under GAAP unless asset held for disposal

Question 37

reversal

Answer 37

prohibited under GAAp unless intangible asset is held for sale