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Flashcards in Accounts Receivable Deck (20):

What situation contingency can record at FV?

When it can be settled by contracting with third party


Servicing asset should be amortized?

In proportion to and over the period of estimated net servicing income or net servicing loss.


When collect the previous write off bad debt happens, it will? En

Increase the AFDA.
When recognize bad debt record as:

Bad debt expense. xx
AFDA. xx

when write off bad debt
AFDA. xx
A/R. xx. (record as uncollectable)

When the bad debt become. Collectable (reestablish collectability)

A/R. xx
AFDA. xx

When collected write offs

Cash. xx
A/ R xx


Factor A/R with /without recourse (追索权)means?

With recourse: risk retains
Without recourse: bank has the risk for uncollectibility


Transfer of a financial asset, what are required before can record accounts receivable as a sale?

1. Transfer is beyond reach of transferor and its creditor
2. The transferee can pledge or sale the AR
3. Transferor doesn't maintain effective control over the transfer asset( no repo or redemption agreement)
4. If there is participating interest, no party had the right to pledge or exchange the entire financial asset unless allergies agree.


Which of the following decrease working capital?
Cash dividend declared?
Dividend recorded?
Or cash dividend paid?

Cash dividend declared, it increases payable (liability), when cash dividends paid, cash and liability decrease by the same amount, so no effect on WC.


Bonus calculation before tax, but after B

B= B% (NI- Bonus Shredhold - B)


Asset retirement obligation treatment

Record at FV and associated liability placed in book, the cost of ARO is allocated over the assets life and interest is accrued. The interest is using the adjusted interest rate by the fair value of asset and liability.


If using 400K C/S to refinance the current liability of 500k subsequent to the end of the year, the classification of the s-t liability?

400K of the short term liability might reclassified as noncurrent. So current liability is only 100K.


Refinance the short term liability with long term, when should it be appropriately excluded from financial statement?

Before issue the financial statement, can be after fiscal year end.


Describing terms and examples.
Going concern
Substance over form

1. Refers to using the similar accounting principle from period to period
2. Assume business is operate in a continue basis
3. Matching uncollectible amount with credit sales based on ratio. Matching A/R with uncollectible amount
4. Transactions based on economic substance, not just legal form


A method of estimating bad debt focus on income statement rather than balance sheet is e allowance method based on?

Credit sales

Direct write off for bad debt is a method to estimate the expense, not compliant with GAAP.


Two methods to estimate bad debt and its JE

Direct write off (one step, write off right away)
Bad debt expense xx
A/R. xx

Allowance method (three steps)

1. Bad debt expense. xx
AFDA (estimated). xx

2. AFDA. ( record uncollectible) xx
A/R. xx

3. Reverse if become collectible again

4. Recovered
Cash xx
A/R. xx


Meaning of terms

Expropriation: land was involuntarily used by gov.
Imminent: will happen soon


Ways to generate cash from A/R

Assignment and factoring, pledge, transferring


Coupon redemption questions for contingent liability

Watch out the words, handling cost happens only if coupons are redeemed. Check the dates too, if redemption will e lire in three month, check the date for the retail reimbursement, after 3 months, but long before December 31, probably the earlier liability is all paid.


Factoring fees includes?

Can be factor fee + interest charge for A/R that is over certain days, calculate as amount of A/R * interest rate * (receivable maturity dates/ days in a year)


Cash and cash equivalent qualification

Readily available
Investment original maturity is less than or equal to three months, doesn't matter if it will be available in three months, if maturity date is longer than three months, then not qualified as cash


Accrued liabilities related to taxes including?

Federal unemployment taxes and employer share of FICA taxes


Write off bad debt expense using allowance method effect on net income and total asset?

Write off record as AFDA decrease, A/R decrease against AFDA, so there is no effect on NI nor total net asset.

However if using direct write off method, it record as
BDE. xx
A/R. xx. it will decrease both NI and asset