CH 4

Question 1

Factoring
1 - With Recourse
2 - Without Recourse

Answer 1

1 - Ownership is not transferred

2 - Ownership is transferred

Question 2

Accrual A/R method

Answer 2

Allowance

Direct Write off does not match expenses with Revenues

Question 3

A/R Recovery JE:

Result:

Answer 3

A/R XX
Allowance XX

Cash XX
A/R XX

Increase in Allowance for Uncollectibles and Increase in CASH - A/R CANCELS

Question 4

Differentiate
1 - Bad Debt Expense

2 - Allowance for Uncollectibles EXCLUDES:

Answer 4

1 - Allowance Account Balance - Current Year Uncollectibles
Income Statement Effect

2 - Current Yr collectibles ONLY
EXCLUDES Written off Amounts

Question 5

Classification:
Inventory
Fixed Assets 
Overdraft
Prepaid

Answer 5

Current Asset
Noncurrent Asset
Current Liability
Asset or current liability

Question 6

Deferred Tax Liability Classification
1 - Reversing in Next Year
2 - Depreciation

Answer 6

1 - Current

2 - Non current

Question 7

Bond Sinking Fund

Answer 7

Restricted Cash NOT LIQUID

Question 8

Quick Ratio

Answer 8

Cash + Net Receivables + MKT Sec. / Current Liabilities

Question 9

Factoring is effect by:
1 - Allowance for Sales Returns
2 - Commission Charged

Answer 9

Reduce amount received from factoring

Question 10

Uncollectible Accounts is what

Answer 10

Contra Assets :
Debits decrease
Credits increase

But still considered an asset account

Question 11

Net sales Revenue uncollectibles period

Answer 11

any known uncollectibles are always booked

Question 12

Mortagages
Note Payments
Incrimental Payments
TRICK

Answer 12

always include current year portion in CURRENT ASSET

Question 13

Capitalized Interest LESSER of

Answer 13

Avoidable Interest (Weighted Avg * %)

OR

Total Expense Incurred * %

Question 14

Interest is capitalized under 2 other circumstances

Answer 14

1 - During a construction period

2 - Assets held for sale

Question 15

IFRS Revalution
1 - Gains
2 - Losses

Answer 15

1 - directly to OCI unless offset prior losses

2 - directly to the I/S unless offset prior gains

Question 16

IFRS Investment Property
1 - Items included
2 - Items disclosed

Answer 16

1 - rental income & buildings for capital appreciation

2 - FMV of investment property

Question 17

IFRS excluded inventory valued at

Answer 17

1 - replacement cost

2 floor

Question 18

LIFO Layers
Step 1
Step 2

Answer 18

Step 1
Total Cost/ Total Based = Index

Step 2
Index * Layer = Dollar LAYER VALUE

Question 19

Price Level Changes use

Answer 19

LIFO

Question 20

Achieve the lowest inventory value by

Answer 20

separating each inventory item

Question 21

Cosignor Cosignee Rules
1 - Inventory Recordance
2 - Profit Recordance
3 - Commission is based of 
4 - Cosignor costs

Answer 21

1 - remains of cosignors books unit sold
2 - becomes profit when sold by cosignee
3 - GROSS profit
4 - storage of inventory and shipment to cosignee

Question 22

FIFO Versus LIFO
NI
Inventory

Lowest Inventory Turnover

Answer 22

Inverse

COGS/Avg Inv.
FIFO

Question 23

Additional LIFO Methods
1 - Perptual
2 - Periodic
3 Moving Avg

Answer 23

1 - Find COGS by moving backwards from latest date of purchase cost (NEW to OLD)
2 - Find COGS by moving forwards from earliest date of purchase cost (OLD to NEW)
3 - Average of all prior purchases

Question 24

Disposal
MKT ceiling
MKT floor

Answer 24

ceiling reduce by disposal

floor reduce by disposal and profit margin

Question 25

Obsolete inventory is included as

Answer 25

COGS

Question 26

Ending EI Effect on COGS

Answer 26

Inverse

Question 27

IFRS disallows inventory valuation at

Answer 27

LIFO