CPA FAR - F3 Flashcards
(36 cards)
For T-Bills, what is the criteria to be considered cash/cash equivalent?
Original maturity must be less than 90 days (3 months).
Is cash from a bond sinking fund considered cash/cash equivalent?
No, this is because cash really means unrestricted cash. Restricted cash is not considered cash/cash equivalent.
For checks outstanding, how does that affect the checkbook balance?
You must add back the checks outstanding amount to the checkbook.
What is Factoring Receivables without Recourse?
A company selling their receivables to another company for money while also transferring the uncollectible accounts.
What is the journal entry for the allowance method to write-off a specific amount?
Dr. Allowance
Cr. A/R
Is the discount always applied on the maturity value?
Yes, the discount is always applied on the maturity value.
How do you identify the principle market?
It is the market where the most volume is sold (using everyone’s volume, not just your own)
How do you identify the most advantageous market?
It is the market when, with volumes being the same, gives the most price.
How do you calculate COGS?
Beginning Inventory + Purchases - Ending Inventory
How do you identify the cost in LCM (Lower Cost or Market)?
Pick the middle value between:
1. Replacement Cost
2. NRV (most you could get)
3. NRV - (SP * Profit Margin %)
How do you identify the cost in LCNRV (Lower Cost or Net Realizable Value)?
Pick the lowest value between:
1. Cost as determined by FIFO/LIFO/WA (not replacement cost)
2. SP - cost to finish OR SP - cost to dispose
When inventory is understated, what is COGS?
COGS is also understated.
How do you calculate Inventory Turnover?
COGS / Average Inventory
How do you calculate Weighted Average per Unit?
Total Cost of Purchases / Total Units of Purchases
How do you calculate Weighted Average COGS?
Weighted Average per Unit * # of Units Sold
Does the date of sale matter in LIFO Periodic?
No, even if the sale occurs before a purchase, we will use the last purchase (if LIFO) because this is all happening at the end of the period (think the end of year inventory count).
When do you use the “30-day or 60-day forward” rates in a foreign transaction problem?
You use it when the company is entering a contract for SPECULATIVE PURPOSES, not when they are selling stuff.
What is the time period leaseholder improvements are capitalized?
These improvements are capitalized over the LESS of:
1. Useful life of the improvement
2. Remaining term of the lease
What costs go into the land’s value?
- Getting the land ready for intended use (razing old buildings - salvage value)
- Title insurance
- Legal fees
- SUBTRACT sale of salvaged materials
- Taxes in Arrears
How do you calculate Residual Income?
Operating Income - (Rate of Return % * Average Capital)
Is revenue recognized for products expected to be returned?
No
When is Dollar-Value LIFO the best inventory valuation method to use?
When raw materials are purchased evenly throughout the year.
Is salvage value part of the double-declining balance depreciation method?
No, salvage value is not included in the double-declining balance depreciation method. Instead, the carrying value is subtracted by accumulated depreciation.
Can you mark-up the value of a previously impaired asset?
No, you cannot mark-up value of a previously impaired asset (i.e., value went from 120 to 100 and then back up to 130, need to keep it at 100).
