Current Assets/Liabilities & DTA/DTL Flashcards Preview

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Flashcards in Current Assets/Liabilities & DTA/DTL Deck (19):

What is a current asset?

Cash plus other assets that are expected to be sold or converted to cash during the current operating cycle

Includes: Demand deposits, cash equivalents, accounts receivable, inventory, pre-paids, and short-term investments


What is a current liability?

A liability expected to be paid within 12 months or less


How is the Quick Ratio calculated?

(Cash + A/R + Trading Securities) / Current Liabilities


How is the Current Ratio calculated?

Currents Assets / Current Liabilities


How is Working Capital calculated?

Currents Assets - Current Liabilities


How is A/R Turnover calculated?

Credit Sales / Average A/R


How is Inventory Turnover calculated?

COGS / Average Inventory


How is Day Sales in Inventory calculated?

365 / Inventory Turnover


How is Days to Collect A/R calculated?

Average A/R / Average Sales per Day


How are gain contingencies recorded?

They are NOT accrued due to Conservatism


When are loss contingencies recorded?

If Probable - they are accrued (if estimable) and disclosed

If Reasonably Possible - they are disclosed

If Remote - don't accrue or disclose


What is a temporary difference related to deferred taxes?

GAAP says to recognize a revenue/expense in one period and tax laws say to recognize it in another

Example: Dividends from a subsidiary accounted for using the Equity Method - tax income but not book income


What is a deferred tax asset?

Deduction will reduce future income taxes expense.


What is a deferred tax liability?

Income will be taxable in a future period and will increase future tax expense


Which period's tax rate is used to calculate a deferred tax asset or liability?

The FUTURE enacted tax rate not the current one.

It is never discounted to present value.


What valuation allowance is used with respect to a deferred tax asset?

If it isprobable that not all of a Deferred Tax Asset (debit) will be realized then the Deferred Tax Asset account must be written down (credit) to reflect this


What effect do permanent differences have on deferred income taxes?

They have no tax impact.

When calculating the total differences between book and tax income subtract the permanent differences from the total before applying a future enacted tax rate


What is deferred income tax expense?

The sum of Net Changes in Deferred Tax Assets and Deferred Tax Liabilities

GAAP Method for calculating is theAsset and Liability Approach

Note: IFRS uses the Liability approach only


How are deferred tax assets classified as current or non-current on the balance sheet?

Current Deferred Tax Assets and Liabilities will impact income tax expense within 12 months. All current amounts are netted and reported as a single amount on the Balance Sheet

Non-Current Deferred Tax Assets and Liabilities will impact income tax expense 12 months or more fromt he Balance Sheet Date. All non-current amounts are netted and reported as a single amount on the Balance Sheet