F3 - Assets and Related Topics

Question 1

Gross Method (For AR & Sales)

Answer 1

Record at 100% of sale bc we assume customer won’t take the discount

Question 2

Net Method

Answer 2

Record as if they will take the discount

Question 3

Trade Discounts

Answer 3

Quantity Discounts (they buy alot of goods)

Question 4

Factoring Receivables with Recourse

Answer 4

The transferor stays with the risk

Question 5

When calculating Aging AR

Answer 5

Do not include beginning balance
Only include the %’s applied, add them up for year end
FOR THE ENDING BALANCE of the Allowance

NOW If you are calculating the Credit Loss Exp using THIS method then:
You consider the beginning balance of the Allowance

Question 6

Recovery of a Write-Off has NO effect on Total Current Assets, Total assets or net income

Answer 6

BUT Recovery reduces NRV and increases cash
ACCT REC - Allowance of = New NRV

Question 7

When the CECL method (Credit Expected Credit Loss)

GAAP Method

Answer 7

Allowance for credit is a contra-asset
Write-offs:
DR Allowance for CR Losses
CR A/R

Recoveries:
DR A/R
CR Allowance for CR Losses
Then
DR Cash
CR A/R

Recoveries have no impact on Income Stmt

Question 8

To Calculate Ending balance and Bad Debt Exp

Answer 8

USE BASE
Beginning Balance
Additions: Recoveries or a recording of Credit Loss Expense
Squeeze (Expense)
Subtract: Write-offs
Ending Balance

Question 9

A Pledge of AR is just use of AR as collateral for a loan

Answer 9

The AR remain on the company’s books and the company continues to service the receivables

Question 10

When Interest-bearing not receivable is issued

Answer 10

The note is recorded at the present value of the expected future cash flows
Discounted using the Market Interest rate at the time of issuance

GAAP Requirement

Question 11

Notes Receivable can be discounted

Question 12

FOB Shipping Point

Answer 12

BUYER owns the goods while in transit

Question 13

Purchases account you will only see under the

Answer 13

Periodic System

Gross Purch
Minus Purchase Returns & Allow, Purchase Discounts
Plus Fright In
COG Purchased - To determine COGS

Question 14

COGS - Periodic

Answer 14

Beg Inventory
Add Purch
Total Available for Sale
Less Ending Inventory
COGS

Question 15

In Double Declining Method of Depreciation

Answer 15

Depreciation base is cost
Salvage Value is NOT USED

Double Declining Depreciation expense =
Cost X(2/#of yrs x (month/12)

Question 16

What is capitalized in the loan of construction
Avg Accumulated Expenditures

Answer 16

Use this for payments made evenly to contractor

The lesser of actual interest or avoidable interest

Interest Rate X Avg Accumulated Expenditures for Construction
Beginning + Ending / 2 for the Avg Accumulated Expenditures

Question 17

Avoidable Interest - Weighted Average

Answer 17

When payments to the contractor are not made evenly

Interest rate X Weighted Average accumulated expenditures for construction

Question 18

A Subsequent reversal of an impairment loss is prohibited under US GAAP

Answer 18

Unless the asset is held for disposal

Question 19

Net gain from a sale of a warehouse and a purchase of a new warehouse will fall under

Answer 19

Continuing operations on the income statement, under “other” revenues and gains

Question 20

An old bldg being marketed for sale

Answer 20

Will be valued at:
Lower of its book value
OR
Net Realizable Value ( FV - Costs to sell )

Question 21

Depletion Base

Answer 21

Costs of Land +
Development Costs +
Restoration Costs -
Residual Value

Question 22

Fixed assets are recorded at their historical cost

Answer 22

They are not adjusted for changes in market value.

Question 23

Carrying amount of Fixed Assets should be tested for recoverability whenever

Answer 23

Events or changes in circumstances indicate the carrying amount may not be recoverable