F4 Flashcards
(46 cards)
At what value is life insurance valued?
cash surrender value
Indications that Debt is Being Refinanced
(will allow the liability to continue to be classified as long-term)
- actual refinancing prior to the issuance of the financial statements
- existence of a noncancelable financing agreement from a lender having the financial resources to accomplish the refinancing
Refinancing under IFRS
*existence of a financing agreement is not enough; it must have been refinanced
Cash and Cash Equivalents
*must have a maturity date of 30 days or less FROM THE DATE IT WAS PURCHASED
Are legally restricted deposits equivalents?
No
How to classify restricted cash
based upon the current or noncurrent asset/liability
Bank’s Side - Bank Reconciliation
Add: Deposits in Transit
Subtract: Outstanding Checks
Adjust: errors
Company’s Side - Bank Reconciliation
service charges bank collections errors NSF interest income
Difference Between A/R and N/R
*notes are evidenced by a written promise
A/R Valuation Methods
Gross
Net
Are trade discounts reported gross or net?
- they are always recorded net because it is a quantity discount, not a timing discount
- do not add percentages together; take each percentage one at a time (40% and then 10%; not 50%)
Do expected exchanges affect sales, inventory, or COGS?
No
Accounts involved in Sales Return
DR: Sales Returns (contra-revenue)
CR: Accounts Receivable
Is the direct write-off method allowed for GAAP?
No
DR: Bad debt expense
CR: Accounts Receivable
3 Methods for Estimating Allowance for Doubtful Accounts
- % of sales
- % of A/R (balance sheet approach)
- aging (balance sheet approach)
Subsequent Collection under Direct Write-off Method
DR: Cash
CR: Uncollectible accounts recovered (revenue account)
Pledging (Assignment) vs. Factoring
pledging - disclosure only (collateral)
factoring - selling
Requirements for a Factoring with Recourse to be Considered a Sale
- seller’s obligation can be reasonably estimated
- transferor surrenders control of the future economic benefits
- transferor cannot be required to repurchase the receivables but may be required to replace the receivables with similar receivables
*otherwise it is treated as a loan (footnote)
Treatment of a Discounted Note Receivable with Recourse
DR: Cash
and
CR: note receivable discounted (contra-asset)
or
CR: not receivable and contingent liability
How to compute interest income earned when discounting note
- compare cash received to the face value of the note (difference is the interest income earned)
- in reality, this is the interest earned on the note minus the loss due to discounting
Should sales with the right to return be included in inventory?
Amount reasonably estimable? No
No reasonably estimable? Yes
How are Precious Metals and Farm Products valued?
Net realizable value
Where are inventory write-downs reflected?
Minor –> COGS
Material –> separate loss line item
Can you reverse an inventory write-down under IFRS?
Yes, but only to the extent of the write-down
