FAR 3.1

Question 1

Bank Rec

Bank balance adjustments?

Answer 1

Add - Deposits in transit
Subtract - Outstanding checks
+/- Errors

Question 2

Bank Rec

Book balance adjustments?

Answer 2

Add - EFT's
Add - Earned Int
Subtract - Service charges
Subtract - NSF checks
\+/- Errors

Question 3

JE for Recovery of previous write offs?

Answer 3

Dr. AR
Cr. Allow

Dr. Cash
Cr. AR

Question 4

How to calculate an allowance under the % of sales method?

Answer 4

“YE Plug” Solve for the allowance credited during the year, NOT the ending Allowance amount (as would be the case for the % of receivables approach).

% Receivables - BDE Plug

Question 5

JE to write off a AR account?

Answer 5

Dr. Allowance

Cr. AR

Question 6

What is the AR T-Account setup?

Answer 6

\+Beg
\+Credit sales
-w/o's
-AR converted to note rec
-money collected

Question 7

Inventory: Should permanent declines in market value of inventory be recognized in interim f/s?

Answer 7

yes

Question 8

Revenue for agriculture & precious metals when a company has agreed to purchase entire production amount, even if spread over multiple years?

Answer 8

recognize revenue in its entirety at market value

and only if a fixed number is required to be purchased

Question 9

Dollar value LIFO equation?

Answer 9

current year cost / base year cost = index to be multiplied by the annual layer

next add the layers together to get the year end inventory cost

Question 10

Capitalized cost of equipment purchased on a note payable

When given the note payable amount, payment amount 6,000, int rate 8%, ordinary annuity factor three years 2.58, and PV for the future single sum for three years, .735?

What part of the note payable is capitalized?

Answer 10

PV of the note payable = 6,000 x 2.58 (PV of an ordinary annuity factor for three years at 8% is 2.58)

Question 11

Interest is capitalized when machinery is…

Answer 11

self-constructed and not purchased

Question 12

How to calculated the amount of interest to be capitalized?

Answer 12

Step 1: Calculate the WAvg accumulated expenditures

Step 2: Compute the capitalized interest by multiplying the appropriate interest rate times the WAvg accumulated expenditures. 170*.10

Step 3: Compare the capitalized interest to the actual interest cost. 30k > 17k, and take the lesser

Question 13

Depreciation

When a permanent impairment occurs, the BV is reduced and a loss is recorded, should the loss be debited or credited to accumulated depreciation?

Answer 13

Credited. In addition, the current year’s depreciation expense should be added. The NEW book value is depreciated over the new life.

Question 14

Component depreciation

How to treat component costs?

Answer 14

First subtract them from the cost of the equipment, then separately depreciate them.

Question 15

Nonmonetary exchange

Loss, how to treat?

Answer 15

recognize immediately

Question 16

Nonmonetary exchange

Gain, how to treat if Commercial Substance, and No Commercial Substance?

Answer 16

Yes commercial substance - recognize entire gain, using FV approach

No commercial substance, No cash received = No Gain

No commercial substance, Cash paid = No Gain

No commercial substance, Cash received, then if
less than 25%, recognize pro-rata gain @ (cash received/total FV received including cash)

if greater than 25%, then recognize entire gain on BOTH SIDES

Question 17

How to treat legal fees and other costs associated with registering a patent?

Answer 17

Capitalize

Question 18

If equipment has alternative future uses, should you expense or capitalize?

Answer 18

capitalize

Question 19

How to treat internally created goodwill?

Answer 19

expense

Question 20

Impairment loss, IFRS

How to calculate Impairment loss?

CV 12,500
FV 11,200
Costs to sell 600
PV of FCFs 10,950

Answer 20

FV less costs to sell or value in use, whichever is greater, (not undisc. FCF) - Carrying Value