FAR Module 3

Question 1

Balances Within the Same Bank

Answer 1

Can be Netted

Question 2

Balances in different banks must…

Answer 2

Be stated separately

Question 3

What is not considered bank reconciling items but rather “errors”

Answer 3

1. NSF Checks
2. Service Charges
3. Credit Memos
4. Interest Income

Question 4

Cash Collections from Customers

Answer 4

Sales adj by Deducting “AR written off” and deducting “Increase in AR balance”

Question 5

Are returns included when reporting revenue?

Answer 5

No they are not

Question 6

Allowance Method

Answer 6

Used to match expenses with revenues & record carrying amount

Question 7

Factoring Receivables

Answer 7

Process by which company converts receivables to cash by assigning them to a factor either with or without recourse

Question 8

Pledge of AR involved use of AR as collateral

Answer 8

When cash is received, credit recorded to notes payable

Question 9

Bonds…

Answer 9

FV * Rate = Interest + FV = Maturity Value and you can go from there

Question 10

What assumption does the Moving-Average method assume?

Answer 10

Assumes perpetual records - new weighted-average cost is computed after each purchase & issues are priced at latest weighted cost

Question 11

FOB Shipping Means…

Answer 11

Title reverts to buyer when seller delivers goods
Buyer should include goods upon shipment
Buyer should include inventory

Question 12

What does a periodic inventory system mean?

Answer 12

Inventory is determined by physical count. Units are counted & valued at end of period