FAR -- Working capital (CA, CL) and fixed Assets (and inventory) Flashcards Preview

FAR CPA Review - (Becker, Roger, Wiley CPA Excel, NINJA) > FAR -- Working capital (CA, CL) and fixed Assets (and inventory) > Flashcards

Flashcards in FAR -- Working capital (CA, CL) and fixed Assets (and inventory) Deck (10):
1

What does "uncollected accounts written off" mean?

Uncollected accounts written off = Reduce "allowance for uncollected accounts"

2

What are the other words for "uncollected accounts expense?"

Bad debt expense
Provision for uncollected accounts

3

Allowance for uncollected accounts formula

Beginning balance
+ provision for uncollected accounts or + bad debt expenses
+ recoveries
- uncollected accounts written off
= Ending balance

4

When you use "% x accounts receivable," what does this give you?

The ending "allowance for uncollected accounts" balance.

Example:
3% x $100,000 = $30,000 ending balance for allowance for uncollected accounts

5

When you use "% x credit sales," what does this give you?

The adjustment to increase to the Allowance for uncollected accounts.

Example:
4% x 100,000 credit sales = $40,000
-->

Allowance for uncollected accounts
$100,000 beginning balance
+ $40,000 provision
------------------------------
= $140,000 ending balance on Allowance for uncollected accounts

6

How to calculate adjusted cash balance?

Adjusted cash balance =
UnadjustdUnadjustd cash balance
+ / - bank errors

+ credit memos (i.e. interest income)
- service charges (debit memo)
+ add back checks paid out after date of bank reconciliation

Example:
Adjusted cash balance =
10,012 unadjust cash balance
- ($95 bank amount - $59 ledger error)
+ 35 interest earned
- 50 service charge

= $9,961

7

A short-term liablity note payable can become a long-term liability when

____ on long-term basis
intent spported by existing noncancellable financing_____ or an actual refinancing ____ issue financial statements.

A short-term liablity note payable can become a long-term liability when

REFINANCE on long-term basis (pay off liability more than one year later; pay off much later)

intent supported by existing non-cancellable financing AGREEMENT

--or--

An actual refinancing event took place (the lender actually able to refinance) BEFORE/PRIOR issue financial statements.

8

What is factoring receivables?

Factoring receivables = company converts a/r to cash by assigning them to a factor with with or without recourse.
This is done in a quick timely manner.

It alters the timing of a company's cash flows already reported on their books.

9

When does a note payable even when tried to be refinance is still considered as short-term liability?

When the lender is NOT expected or is able to of honoring the agreement to refinance the debt.

10

When a company spent $300,000 lump sum purchase price to acquire assets (i.e. inventory, land, and building) on March 1st, what is the cost of these items on the company's balance sheet when the fair values and carry amounts are as follows?

Inventory: $60,000 FV; $70,000 CV
Land: $50,000 FV; $40,000 CV
Building: $250,000 FV; $150,000 CV.
Machine: $120,000 FV; $80,000
Total: $480,000 FV; $340,000 CV

How does these costs on inventory, land, building, look like on the balance sheet?

(1) FV / total FV for each item:

Inventory: $60,000 / $480,000 = 0.13

Land: $50,000 / $480,000 = 0.10

Building: $250,000 / $480,000 = 0.52

Machine: $120,000 / $480,000 = 0.25

(2) Then each FV ratio x total lump sum purchase price:

Inventory: 0.13 x $300,000 = $39,000 cost

Land: 0.10 x $300,000 = $30,000 cost

Building: 0.52 x $300,000 = $156,000 cost

Machine: 0.25 x $300,000 = $75,000 cost

(3) Balance sheet presentation:

Balance Sheet
As of Jan 1, 20XX

Current Assets
Inventory 39,000

Long-term Assets
Machine 75,000
Building 156,000
Land 30,000

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