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Midterm II Flashcards

1
Q

To convert annual IR into Compounding Period Interest Rate, divide annual IR by ____.

A

Number of compounding periods per year

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2
Q

T or F?: All things equal, borrowers prefer to pay simple interest.

A

T

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3
Q

What is an ordinary annuity?

A

series of equal payments made at END of consecutive periods

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4
Q

What is an annuity due?

A

series of equal payments made at the BEGINING of consecutive periods

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5
Q

Does simple interest compound?

A

No.

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6
Q

What table shows the smallest value for a given #?

A

Present value of 1.

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7
Q

Process of accumulation involved determining the _____.

A

future value

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8
Q

Future value of an ordinary annuity will be greater or less than an annuity due?

A

Less than, since ordinary annuities compound interest at the end of the month instead of beginning.

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9
Q

Expected cash flow approach calls for ______ to discount cash flows.

A

risk-free rate of return

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10
Q

When compounding frequency is more than once a year, the effective-IR is always ____ than the stated rate.

A

exceeds

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11
Q

The FV of a deferred annuity is _____ as the FV of an annuity not deferred.

A

the same

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12
Q

FASB has studied whether to eliminate ______ as a cash classification.

A

cash equivalents

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13
Q

T or F: Cash can be either current or long term asset

A

T; depending on availability of disbursement

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14
Q

Does cash include postdated checks?

A

No

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15
Q

Does cash include CD’s or Tax Refunds due?

A

No

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16
Q

Are bank overdrafts offset against a cash account?

A

Yes

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17
Q

If FASB eliminates Cash Equivalents, Treasury Bills will be considered _____.

A

a temporary investment

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18
Q

Sales discounts offsets ____.

A

AR

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19
Q

Sales returns and allowances has a normal ___ balance.

A

debit

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20
Q

Non-trade receivables doesn’t include _______.

A

oral promises to pay

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21
Q

Effective annual interest rate from 1/10 n/30 =

A

1% / [(30d-10d)/365d]

Percent divided by fraction of year between options.

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22
Q

Notes receivable can be classified as _______.

A

Current/noncurrent and trade/nontrade

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23
Q

Using net method, sales discounts forfeited should be reported as _____.

A

other revenues and gains on IS

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24
Q

Why does direct write-off method violate expense recognition concept?

A

Fails to record expenses in same period as associated revenues

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25
% of receivables approach presents AR at _____.
NRV
26
% of sales approach matches _____ on IS.
revenue and expenses
27
Allowance for Doubtful Accounts has a normal ____ balance.
credit
28
NRV of AR =
AR - Allowance Account
29
IR that equates cash paid with amount received in future with 'zero interest'
Implicit rate
30
T or F: You only recognize interest revenue after the period end.
T; otherwise its interest receivable
31
Under Fair Value option, unrealized holding gains and losses on receivables are included in _______, not as part of other comprehensive income.
net income
32
T or F; Assignment and Factoring are both methods used to generate cash from AR
T
33
Companies that buy receivables from businesses are called _____.
Factors
34
T or F; Securitization requires purchaser to service receivable
F
35
AR Turnover Ratio=
Net Sales / Avg Net AR
36
AR Turnover Ratio measures _____.
number of times the avg balance of AR is collected during period
37
What is float?
$ briefly counted twice due to time gaps in transactions. Prevented with lockbox.
38
Do deposited check bounces reduce cash account?
no
39
Bank overdrafts are ____.
netted against cash balances
40
Merchandising firms call their unsold units _____ inventory.
Merchandise
41
A 'purchases' account only exists in a ______ inventory system.
periodic
42
The 'gross method' for recording purchase discounts does/does not use a purchase discounts account?
does not
43
Is interest a product cost or period cost?
period cost, not associated with inventory
44
What three costs are excluded from inventory under GAAP and IFRS?
Storage, admin, selling
45
Freight costs are a ____ cost on COGS.
period
46
In a repurchase agreement, the ____ retains the risk, despite physical possession.
Seller
47
Average cost flow assumption is good when you have ____ products.
similar
48
What cost flow assumption when few, costly and easily distinguishable items?
Specific Identification
49
Inventory method that makes net income manipulation possible.
LIFO
50
Ending inventory and COGS is same whether perpetual or periodic under ____ method.
FIFO
51
Trade discounts are deducted when?
immediately
52
Purchase discounts are deducted when?
within terms
53
In a periodic system, all inventory acquisitions are debited to a _____ account.
purchases
54
In a periodic system, the COGS is taken from the ____ account at the ____ of the period.
purchases account at end of period
55
What does a COGS JE look like in periodic system (end of period)?
Inventory (ending ct) COGS -------Purchases -------Inventory (beg ct)
56
In a perpetual system, COGS is recorded when?
At each time of sale
57
In a perpetual system, inventory acquired is debited to the _____ account.
inventory
58
Can LIFO liquidation distort net income?
Yes
59
Can LIFO liquidation result in substantial additional taxes?
Yes
60
Most companies that use LIFO use ________ LIFO.
dollar-value
61
'Allowance to reduce inventory to LIFO' acct is reported on ____________.
BS has deduction from inventory
62
Dollar-value LIFO techniques protect LIFO layers from _____.
erosion
63
LIFO Reserve =
Internal inventory - LIFO (external method)
64
LIFO Inventory + LIFO Reserve =
FIFO Inventory
65
Under LIFO, future earnings will _____ if there are future price declines.
increase
66
LIFO is not appropriate when prices tend to lead to _____.
costs
67
LIFO is/is not appropriate when prices lag behind costs?
is appropriate
68
If beginning inventory is overstated, COGS is _______ and retained earnings/net income are _______.
overstated; understated
69
NRV= (meaning)
estimated selling price - cost of completion and disposal
70
The ___ method uses a contra asset account and loss account to record write-off in lower-of-cost and NRV.
loss
71
COGS valuation method
subs net realizable cost for historical cost, reports loss as part of COGS
72
Abandon historical cost principle (when valuing inventory) when _____.
future utility is less than cost
73
NRV= (formula)
Selling price - cost to sell - cost to complete
74
What accounts are debited and credited in Loss method of LCNRV?
Debit Loss due to decline of inventory | ------Credit Allowance to reduce inventory to NRV
75
floor=
NRV - normal profit margin | or Selling - costs of completion/disposal - profit margin
76
ceiling=
NRV
77
'market' really means ________.
replacement cost
78
Both COGS and loss method credit what account?
allowance to reduce inventory
79
Market is middle value of ________.
replacement cost, NRV and NRV-profit margin
80
What does an unrealized holding loss JE look like?
Debit Unrealized Holding Gain/Loss | ---Credit Estimated Liability on Purchase Commitment
81
Inventory can be recorded at NRV when what 3 conditions are met?
1. Controlled market with quoted price 2. No disposal costs 3. Immediate delivery
82
Valuation of minerals/ag products are based on _____.
NRV
83
Estimated Losses on Purchase Commitments is reported as _____.
other expenses and losses
84
Gross profit method of estimating inventory is not acceptable for _____ financial reports.
annual
85
Gross Margin (profit %)=
(revenue - cogs)/revenue
86
Cost to Retail Ratio=
cost of goods available for sale / retail value of goods available for sale
87
The calculation of 'Cost to Retail Ratio | does not include _____.
net markdowns
88
What is deducted from both cost and retail columns when computing cost-to-retail ratio?
Abnormal shortages
89
Inventory Turnover=
COGS/Avg Inventory
90
LIFO retail assumes markups and markdowns apply only to goods purchased ______.
during period
91
Dollar-Value LIFO, last years layer is multiplied by ________.
last year's cost ratio and last year's index
92
Does IFRS allow LIFO?
No
93
Land held for speculation is classified as ______.
An investment
94
Proceeds from salvaged materials on land that will be used for a building should _______.
reduce the cost of the land
95
Are repair costs capitalized?
No
96
Method for accounting for overhead costs related to self-constructed assets:
assigning pro-rata portion of all overhead to asset
97
Avoidable Interest=
Weighted average accumulated expenditures x interest rate
98
Weighted Average IR=
Total interest paid in one year / total principal
99
The amount of interest costs capitalized during period should not exceed ________.
The actual interest costs incurred
100
Exchange has commercial substance:
both gains and losses recognized immediately
101
Contributions received should be recorded as _____.
revenue
102
Donated assets should be recorded at _______.
fair value
103
Cash and Gain with Commercial Substance:
fair value - deferred portion of gain
104
If boot is more than _____% of total amount given up, transaction is monetary in nature.
25
105
Accelerated depreciation can offset the effect of increasing _______ costs as the asset ages.
repair and maintenance
106
The composite life is the _____ depreciable cost divided by ____ annual depreciation.
total; total
107
Impairment of assets JE:
debit loss on impairment | ---credit accum depreciation
108
The impairment charge is the difference between_______.
book value and FMV
109
Restoration is only permitted on assets _______.
held for disposal
110
Depletion is usually a part of ____.
COGS
111
MACRS assumes a salvage value of __.
0
112
What method is not permitted under IFRS?
units-of-production

Acct 3001 (2 decks)

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