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39 Cards in this Set

  • Front
  • Back
Good will has no
R&D as a basket purchase =
R&D purchased w/ business combination
= asset
Goodwill excess assets
FMV- liabilities
Assets w/ indefinite life use fmv =
Present Value Cash Flow/ Interest Rate
Check for good will
every year
income tax expense
based on income before taxes
income tax payable
based on taxable income
differences between financial (book) income and taxable income result from
permanent and temporary differences.
basic calculation from pre-tax financial income to taxable income
pt financial
+- permanent differences
+- temporary differences
= taxable income
permanent differences
muncipal bond interest, proceeds from life insurance
life insurance premiums / fines
temporary differences
differences that created deferred tax liabilities
installment sales
unrealized gains losses,
accelerated depreciation methods
Deferred tax assets
revenues of gains that are taxable before they are recognized for financial reporting purposes
expenses or losses deductible for tax purposes after they are recognized for financial reporting
deferred tax asset ex
rent revenue advanced
warranty expense
bad debt
restructuring charges deductible for tax purposes
UNREALIZED GAINS OR LOSSES on trading securities
Carry back
carry forward
2 years
30 years
tax expense > tax payable
tax expense < tax payable
tax liability
tax asset
if allowance valuation

deferred tax aset decrease
Long lived assets recorded on books /reported on financials at the of historical cost or fmv
Historical cost vs fmv
easier to ascertain historical cost than fmv
historical cost
includes cost plus any expenditure required to prepare the asset for use
other costs (historical)
surveying/titling costs, treatment of land, testing and installation equipment
two types of long lived assets
tangibles intangibles
arrangement type in purchase of assets
basket purchases
deferred payment
exchange of non-monetary asets
basket purchases
costs are prorated based on fv of assets
exchange of non-monetary assets
if both asset values are determined the lower value is used. may result in gain or loss.
test of impairment for intangible assets
1definite life
2indefinite life
impaired if...
1. BV>undiscounted cash flows
2. BV> FMV
Goodwill is generally tested for impairment .......
If an asset is impaired it must be
written down to its impaired or fair market value
fvalue of impaired asset can be approximated using
present value of estimated future cash flows from asset
Inventory is carried at the lower of ___ and ____?
Cost or Fair market value
Name the four categories of inventories.
Retail inventories, raw material, work-in-process, finished goods
4 methods of inventory cost valuation?
Specific identification, Average cost, FIFO, LIFO
What is the LIFO reserve?
The difference between the LIFO and FIFO value.
When adjusting FIFO for LIFO, you need to adjust by the change in LIFO. Current year's LIFO as a negative number, last years as positive. Net the change.
The LIFO reserve at a balance sheet date multiplied by the tax rate results in what?
the tax saving (tax shield) as a result of using the LIFO method for costing inventory
In a time of increasing prices, LIFO results in what?
Lower net income and lower ending inventory (assets) than FIFO
In a time of decreasing prices, FIFO results in what?
Lower net income and lower ending inventory (assets) than LIFO
name one FIFO advantage and disadvantage in relationship to physical flow of goods?
Advantage:Ending inventory balance is close to current replacement cost
Disadvantage: No income tax deferral
LIFO advantage and disadvantage:
Advantage: income tax deferral
Disadvantage: Ending inventory much lower than current replacement cost