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42 Cards in this Set
- Front
- Back
Definition of measurement
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the assignment of numerals and other symbols to represent the magnitude of an attribute of a phenomenon
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Def. relevance
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Capacity of info to make a difference in a decision
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Relevance needs:
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Predictive and feedback value, timeliness
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Def. Reliability
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Reasonably free from error and bias, faithfully represents what it purports to represent
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Reliability needs:
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Verifiability, neutrality, rep. faithfulness
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Def. Rep. Faithfulness
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Clear identification of underlying attribute of interest
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Def. Verifiability
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Independent measures derive the same value
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2 methods used to estimate bad debt expense
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Percent of sales
Percent of receivables |
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J/E for BDE
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BDE
___Allowance for FDA |
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Allw for bad debt effect on statements
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None on income
No net balance sheet effect |
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Relationship between COGS and inventory
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Cost of goods available for sale is either allocated into COGS or EI
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Absorption vs. variable costing
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Absorption includes variable AND production costs
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Pre-tax net income, LIFO vs. FIFO
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Lower under LIFO
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Different measures of market used in LCM
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Replacement cost
Net realizable value NRV - profit |
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Market ceiling and floor
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Ceiling - Inventory's net realizable value
Floor - NRV - Normal profit margin |
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LIFO reserve
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FIFO EI - LIFO EI
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Intangible asset
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Any current or non-current asset, owned by the company, with probable future benefits, that lacks physical substance, other than financial instruments - only recorded when purchased
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5 types of intangible assets
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Marketing
Artistic Customer Technology Contract |
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Separability and intangible assets
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If the asset is not separable (can't be sold) it is goodwill
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Def. goodwill
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The excess of the fair value of the entire company over the sum of the market values of all the identifiable assets (net of liabilities)
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Depr of goodwill vs. other assets
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Goodwill is not amortized, only tested for impairment
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Goodwill impairment
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If business's FV < BV, then subtract the goodwill's BV - FV
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Disclosure of goodwill, impairment, and intangible assets
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Goodwill - Balance sheet
Impairment - Operating section of income statement, unless it is under discontinued operations Intangible assets - one line on BS |
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R&D on IFRS vs. GAAP
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GAAP - all expensed
IFRS - Research expensed, development capitalized if: Technical feasibility reached Intend to complete Ability to use or sell Future economic benefit expected Adequate resources to complete Ability to measure expenditure attributable to asset |
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Cost included in depreciation
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Inventory - all costs to get it there and working
Manufactured - All RM, DL, OH, and interest incurred during the construction period |
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Begin interest capitalization when:
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Expenditures for the asset have been made
Activities are in progress Interest cost is being incurred |
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How much to capitalize for depr
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Lower of actual interest or avoidable interest (average accumulated expenditures * interest rate)
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Maintenance capitalized as a new asset when:
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One of:
Useful life has been increased Quantity of units produced is increased Quality of units produced is increased |
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Three methods of depr
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Straight line
Activity Accelerated (sum of years, declining balance) |
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Activity based depr
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[(Cost - Salvage Value)/(Expected units)] * Units produced in the year
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Non-monetary exchanges
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Recognize on the income statement the gain or loss realized
If gain on similar assets: Gain not recognized, book value of new asset is reduced by the amount of the gain not recognized |
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Def. SCF
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Statement that provides an explanation of how the company's cash balance has changed from the beginning of the year to the end of the year.
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Why cash balances are good
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Not subjective
Provides insight of the validity and sustainability of accrual NI Debtors want cash |
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Three sections in SCF
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Operating
Investing Financing |
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Operating activities
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Events or transactions that enter into the determination of the NI (cash basis rev and exp)
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Approaches of operating cash flow
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Direct
Indirect - 98% |
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3 indirect approaches to operating accrual NI
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Items that affected NI but not cash (depr, ammor)
Items that affected NI and cash but not operating activity (sale of property/equip) Operating items from which the income effect differs from the cash effect |
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General rule of indirect approach
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Increase to current asset = Negative adjustment to NI
Increase to current liability = Positive adjustment to NI |
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Def. Cash flow from investing activities
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Cash flows that result from the purchase/sale of productive assets (equip), marketable securities, or companies/divisions (long term assets)
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Def. Cash flows form financing activities
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Cash flows from selling its own stocks/bonds, paying dividends, buying back shares, or borrows money (long-term liabilities/equity)
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J/E for impairment
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Loss on impairment
___Goodwill |
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Avoidable interest J/E
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Building xx
____Interest expense xx |