Pm-F4

Front 1

Note

Back 1

During Bank reconciliation the 2 adjustments that should be occur to the bank statement is:
1-Adding deposits in transit
2-Subtracting outstanding checks

Front 2

Note

Back 2

Estimation of uncollectible accounts expense using the ratio of past actual losses from uncollectible accounts to past net credit sales follows the accounting concept of Matching Principle.

Front 3

Note

Back 3

Net sales should reflect estimated sales returns but not exchanges.

Front 4

Note

Back 4

Footnote 2 of SFAS No 6, Classification of Short-Term Obligations Expected to Be Refinanced, states "if equity securities have been issued [after the B/S date but before the B/S is issued], the short-term obligation, although excluded from current liabilities, shall not be included in owners' equity."
This entry is not allowed:
Dr: Short term liability
Cr: CS
But rather:
Dr:Short term liability
Cr:long term liability

Front 5

Note

Back 5

Cash in a bond sinking fund is restricted cash.

Front 6

Note

Back 6

Discount on Bonds payable should be deducted from the bonds payable & not added

Front 7

Note

Back 7

A short-term obligation may be excluded from current liabilities & included in non-current debt if the company has both the intent & the ability to refinance the debt on a long-term basis, as evidenced by an actual refinancing before the issuance of the FSs, or by the existence of a noncancelable financing agreement from a lender with the financial resources to accomplish the refinancing.

Front 8

Note

Back 8

Inventory Turnover = COGS/Average Inventory

Front 9

Note

Back 9

When the current market value of the inventory is less than the fixed purchase price in a purchase commitment, the loss must be recognized at the time of the decline in price, a liability must be recognized on the B/S & a description of the losses must be described in the footnote s.

Front 10

Note

Back 10

During bank reconciliation, If the check has not yet been mailed to the supplier yet before the year end it should be added back to the checkbook balance

Front 11

Note

Back 11

A short-term obligation may be excluded from current liabilities & included in non-current debt if the company has both the intent & the ability to refinance the debt on a long-term basis, as evidenced by an actual refinancing before the issuance of the FSs, or by the existence of a noncancelable financing agreement from a lender with the financial resources to accomplish the refinancing.

Front 12

Note

Back 12

To allocate the shipping cost between ending inventory & COGS you must use the percentage of each item from the total inventory that were available

Front 13

Note

Back 13

The write-off of obsolete inventory is treated as an operating loss & not as cost of goods sold.

Front 14

Note

Back 14

The post-dated check should not be included in cash & cash equivalents because it is dated after the B/S date.

Front 15

Note

Back 15

FOB Shipping point means that the buyer have received the merchandise on the board of the ship at the port of the seller, but FOB destination means that the buyer receive the merchandise at the buyer's store

Front 16

Note

Back 16

When a company pledges receivables in return for a loan, the assigning company will retain title to the receivables & will use the proceeds collected from the receivables to repay the loan.

Front 17

Note

Back 17

Footnote 2 of SFAS No 6, Classification of Short-Term Obligations Expected to Be Refinanced, states "if equity securities have been issued [after the B/S date but before the B/S is issued], the short-term obligation, although excluded from current liabilities, shall not be included in owners' equity."
This entry is not allowed:
Dr: Short term liability
Cr: CS
But rather:
Dr:Short term liability
Cr:long term liability

Front 18

Note

Back 18

Aging of Receivables method is a B/S approach

Front 19

Note

Back 19

If the payment of a portion of the payables by a cheque & this cheque didn't mailed till the issuance of the FSs then it will still be recorded as part of the company's payable amounts

Front 20

Note

Back 20

Rule: The aggregate amount of payments to be made on unconditional purchase obligations should be disclosed (in a footnote to the FSs) for each of the 5 years following the date of the latest B/S.

Front 21

What are the unconditional purchase obligations?

Back 21

Agreements that are enforceable, legally binding & specify certain minimum quantity & pricing terms.

Front 22

Note

Back 22

Imputed interest on non-interest bearing note is reported as interest expense, but Interest incurred to finance construction of machinery for own use is capitalized as part of the cost of the machinery.

Front 23

Note

Back 23

The agricultural products revenue is recognized at time of production & not at the time of sale.

Front 24

Note

Back 24

Uncollectible Expense is the Bad debt expense

Front 25

Note

Back 25

Under IFRS, the impairment loss is recognized as the difference between the CV & the recoverable amount, The recoverable amount is the greater of the FV of the assets less cost to sell & the asset's value in use (otherwise known as the PV of future cash flows)

Front 26

Note

Back 26

Rule: Expense ordinary repairs but capitalize expenditures, which are "additions" or "benefit several periods" or "improve efficiency"

Front 27

Note

Back 27

Rule: Consignor must include consigned goods (in the hands of the consignee) in his own inventory, at his cost plus warehousing costs of consignor before goods are transferred to consignee plus shipping costs to consignee.

Front 28

Note

Back 28

Depreciate the lower of cost or market value of the asset

Front 29

Note

Back 29

Subsequent reversal of an impairment loss is prohibited under U.S. GAAP. Note that reversal of impairment loss is permitted under IFRS.

Front 30

Note

Back 30

Neither "periodic payment of interest" nor "secured by collateral" are generally associated with payables classified as accounts payable.

Front 31

Note

Back 31

In the dollar value lifo inventory valuation method, End-of-year cost is the current year cost

Front 32

Note

Back 32

To determine if there is impairment losses or not under U.S. GAAP you must subtract the "undiscounted future net cash flows from the net carrying amount" & if there is positive result so there is no impairment losses to be reported, but if there is negative one so it can be calculated through subtracting the "FV or PV (whichever is greater) from the net CV"

Front 33

Note

Back 33

Consigned goods is "inventory" not A/R.

Front 34

Note

Back 34

Imputed interest on non-interest bearing note is reported as interest expense.

Front 35

Note

Back 35

Inventory Turnover Ratio = COGS/Average Inventory

Front 36

Note

Back 36

The in-transit insurance premium is included in inventory costs because it is a cost necessary to bring the goods to their location, but Advanced commissions are excluded because they do not add "time" or "place" utility to the inventory. Rather, they are
classified as a prepaid expense that will become commissions expense when the goods are sold.

Front 37

Note

Back 37

If the lender couldn't fulfill the agreement so the borrower must report the N/P as a current liability because refinancing on a long-term basis will not be available

Front 38

Note

Back 38

Rule: In all depreciation methods except declining balance, salvage value is subtracted from an asset's cost in arriving at the depreciation base.

Front 39

Note

Back 39

The net gain from the sale of a warehouse & purchase of a new warehouse will fall under continuing operations on the I/S, under "other'' revenues & gains.

Front 40

Note

Back 40

The asset shouldn't have to increase the useful life in order to be capitalized

Front 41

Note

Back 41

Cash in bond sinking fund is restricted cash so its not considered as cash & cash equivalents, The post-dated check should not be included in cash & cash equivalents because it is dated after the B/S date.

Front 42

Note

Back 42

Neither "periodic payment of interest nor "secured by collateral" are generally associated with payables classified as accounts payable. A liability that requires the periodic payment of interest should be classified as an accrued liability or debt. A liability that is secured by collateral should be classified as a loan payable.

Front 43

Note

Back 43

Composite life of all assets equal the depreciable cost of all assets divided by the total depreciation expense

Front 44

Note

Back 44

In Agricultural products revenue is recognized in time of production not in time of sale

Front 45

Note

Back 45

Inventory Turn over Ratio = COGS/Inventory

Front 46

Note

Back 46

Probable loss means has great probability of occurrence

Front 47

Note

Back 47

Applying the lower of cost or market rule (item by item) separately to "each item" results in the lowest inventory amount.

Front 48

Note

Back 48

Estimated restoration costs should be added to the depletable base of the natural resource. In this way, the amount of depletion charged to expense over the life of the mining operation will include the restoration costs.

Front 49

Note

Back 49

The Units of Production method of depreciation is most appropriate when an asset's service potential declines with use

Front 50

Note

Back 50

Using the ratio of past actual losses from uncollectible accounts to past net credit sales, follows the accounting concept of Matching

Front 51

Note

Back 51

Rule: interest costs incurred during the construction period of machinery to be used by a firm as a fixed asset, should be capitalized as part of the historic cost of acquiring the fixed asset. Interest costs on the fixed asset subsequent to the construction period as well as all interest costs on the routine manufacture of machinery for sale to customers (inventory) should be expensed in the I/S for the period incurred.

Front 52

Note

Back 52

Probable loss means estimated loss

Front 53

Note

Back 53

"Security deposits" are not accounts receivable & generally are not a current asset, as is "accounts receivable."

Front 54

Note

Back 54

The carrying amount of fixed assets should be tested for recoverability at least annually or whenever events or changes in circumstances indicate the carrying amount may not be recoverable.

Front 55

Note

Back 55

Trade notes & accounts receivable with customary trade terms not exceeding one year may be recorded at face amount.

Front 56

Note

Back 56

If a revalued asset becomes impaired, the impairment is recorded by first reducing any revaluation surplus to zero, with further impairment losses reported on the I/S

Front 57

Note

Back 57

Restoration of CV is permitted if the impaired asset is held for disposal, & prohibited if the asset is held for use

Front 58

Note

Back 58

Perpetual moving average method ("perpetual") will produce a higher inventory carrying amount than periodic weighted average ("periodic") when prices are increasing.

Front 59

Note

Back 59

Perpetual computes a new weighted-average cost after each purchase while periodic is based on the average price of all purchases during the period. Perpetual will thus be affected more by increasing prices, & inventory will be more reflective of current costs.

Front 60

Note

Back 60

The lower of cost or market rule will result in a higher inventory cost if applied to total inventory than individual items when prices are generally increasing although a few individual prices are decreasing.

Front 61

Note

Back 61

The aggregation of the inventory as a whole will "cover up" the impact that individual items with decreasing prices would have under the individual item method.

Front 62

Note

Back 62

Rule: Under the units-of-production depreciation method, the cost of a fixed asset is allocated to expense based on the number of units produced during the period relative to the total number of units expected to be produced over the asset's life. Accordingly, the total number of units over the asset's life must be able to be estimated.

Front 63

Note

Back 63

In case of discounting interest bearing N/R the discount is always applied on the maturity value, not the face value

Front 64

Note

Back 64

If a 3rd party is going to pay the residual value at the end of the lease (& will not be paid by the lessee), it will not be included in the calculation of the lease obligation

Front 65

Note

Back 65

The previous year price index has been used because no layer has been formed during the current year

Front 66

Note

Back 66

Interest costs incurred during the construction period of machinery to be used by a firm as a fixed asset should be capitalized as part of the historic cost of acquiring the fixed asset. Interest costs on the fixed asset subsequent to the construction period as well as all interest costs on the manufacture of machinery for sale to customers (inventory) should be expensed in the I/S for the period incurred.

Front 67

Note

Back 67

Depreciation-related deferred tax liability, must be reported as noncurrent liabilities.

Front 68

Note

Back 68

If accumulated depreciation equals original cost, then the asset has been depreciated to $0

Front 69

What is the formula to change from Cash basis Revenue to Accrual basis Revenue?

Back 69