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44 Cards in this Set
- Front
- Back
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Working Capital |
Current assets - current liabilities |
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Current Ratio |
Current Assets / Current Liabilities |
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Quick Ratio |
(Cash + Mkt Securities + Net A/R) / Current Liab |
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Short Term Obligation Expected to be Refinanced |
GAAP: If have the ability and intent to do so, can reclassify to LONG TERM debt IFRS: No. |
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Cash Equivalents |
ready convertible to cash within 90 days of purchase |
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Restricted Cash |
Set aside for a specific use or purpose MUST be kept separate on the B/S |
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Bank Reconciliation |
Deposits in Transit --> ADD TO BANK Outstanding Checks --> SUBTRACT FROM BANK Service Charges --> SUBTRACT FROM BOOKS Bank Collections --> ADD TO BOOKS Errors --> depends.... NSF Checks --> SUBTRACT FROM BOOKS |
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Sales Discounts GROSS METHOD |
Assume they won't take discount @ sale: DR. A/R 100 CR. Revenue 100 @ collection (if within discount window): DR. CASH 98 DR. Discount 2 CR. A/R 100 |
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Sales Discounts NET METHOD |
Assume the discount WILL be taken @ sale: DR. A/R 98 CR. Revenue 98 @ collection (w/in discount window) DR. CASH 98 CR. A/R 98 @ collection (NO DISCOUNT TAKEN) DR. CASH 100 CR. Discount not taken 2 CR. A/R 98 |
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Uncollectible A/R Estimation Direct Write Off vs. Allowance |
Direct Write Off is for TAX PURPOSES ONLY Allowance must be used for GAAP |
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Uncollectible A/R Estimation % of Sales Method |
company estimates a % of credit sales it will NOT be able to collect DR. BDE CR. Allowance for uncollectible INCOME STATEMENT APPROACH |
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Uncollectible A/R Estimation % of A/R at year end Method |
company estimates a % of A/R remaining at YE that it won't be able to collect (1) Find required end balance in allowance (2) Find beginning balance in allowance acct (3) Plug to find necessary adjustment BALANCE SHEET APPROACH |
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Uncollectible A/R Estimation A/R Aging |
Place A/R into buckets by number of days outstanding. Multiply each bucket by a % of uncollectibility |
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Specific A/R Write Offs AND subsequent collection |
Write Off DR. Allowance CR. A/R Subsequent Collection DR. CASH CR. Allowance (reinstate the allowance previously reversed) |
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Factoring A/R Without Recourse |
Sale is FINAL. DR. CASH DR. Due from Factor (if sale includes % of A/R collected later) DR. Loss on sale of A/R CR. A/R |
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Factoring A/R With Recourse |
To be considered a sale: (1) seller's obligation for uncollected A/R can be estimated (2) surrenders control of future economic benefits (3) can't be required to repurchase the receivables Otherwise, considered a loan and A/R not removed from the books |
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Surrender of Control: Financial Assets |
(1) Transferred assets have been isolated from transferor (2) Transferee has right to pledge/exchange assets at any time (3) Transferor does NOT maintain control under repurchase agreement |
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Transfers/Servicing of Financial Assets Control Surrendered, NO continuing involvement |
Recorded as a sale Recognition of G/L Reduction of Asset account |
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Transfers/Servicing of Financial Assets Control Surrendered, Continuing Involvement |
If surrender of control, RECORDED AS SALE Transferred assets divided between "sold" and "not sold" Any retained interest still carried at BV based on proportion of FMV @ time of transfer |
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Transfers/Servicing of Financial Assets Control NOT surrendered |
Account for the transfer as a secured borrowing with pledged collateral |
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Discounting N/R With Recourse |
Still liable for the ultimate payment. Reported on B/S and disclosed |
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Discounting N/R Without Recourse |
(1) Find maturity value of note (2) Compute bank discount on payoff @ maturity **don't forget that interest rate is annual (discount by period) (3) Determine amount paid by bank for N/R (4) Derive interest income by subtracting face value of the note from amount paid by bank |
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Inventory Lower of Cost or Market |
GAAP Market = middle of.... (A) Replacement Cost (B) "Ceiling" = NRV (net selling price - costs to complete) (C) "Floor" = "Ceiling" - Normal Profit Then compare to COST and write it down if market < cost |
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Inventory Lower of Cost or Net Realizable Value |
IFRS the lower of Cost or NRV ("Ceiling" in GAAP) Reversal of inventory write downs allowable up to the amount of original write down |
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Periodic Inventory System (Basics) |
Beginning Inventory * +Purchases ================ Cost of Goods Available < Ending Inventory > ** ================ Cost of Goods Sold *if understate Beg Inv, overstate Income, understate COGS ** if understate End Inv, understate Income, overstate COGS |
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Inventory Specific Identification Method |
unique item, its cost is easily identifiable at sale |
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Inventory FIFO |
First in, First out Perpetual and Periodic will give SAME RESULT |
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Inventory Weighted Average |
Average the cost of the items in inventory for the entire period. # of items sold x Weighted Avg = COGS # of items remaining x Weighted Avg = End Inv |
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Inventory Moving Average |
New weighted average after every purchase Each sale might have a different average cost |
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Inventory LIFO |
Last in, First Out LIFO layers |
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LIFO Layers |
New Layer more production/purchases than sales LIFO Liquidation take out previously created layers in a year Company sells more than produced/purchased |
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Inventory Dollar Value LIFO |
Price Index End Inv @ CY cost / End Inv @ base year cost Use the index on the increase in base year costs ONLY! NOT all the inventory The ratio for each layer remains in that layer NO MATTER WHAT |
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Fixed Asset Valuation Cost Model |
GAAP / IFRS Historical Cost < Acc. Dep > < Impairment > ============= Carrying Value |
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Fixed Asset Valuation Revaluation Model |
IFRS Only SAME AS INTANGIBLES Revaluation Losses --> Income Statement Revaluation Gains --> OCI (PUFER) ** unless to reverse previously recognized gains or losses |
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Cost of Equipment |
Includes sales price and ALL necessary costs to get asset to it's intended use x Freight in, taxes, interest?, installation, etc. |
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Repairs and Maintenance |
Ordinary - EXPENSE Extraordinary (1) Increases life --> REDUCE ACC. DEP (2) Increase usefulness --> CAPITALIZE |
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"Basket Purchase" of Land and Building |
Allocated purchase price based on ratio of appraised FMV of individual items [EX] $1M for land/building. Land = FMV of 500,000 Building = FMV of 700,000 Land = basis of 416,667 (1M x (500/1200)) Building = basis of 583,333 (1M x (700/1200)) |
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Investment Property FAIR VALUE MODEL |
IFRS Only Reported on B/S @ FMV and is NOT depreciated |
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Construction Period Interest |
Capitalized as part of producing fixed assets Weighted Avg Amt of Accum. Expenditures --> apply interest rate to this NOT borrowed amount (1) Only capitalize interest on money spent (2) Amount of capitalized interest is lower of: (i) actual interest cost incurred (ii) computed capitalized interest (avoidable interest) |
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Salvage Value |
Straight Line? YES Sum of the Year's Digits? YES Declining Balance? NO |
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Component Depreciation |
Required under IFRS Separate significant components of a fixed asset with different lives are recorded and depreciated separately |
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Composite Depreciation |
MOST USE THIS Depreciating the entire class of assets over a single life. SIMPLIFIED No G/L recog. when one asset in group is retired absorbed into the accumulated depreciation account |
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Sum of the Year's Digits |
[EX] 5 years (1) 5 / (5+4+3+2+1) = 5/15 = 1/3 (2) 4 / (5+4+3+2+1) = 4/15 ... (5) 1 / (5+4+3+2+1) = 1/15 |
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Declining Balance |
__*___ x (% straight line) x (Cost - Acc. Dep) *depends on amount of declining balance. 2 = double declining NO SALVAGE VALUE But, never depreciated below salvage |
