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67 Cards in this Set

  • Front
  • Back
What method of estimating uncollectible accounts emphasizes asset valuation?
Aging of receivables method
What types of inventory system can be used with moving average method - periodic and/or perpetual?
If LIFO is used for tax purposes it must be used for GAAP financial statments
When using the direct write off method, what accounts are debited and credited whn a collection is made on an account previously written off?
credit Uncollectible accoutns recovered
What's the difference between selling accoutns receivable with and without recourse?
With recourse: the factor can resell any uncollectible receivables back to the seller
Using the conventional retail method, calculate ending inventory at cost and retail:
cost retail
Beg inv 25,000 39,000
purchases 35,000 60,000
markups 1,000
markdowns 2,000
sales 88,000
cost complement: 60,000 / 100,000 = 60%
ending inv retail: 10,000
ending inv cost: 6000
What is the journal entry when factoring accounts receivable without recourse?
Due from factor
loss on sale of receivable
accoutns receivable
When is the weighted average inventory method particualry suitable?
homogeneous products and periodic inventory system
This is used as a measure of solvency
working capital
In order for a CD to be considered a cash equivalent, the maturity must be in this amount of time.
90 days
What are the 2 methods for recognizing uncollectible accounts receivable? Which is gaap?
direct write-off method
allowance method (gaap)
know how to calculate dollar value LIFO (page F4-60) with price index.
What's the formula to cmpute the price index for dollar-value LIFO?
ending inventory at current year cost / ending inventory at base year cost
When goods are sold to the buyer with the right of return, when are the goods included inthe seller's inventory?
If the amount of goods likelyu to be returned can't be estimated.
What accounts are debited and credited when recording an allowance for sales retunrs??
sales returns (contra sales)
allowance for sales returns (contra AR)
Know how to calculate ending inventory using LIFO retail when a LIFO layer is depleted (page F4-68).
What is the market ceiling?
the item's net selling price less the costs to complete and disopose (called the net realizable value)
Are revenues recorded gross or net of trade discounts?
Full costing is also called what?
Absorption costing
Who pays shipping costs when FOB shipping point?
Which is more current,
a) weighted average method
b) moving average method
moving average method
Under FIFO, ending inventory and cost of goods sold are the same
lcm can be applied to items, categories or total inventory. Which is most conservative?
Applying to each item
What's the disadvantage of using the periodic inventory system?
Shortages are part of cost of goods sold
Explain the modified perpetual system?
Only quantities are maintained on a perpetual system.
Is restricted cash considered cash or a cash equivalent?
What method of estimating uncollectible accounts emphasizes matching?
Percent of sales method
The buyer rejects nonconforming goods. The goods are still in the buyer's possession, prior to their return to the seller. Who does the title belong to?
the seller
If conditions have not been explicitly agreed upon, when does title pass from the seller to the buyer?
At the time the seller's performance is complete
When should an allowance for sales returns be established?
When past experience shows a material percentage of receivables returned.
What are the three methods of estimating uncollectible acconts?
1. percentage of sales
2. percentage of accoutns receivable at year end
3. Aging of receivables
Calculate ending inventory at retail and LIFO cost using the LFIO cost retail inventory method.
cost retail
Beg. inv. 25,000 39,000
purchases 35,000 60,000
markups 1,000
markdowns 2,000
sales 88,000
Cost complement: 25,000/39,000
ending inventory retail: 10,000
ending i nventory cost: 6,410
In order for factoring with recourse to be a sale, what conditions must be true?
1. The seller's obligation for uncollectible accounts can be reasonably estimated
2. The transferor surrenders congrol of the future economic benefits of receivable sto the buyer
3. The transferor can't be required to repurcharse the receivables
If a note receivable is discotned with recourse, how is it accounted for in th efinancial statemtns?
1. On balance sheet with a contra acount (note receivable discounted)
2. removed from balancesheet and liability disclosed in notes
Be familiar with the gross profit method of inventory cost flow asusmption.
Understand how to use the FIFO cost retail mthod to find the cost complement and ending inventory at cost.
What are the two non GAAP inventory cost flow assumptions?
Base stock method and Next In, first out method
What is market value?
The middle value of
a) replacement cost
b) market ceiling
c)market floor
What is the market floor?
The market ceiling, less a normal profit margin
Know how to calculate the LIFO retail inventory method (pg F4-67)
What are the two methods used toa ccount for sales with a cash discount?
Gross and net method
What type of inventory system is used with the gross profit method?
What inventory system is used with the retail method?
Absorption costing is also called what?
Full costing
Using the FIFO cost retail inventory method, calculate ending inventory with FIFO retail and FIFO cost.
cost retail
Beg. inv 25,000 39,000
Purchases 35,000 60,000
markups 1,000
markdowns 2,000
sales 88,000
cost complement: 35,000/59,000 = 59.32%
Ending inv at FIFO retail: 10,000
ending inventory at fifo cost: 5,932
calculate ending inventory at retail and cost using the LIFO retail inventory method.
cost retail
Beg inv 200,000 300,000
purchases 550,000 800,000
transportation 50,000
markups 100,000
markdowns 60,000
sales 750,000
cost complement: 600,000 / 840,000 = 71.4%
end inv retail: 390,000
end inv cost: 264,260
(LIFO layer = 64,260)
This inventory cost flow doesn't match current costs to current expenses.
When using fifo, ENDING INVentory and cost fo goods sold is the same wheter using the periodic or perpetual inventory system.
Can you use LIFO if that doesn't represent the physical flow of goods?
Using cost retail inventory method, calculate ending inveotryu at cost and retail
cost retail
beg. inc 25,000 39,000
purchases 35,000 60,000
markups 1,000
markdowns 2,000
sales 88,000
cost complement: 60,000 /98,000 = 61.22%
end inv at retail: 10,000
end inv at cost: 6122
Total depreciation is calculated by multiplying the unit depletion rate times the number of units
1) sold
2) extracted
When chainging the useful life of a depreciable asset, is the change accounted for retrospectively or prospectively?
Is component depreciation available for
a) Macrs depreciation
b) straight line
a) no
b) yes
what are the disadvantages of the straight line method?
1. Doesn't reflect difference in usaage of asset from year to year
2. Doesn't accurately match costs with re venue
Name the 2 methods of depletion. Which is GAAP?
1. Cost depletion (gaap)
2. percentage depletion
Whcih statement is true?
a) cost depletion can exceed percentage depletion
b) percentage depletion can exceed cost depletion
Are donated fixed assets receorded at NBV or FMV?
If during cosntrusction of a fixed asset, you haven't taken out a specific contructionloan, what interest rate do you use?
The weighted average
Which depreciation methods are available for group deprectiation?
Straight line
What accoutn is credited when a fixed asset is recevied by donation?
Contribution revenue
With an improvement or replacement, and the carrying value of the old asset is knowm, how do you account foer it?
Remove carrying value, recognize gain or loss, and capitalize the improvement/replacement
How is gain/loss accounted for when selling an asset that's being depreciated in a group?
Debti/creidit accumulated depreciation
What's the formula for the 1st and 2nd year's depreciation using the sum of the years digit method for an asset with a depreciable base of $10,000 and a lif eof 4 years.
year 1 $10,000 x 4/10
year 2: $10,000 x 3/10
When using a declining balance method of depreciation, is salvage value taken into consideration?
Not for the depreciation rate and the yearly depreciation. Just make sure to not depreciate below salvage value.
In a replacement or improvement, and the carrying value is unknown, how do you account for it when
a) asset's life is extended
b) the usefulness of the asset is increased
a) debit accumulated depreciation for the cost of the improvement
b) capitalize
Are extraordinary fixed asset repairs expensed or capitalized?
Capitalized (treat as addition or improvement)
What 3 conditions must be met in order to begin capitalization of contruction interst?
1. Expenditures must have been made
2. Activities that are necessary to get the asset ready for its intended use are in progress.
3. Interest cost is being incurred.