Far Chapter 4

Front 1

What method of estimating uncollectible accounts emphasizes asset valuation?

Back 1

Aging of receivables method

Front 2

What types of inventory system can be used with moving average method - periodic and/or perpetual?

Back 2

perpetual

Front 3

FACT
If LIFO is used for tax purposes it must be used for GAAP financial statments

Back 3

n/a

Front 4

When using the direct write off method, what accounts are debited and credited whn a collection is made on an account previously written off?

Back 4

credit Uncollectible accoutns recovered

Front 5

What's the difference between selling accoutns receivable with and without recourse?

Back 5

With recourse: the factor can resell any uncollectible receivables back to the seller

Front 6

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

Back 6

cost complement: 60,000 / 100,000 = 60%
ending inv retail: 10,000
ending inv cost: 6000

Front 7

What is the journal entry when factoring accounts receivable without recourse?

Back 7

Cash
Due from factor
loss on sale of receivable
accoutns receivable

Front 8

When is the weighted average inventory method particualry suitable?

Back 8

homogeneous products and periodic inventory system

Front 9

This is used as a measure of solvency

Back 9

working capital

Front 10

In order for a CD to be considered a cash equivalent, the maturity must be in this amount of time.

Back 10

90 days

Front 11

What are the 2 methods for recognizing uncollectible accounts receivable? Which is gaap?

Back 11

direct write-off method
AND
allowance method (gaap)

Front 12

know how to calculate dollar value LIFO (page F4-60) with price index.

Back 12

n/a

Front 13

What's the formula to cmpute the price index for dollar-value LIFO?

Back 13

ending inventory at current year cost / ending inventory at base year cost

Front 14

When goods are sold to the buyer with the right of return, when are the goods included inthe seller's inventory?

Back 14

If the amount of goods likelyu to be returned can't be estimated.

Front 15

What accounts are debited and credited when recording an allowance for sales retunrs??

Back 15

sales returns (contra sales)
allowance for sales returns (contra AR)

Front 16

Know how to calculate ending inventory using LIFO retail when a LIFO layer is depleted (page F4-68).

Back 16

n/a

Front 17

What is the market ceiling?

Back 17

the item's net selling price less the costs to complete and disopose (called the net realizable value)

Front 18

Are revenues recorded gross or net of trade discounts?

Back 18

net

Front 19

Full costing is also called what?

Back 19

Absorption costing

Front 20

Who pays shipping costs when FOB shipping point?

Back 20

buyer

Front 21

Which is more current,
a) weighted average method
b) moving average method

Back 21

moving average method

Front 22

FACT
Under FIFO, ending inventory and cost of goods sold are the same

Back 22

n/a

Front 23

lcm can be applied to items, categories or total inventory. Which is most conservative?

Back 23

Applying to each item

Front 24

What's the disadvantage of using the periodic inventory system?

Back 24

Shortages are part of cost of goods sold

Front 25

Explain the modified perpetual system?

Back 25

Only quantities are maintained on a perpetual system.

Front 26

Is restricted cash considered cash or a cash equivalent?

Back 26

No

Front 27

What method of estimating uncollectible accounts emphasizes matching?

Back 27

Percent of sales method

Front 28

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?

Back 28

the seller

Front 29

If conditions have not been explicitly agreed upon, when does title pass from the seller to the buyer?

Back 29

At the time the seller's performance is complete

Front 30

When should an allowance for sales returns be established?

Back 30

When past experience shows a material percentage of receivables returned.

Front 31

What are the three methods of estimating uncollectible acconts?

Back 31

1. percentage of sales
2. percentage of accoutns receivable at year end
3. Aging of receivables

Front 32

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

Back 32

Cost complement: 25,000/39,000
ending inventory retail: 10,000
ending i nventory cost: 6,410

Front 33

In order for factoring with recourse to be a sale, what conditions must be true?

Back 33

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

Front 34

If a note receivable is discotned with recourse, how is it accounted for in th efinancial statemtns?

Back 34

1. On balance sheet with a contra acount (note receivable discounted)
OR
2. removed from balancesheet and liability disclosed in notes

Front 35

Be familiar with the gross profit method of inventory cost flow asusmption.

Back 35

n/a

Front 36

Understand how to use the FIFO cost retail mthod to find the cost complement and ending inventory at cost.

Back 36

n/a

Front 37

What are the two non GAAP inventory cost flow assumptions?

Back 37

Base stock method and Next In, first out method

Front 38

What is market value?

Back 38

The middle value of
a) replacement cost
b) market ceiling
c)market floor

Front 39

What is the market floor?

Back 39

The market ceiling, less a normal profit margin

Front 40

Know how to calculate the LIFO retail inventory method (pg F4-67)

Back 40

n/a

Front 41

What are the two methods used toa ccount for sales with a cash discount?

Back 41

Gross and net method

Front 42

What type of inventory system is used with the gross profit method?

Back 42

Periodic

Front 43

What inventory system is used with the retail method?

Back 43

Perpetual

Front 44

Absorption costing is also called what?

Back 44

Full costing

Front 45

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

Back 45

cost complement: 35,000/59,000 = 59.32%
Ending inv at FIFO retail: 10,000
ending inventory at fifo cost: 5,932

Front 46

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

Back 46

cost complement: 600,000 / 840,000 = 71.4%
end inv retail: 390,000
end inv cost: 264,260
(LIFO layer = 64,260)

Front 47

This inventory cost flow doesn't match current costs to current expenses.

Back 47

fifo

Front 48

FACT
When using fifo, ENDING INVentory and cost fo goods sold is the same wheter using the periodic or perpetual inventory system.

Back 48

n/a

Front 49

Can you use LIFO if that doesn't represent the physical flow of goods?

Back 49

yes

Front 50

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

Back 50

cost complement: 60,000 /98,000 = 61.22%
end inv at retail: 10,000
end inv at cost: 6122

Front 51

Total depreciation is calculated by multiplying the unit depletion rate times the number of units
1) sold
2) extracted

Back 51

Extracted

Front 52

When chainging the useful life of a depreciable asset, is the change accounted for retrospectively or prospectively?

Back 52

prospectively

Front 53

Is component depreciation available for
a) Macrs depreciation
b) straight line

Back 53

a) no
b) yes

Front 54

what are the disadvantages of the straight line method?

Back 54

1. Doesn't reflect difference in usaage of asset from year to year
2. Doesn't accurately match costs with re venue

Front 55

Name the 2 methods of depletion. Which is GAAP?

Back 55

1. Cost depletion (gaap)
2. percentage depletion

Front 56

Whcih statement is true?
a) cost depletion can exceed percentage depletion
b) percentage depletion can exceed cost depletion

Back 56

B

Front 57

Are donated fixed assets receorded at NBV or FMV?

Back 57

FMV

Front 58

If during cosntrusction of a fixed asset, you haven't taken out a specific contructionloan, what interest rate do you use?

Back 58

The weighted average

Front 59

Which depreciation methods are available for group deprectiation?

Back 59

Straight line

Front 60

What accoutn is credited when a fixed asset is recevied by donation?

Back 60

Contribution revenue

Front 61

FIXED ASSETS
With an improvement or replacement, and the carrying value of the old asset is knowm, how do you account foer it?

Back 61

Remove carrying value, recognize gain or loss, and capitalize the improvement/replacement

Front 62

How is gain/loss accounted for when selling an asset that's being depreciated in a group?

Back 62

Debti/creidit accumulated depreciation

Front 63

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.

Back 63

year 1 $10,000 x 4/10
year 2: $10,000 x 3/10

Front 64

When using a declining balance method of depreciation, is salvage value taken into consideration?

Back 64

Not for the depreciation rate and the yearly depreciation. Just make sure to not depreciate below salvage value.

Front 65

FIXED ASSETS
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

Back 65

a) debit accumulated depreciation for the cost of the improvement
b) capitalize

Front 66

Are extraordinary fixed asset repairs expensed or capitalized?

Back 66

Capitalized (treat as addition or improvement)

Front 67

What 3 conditions must be met in order to begin capitalization of contruction interst?

Back 67

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.