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ACC502-KaplanSpr'12

ACC502 Kaplan Jan'12 Evening

QuestionAnswer
How can changes in loan loss reserves show possible bad business practices? If AR is increasing dramatically and the corresponding loan loss reserves are not also increasing it may signal an inconsistant estimate for loan default rate.
What is the LIFO conformity rule? When a company uses LIFO for tax purposes, it must use LIFO for accounting purposes.
Can a company use different accounting methods (LIFO, FIFO,Avg inv cost ) on taxes & accounting purposes? As long as it's not LIFO. When a company uses LIFO on taxes they also must use it in their financial reporting.
If a company uses LIFO what must it declare in it's statements? The difference that would be in place had the instead used FIFO accounting methods.
When a company uses LIFO method, where is the difference declared if it had used FIFO? Usually the notes, under "inventory". Also called "LIFO reserves"
What factors must be present to define depreciation costs? Useful Life, Salvage value at end of life, and depreciation rate.
Name the Accumulated Depreciation How much total depreciation would be realized and Net Book Value after 2 years if: Cost was $200, salvage value was $40, and useful life of 8 years. $40 of accumulated depreciation. $160 Net Book Value.
How is double declining balance method calculated? This is double the the value of the rate which would fully depreciate the cost by end of useful life. In subsequent years, depreciation is that percent multiplied by the Net Book value. This contines until depreciated to salvage value.
Name the Accumulated Depreciation How much total depreciation would be realized and Net Book Value after 2 years if: Cost was $200, salvage value was $40, and useful life of 8 years. From first year: $50 depreciation,
Where are fair-value changes for Held-to-Maturity bond investmentes reported? They are not reported in either balance sheet or income statement.
Where would fair-value changes in a debt security show up? Depends- trading would show up on income statement and effect equity as retained earnings. Available for Sale would not show on income statement, and show as AOCI for equity.
If a copmany acquires another company for more than it's book value, what two areas are likely to account for this payment above book value? Goodwill, and possibly PPE if the PPE worth is higher than the book value.
Created by: Trevor Ray Trevor Ray on 2012-01-10



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