Notecards I made from Wiley's 2012 CPA Exam Review
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| show | Includes both Cash (on hand/demand deposits) and cash equivalents (short-term highly liquid investments)
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| What is meant by the term cash equivalents? | show 🗑
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| show | 1. Yes
2. Debit: Special Cash Fund
Credit: Cash
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| show | 1. Yes
2. No
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| show | Separately, not as a current asset
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| show | Necessary if made bank deposits, made to determine what the correct cash balance is
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| What are the bank reconciliations that do not require adjusting JOURNAL entries? | show 🗑
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| What are some bank reconciliations that do require adjusting JOURNAL entries? | show 🗑
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| How is a bank reconciliation performed? | show 🗑
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| Is a special account needed for bank reconciliation adjusting entries? | show 🗑
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| What is a proof of cash or a four column cash reconciliation? | show 🗑
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| show | Sales at net: record sale minus discount in a/r and sales, if discount not taken; credit discount not taken account
Sales at gross: Record sale same as always, if discount taken; debit sales discount account
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| show | bad debts are expenses in the period they are written off. Used for tax purposes.
Debit: Bad debt expense
Credit: AR
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| show | try and estimate the amount of uncollectible receivables.
1st entry use estimated amounts: Debit: Bad debts expense
Credit: Allowance for bad debts
2nd entry use actual uncollectible amount: Debit: Allowance for bad debts
Credit: AR
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| Describe the annual sales percentage method of determining bad debt expense under the allowance method | show 🗑
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| show | Can apply % to total AR or subsets based on an aging schedule
- use AR* % to estimate bad debts
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| What are three major types of transfers, and give a word on each. | show 🗑
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| What are the other three major types of transfers, and give a word on each. | show 🗑
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| What conditions need to be met for a transfer to be considered a sale? | show 🗑
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| What characteristics must an asset have to be a participating interest? | show 🗑
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| show | Sell receivables to a financing institution
1. If factor doesn't get money from customer, then transferor must pay remaining balance
2. outright sell receivable, take a loss on factor's interest expense and fee. Get some of a/r back
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| show | 1.During initial entry for the sale of the a/r to the factor, debit factor's holdback receivable by stated % of a/r
2.Return: Debit: sales returns Credit: factor's holdback receivable
3.End return period: Debit: cash Credit: factor's holdback receivable
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| show | Transaction is same as without recourse, but increase loss of sale by recourse obligation fair value (estimated uncollectible accounts), and add a credit to the recourse obligation account
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| What happens if in factoring receivables with recourse more or less accounts are collected on than the recourse obligation account alloted for? | show 🗑
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| show | 1. only when contractually separated from the underlying asset
2. collecting payments, paying tax/insurance, monitoring delinquencies, foreclosing, investing, remitting fees
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| When should a service be recorded as an asset? liability? neither? | show 🗑
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| Should servicing assets be netted against servicing liabilities? | show 🗑
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| show | 1. initially record at FV
2. amortize in proportion to receipt of estimated net servicing income/loss
3. Test for impairment based on fair value, if asset impaired show in a valuation allowance account. liability FV>BV then increase liability, show a lo
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| Define the fair value method when dealing with service assets/liabilities | show 🗑
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| What disclosure are required for servicing assets/liabilities? | show 🗑
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| What happens in securitizations? | show 🗑
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| show | Treated as a secured borrowing
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| What is the accounting necessary for a secured borrowing? | show 🗑
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| show | 1. transferor still carry as asset, transferee not record
2. Transferee record asset at FV & liability to return, transferor reclassify it as receivable and report separately on BS
3.transferor derecognize asset, transferee recognized if not already
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| Define pledge | show 🗑
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| show | AP, NP, loan obligations(current part of long term debt requiring use of current asset to pay), dividends payable(when declared), payroll expense(employee&employer taxes), property tax, bonus payments, cash advances from customers
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| How is the effective interest rate calculated? | show 🗑
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| Define determinable liabilities | show 🗑
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| show | obligations may exist, but are dependent on uncertain future events
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| If a contingency is thought to be a loss, when should it be accrued? and how?. note this means before loss happens before contingency resolved | show 🗑
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| What is the journal entry for a contingency when recognized? When actually redeemed/used? | show 🗑
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| If the loss from litigation is probable on the balance sheet date and the loss is reasonably estimated, should it be recognized on the balance sheet? | show 🗑
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| show | 1. Debit: Loss from litigation
Credit: Liability from litigation
2. Debit: Liability from litigation
Credit:Cash
Credit:Recovery of loss from litigation
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| For employee compensated absences to be recognized before they are taken, what 4 conditions must be met? | show 🗑
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| show | Nothing until the contingency is resolved and the gain occurs. (gain is recognized during period contingency is resolved)
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| If a loss contingency were remote, it is normally not even disclosed in the financial statements. What are some exceptions to this rule? | show 🗑
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| show | Cash, Net receivables, market securities/ Current liabilities
-measures ability to pay current liabilities from cash and near cash items
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| What is the current ratio? | show 🗑
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| What is receivable turnover? | show 🗑
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| What is number of days' sales in average receivables? | show 🗑
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| show | COGS/Average inventory
-Indicates how rapidly inventory is sold
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| show | 365/inventory turnover
-Measures number of days inventory is held before sale
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| What is length of operating cycle? | show 🗑
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| Under IFRS, when are assets considered current? Liabilities? | show 🗑
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| Under IFRS, define financial asset. How can it be measured? | show 🗑
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| show | a contractual obligation to deliver cash/financial asset, exchange financial instruments at a loss, or a contract that may be settled in its own equity instruments
2.amortized at cost using effective interest method or fair value thru profit or loss
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| show | US GAAP: may report in non-current liability section if there is intent and ability to refinance
IFRS: place under current liability unless there is an agreement in place prior to the balance sheet date
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| show | what US GAAP calls a contingent liability, the outcome is probable (>50%) and measurable
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| Under IFRS what is classified as a contingency? | show 🗑
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