Final Exam | ACIS 3115 - Intermediate Financial Acct, Quizzes of Financial Accounting

Download Final Exam | ACIS 3115 - Intermediate Financial Acct and more Quizzes Financial Accounting in PDF only on Docsity! TERM 1 Cash equivalents DEFINITION 1 Maturities of less than 90 days TERM 2 Examples of cash equivalents DEFINITION 2 Money market fundsTreasury billsCommercial paper TERM 3 Separation of duties-internal control over cash receipts DEFINITION 3 Separate responsibilities for receiving cash, recording cash transactions, and reconciling cash balances TERM 4 Separation of duties-internal control over cash disbursements DEFINITION 4 Separate responsibilities for cash disbursement documents, check authorization, check signing, and record keeping TERM 5 All disbursements, except petty cash, made by: DEFINITION 5 Check TERM 6 Restricted cash DEFINITION 6 Cash that management intends to use for a specific purpose (ex. future plant expansion;Contractually restricted for a specific purpose (ex. future payment of debt) TERM 7 How is restricted cash classified? DEFINITION 7 Investment and funds or other assets TERM 8 Compensating balances DEFINITION 8 Some specified minimum amount that must be maintained on deposit with a bank that has made a loan to the company;May be current or noncurrent depending on term of the loan;If not contractually binding, note disclosure is sufficient TERM 9 Accounts receivable DEFINITION 9 Classified as current assetsRecorded net of trade discountsShould be recorded at PRESENT VALUE (however GAAP doesn't require it because the difference between future and present value is immaterial usually) TERM 10 Cash discounts (sales discounts) DEFINITION 10 Encourages prompt paymentGross method vs. Net methodGross method is most commonly used TERM 21 Balance Sheet approach DEFINITION 21 Also called Percentage of Receivables ApproachFocuses on collectibility of receivablesCompute desired balance of allowance for uncollectible accountsCompanies may apply this method using:1. One composite rate, OR2. An aging schedule using different rates TERM 22 Do write-offs affect income? DEFINITION 22 No;A/R is a balance sheet account, so income stmt not affected TERM 23 Interest on a note receivable DEFINITION 23 Face amount x Annual rate x Fraction of annual period = Interest TERM 24 Effective interest rate= DEFINITION 24 Interest Sales Revenue TERM 25 Financing with receivables: cash may be obtained by: DEFINITION 25 1. Secured borrowing2. Sale of receivables TERM 26 Factor DEFINITION 26 A financial institution that buys receivables for cash, handles the billing and collection of the receivables, and charges a fee for the service TERM 27 Conditions for a sale of receivables: DEFINITION 27 1. Receivables are isolated from transferor2. Transferee has right to pledge or exchange receivables3. Transferor does not have control over the receivables TERM 28 Without recourse DEFINITION 28 Buyer bears all riskFactor charges higher fee TERM 29 With recourse DEFINITION 29 Seller bears all riskIf transaction fails to meet the 3 conditions necessary to be classified as a sale, it will be treated as a SECURED BORROWING TERM 30 Pledged A/R DEFINITION 30 Collateral for loanNo particular receivables associatedCompany retains responsibility for collection of receivablesArrangement should be described in a disclosure note TERM 31 Petty cash fund DEFINITION 31 Used for minor expendituresHas one custodianReplenished periodically TERM 32 Merchandise inventory DEFINITION 32 Goods acquired for resale TERM 33 Manufacturing inventory DEFINITION 33 Raw materialsWork in processFinished goods TERM 34 Perpetual inventory system DEFINITION 34 Inventory account is continuously updated as purchases and sales are made TERM 35 Periodic inventory system DEFINITION 35 Inventory account is adjusted at the end of a reporting period TERM 46 LIFO reserve DEFINITION 46 The difference between the inventory method used for internal reporting purposes and LIFO;Contra account to inventory TERM 47 Pool DEFINITION 47 Groups of items that are physically similar or economically similarReduces risk of LIFO liquidation TERM 48 Goal of Dollar Value LIFO: DEFINITION 48 Determine if an increase in ending inventory over beginning inventory is due to a cost increase or an increase in the quantity of units TERM 49 Market= DEFINITION 49 Current replacement cost;Should not be greater than the "ceiling" or less than the "floor" TERM 50 Compare designated market to cost and: DEFINITION 50 Select the lower value TERM 51 Ceiling (NRV)= DEFINITION 51 Selling price - estimated disposal cost TERM 52 Floor= DEFINITION 52 NRV - normal profit margin TERM 53 Does GAAP allow reversals? DEFINITION 53 No; can never write back up if it goes up in value TERM 54 Does IFRS allow reversals? DEFINITION 54 Yes TERM 55 2 methods of estimating ending inventory: DEFINITION 55 Gross profit method---> not GAAPRetail inventory method--- >GAAP TERM 56 What inventory estimation method does GAAP use? DEFINITION 56 Retail inventory method TERM 57 Gross Profit on selling price= DEFINITION 57 Percentage markup on cost 100% + Percentage markup on cost TERM 58 Retail inventory method objective: DEFINITION 58 Convert ending inventory at retail to ending inventory at cost TERM 59 Initial markup DEFINITION 59 Original amount of markup from cost to selling price TERM 60 Additional markup DEFINITION 60 Increase in selling price subsequent to initial markup TERM 71 Understatement of ending inventory: DEFINITION 71 Overstates COGSUnderstates pretax income TERM 72 Overstatement of beginning inventory: DEFINITION 72 Overstates COGSUnderstates pretax income TERM 73 Understatement of beginning inventory: DEFINITION 73 Understates COGSOverstates pretax income TERM 74 Can research and development costs be capitalized? DEFINITION 74 No; expensed in the period incurred TERM 75 How long is a patent valid? DEFINITION 75 20 years TERM 76 Legal life of a copyright: DEFINITION 76 Life of the author plus 70 years TERM 77 Is goodwill amortized? DEFINITION 77 No; only occurs when one company buys another TERM 78 Noncash acquisitions: DEFINITION 78 Issuance of equity securitiesDeferred payments (issuance of notes)Donated assetsExchanges TERM 79 General Valuation Principle (exchanges): DEFINITION 79 Cost of asset acquired is either:Fair value of asset given up plus cash paid or minus cash received;Fair value of asset acquired, if it is more clearly evident TERM 80 When fair value cannot be determined/exchange lacks commercial substance: DEFINITION 80 Assets acquired are valued at book value, plus or minus any cash exchanged;No gains or losses are recorded TERM 81 Fair value can only be used in legitimate exchanges that have: DEFINITION 81 Commercial substance TERM 82 Depreciation, Amortization, and Depletion: DEFINITION 82 A means of COST ALLOCATION,NOT valuation TERM 83 MACRS DEFINITION 83 Used for depreciation on tax returns; form of double declining balance TERM 84 Does GAAP use component depreciation? DEFINITION 84 Optional TERM 85 Does IFRS use component depreciation? DEFINITION 85 Yes