F4 CPA
- Increases Allowance for Uncollectibles
- No effect on A/R ✔✔When the allowance method of recognizing uncollectible accounts is
used, how would the collection of an account previously written off affect accounts receivable
and the allowance for uncollectible account?
Current liabilities of $30,000 and Long-term liabilities of $100,000. ✔✔A company has
outstanding accounts payable of $30,000 and a short-term construction loan in the amount of
$100,000 at year end. The loan was refinanced through issuance of long-term bonds after year
end but before issuance of financial statements. How should these liabilities be recorded in the
balance sheet?
GAAP = 5,515
IFRS = 5,700 ✔✔A company's inventory has the following associated values:
Cost = $5,700
Market Ceiling = $5,820
Replacement Cost = $5,480
Market Floor = $5,515
The inventory will be valued at for GAAP and IFRS?
Net Realizable Value Less Normal Profit Margin (Floor) ✔✔The original cost of an inventory
item is below the net realizable value and above the net realizable value less a normal profit
margin. The inventory item's replacement cost is below the net realizable value less a normal
profit margin. Under the U.S. GAAP lower of cost or market method, the inventory item should
be valued at:
LIFO = Decrease NI and EI (LIFO = LOWEST)
- Increases COGs ✔✔A company decided to change its inventory valuation method from FIFO
to LIFO in a period of rising prices. What was the result of the change on ending inventory and
net income in the year of the change?
Overstated EI = Overstated Current Assets = Overstated Gross Profit ✔✔A material
overstatement in ending inventory was discovered after the year-end financial statements of a
, company were issued to the public. What effect did this error have on the year-end financial
statements?
FIFO ✔✔Which U.S. GAAP inventory costing method would a company that wishes to maximize
profits in a period of rising prices use?
Understated Assets and Understated Retained Earnings ✔✔Garson Co. recorded goods in
transit purchased F.O.B. shipping point at year end as purchases. The goods were excluded
from ending inventory. What effect does the omission have on Garson's assets and retained
earnings at year end?
FIFO (first in, first out) ✔✔Assuming constant inventory quantities, which of the following
inventory-costing methods will produce a lower inventory turnover ratio in an inflationary
economy?
Replacement Cost
(Floor < Replacement Cost < NRV < Original Cost) ✔✔The replacement cost of an inventory
item is below the net realizable value and above the net realizable value less a normal profit
margin. The inventory item's original cost is above the net realizable value. Under the lower of
cost or market method, the inventory item should be valued at:
Net Realizable Value (NRV) ✔✔The original cost of an inventory item is above the replacement
cost. The inventory item's replacement cost is above the net realizable value. Under the lower
of cost or market method, the inventory item should be valued at:
Retained Earnings Overstated by 1,000
(Overstated EI = Overstated RE = Overstated Gross Margin) ✔✔A firm's ending inventory
balance was overstated by $1,000. Which of the following statements is correct according to a
periodic inventory system?
12 Months ✔✔On day 1, Clothes Co. sells clothing to Link Corp. for $40,000. Clothes ships the
clothing on day 1 and Link is obligated to pay Clothes within six months. Link is given 12 months
to return any of the clothing for a refund if it experiences low demand. Link is also given 18
months to exchange any clothing due to low demand. At the time of sale, Clothes cannot
reasonably estimate returns, but estimates $5,000 in exchanged goods. Clothes should
recognize revenue for the aforementioned transaction:
- Increases Allowance for Uncollectibles
- No effect on A/R ✔✔When the allowance method of recognizing uncollectible accounts is
used, how would the collection of an account previously written off affect accounts receivable
and the allowance for uncollectible account?
Current liabilities of $30,000 and Long-term liabilities of $100,000. ✔✔A company has
outstanding accounts payable of $30,000 and a short-term construction loan in the amount of
$100,000 at year end. The loan was refinanced through issuance of long-term bonds after year
end but before issuance of financial statements. How should these liabilities be recorded in the
balance sheet?
GAAP = 5,515
IFRS = 5,700 ✔✔A company's inventory has the following associated values:
Cost = $5,700
Market Ceiling = $5,820
Replacement Cost = $5,480
Market Floor = $5,515
The inventory will be valued at for GAAP and IFRS?
Net Realizable Value Less Normal Profit Margin (Floor) ✔✔The original cost of an inventory
item is below the net realizable value and above the net realizable value less a normal profit
margin. The inventory item's replacement cost is below the net realizable value less a normal
profit margin. Under the U.S. GAAP lower of cost or market method, the inventory item should
be valued at:
LIFO = Decrease NI and EI (LIFO = LOWEST)
- Increases COGs ✔✔A company decided to change its inventory valuation method from FIFO
to LIFO in a period of rising prices. What was the result of the change on ending inventory and
net income in the year of the change?
Overstated EI = Overstated Current Assets = Overstated Gross Profit ✔✔A material
overstatement in ending inventory was discovered after the year-end financial statements of a
, company were issued to the public. What effect did this error have on the year-end financial
statements?
FIFO ✔✔Which U.S. GAAP inventory costing method would a company that wishes to maximize
profits in a period of rising prices use?
Understated Assets and Understated Retained Earnings ✔✔Garson Co. recorded goods in
transit purchased F.O.B. shipping point at year end as purchases. The goods were excluded
from ending inventory. What effect does the omission have on Garson's assets and retained
earnings at year end?
FIFO (first in, first out) ✔✔Assuming constant inventory quantities, which of the following
inventory-costing methods will produce a lower inventory turnover ratio in an inflationary
economy?
Replacement Cost
(Floor < Replacement Cost < NRV < Original Cost) ✔✔The replacement cost of an inventory
item is below the net realizable value and above the net realizable value less a normal profit
margin. The inventory item's original cost is above the net realizable value. Under the lower of
cost or market method, the inventory item should be valued at:
Net Realizable Value (NRV) ✔✔The original cost of an inventory item is above the replacement
cost. The inventory item's replacement cost is above the net realizable value. Under the lower
of cost or market method, the inventory item should be valued at:
Retained Earnings Overstated by 1,000
(Overstated EI = Overstated RE = Overstated Gross Margin) ✔✔A firm's ending inventory
balance was overstated by $1,000. Which of the following statements is correct according to a
periodic inventory system?
12 Months ✔✔On day 1, Clothes Co. sells clothing to Link Corp. for $40,000. Clothes ships the
clothing on day 1 and Link is obligated to pay Clothes within six months. Link is given 12 months
to return any of the clothing for a refund if it experiences low demand. Link is also given 18
months to exchange any clothing due to low demand. At the time of sale, Clothes cannot
reasonably estimate returns, but estimates $5,000 in exchanged goods. Clothes should
recognize revenue for the aforementioned transaction:
