Examination_3_Preparation_Document

Examination_3_Preparation_Document - Acctg 301 Final Exam...

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Acctg 301 – Final Exam Topic Review Sheet Questions will be selected from the topic areas below. Cash and Receivables: Cash and cash equivalents Effective control procedures over cash Accounts receivable recording at net and gross Cash and trade discounts – interest effect of former Accounting for receivables Accounts receivable – reporting at NRV Write-offs using allowance method. Recovery entries Adjusting for bad debts Income statement approach Aging of receivables (balance sheet approach Notes receivable – accounting for long-term notes. (Note that these questions may well require your computing the present value of a note. You should be prepared to handle that, either using a business calculator or PV tables. The latter will be provided.) Interest-bearing note, stated rate = market rate Interest-bearing note, stated rate < market rate Non interest-bearing note. Recording related interest revenue – including amortization of related discount using effective-interest rate method. (Note that I will not give you a situation where you have to amortize a premium on a note receivable. Accounts receivable activity ratios. Inventories Lecture 1: Physical units to be counted – shipping terms Costs to be included Recording acquisitions at gross and at net Treatment of discounts lost account Periodic systems vs. perpetual – advantages/disadvantages of both. Cost flows LIFO, FIFO, weighted average – computations for perpetual systems only (See example in class notes.) Periodic computations will not be tested. Comparisons of impact of methods on balance sheet and income statement reporting. Impact on ratios – turnover, current, working capital Use of LIFO reserve and effect on financial statements. LIFO conformity rule LIFO liquidation Activity ratio -- inventory turnover and days sales. Also in combination with AR activity ratios from previous section. Estimation of operating cycle Gross profit ratio Acctg 301 – Examination 3 Preparation Document 1
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Inventories Lecture II: Inventory pools – what and why use? Reduces likelihood of involuntary liquidation Dollar-value LIFO What and why? Tracking inventory pools using dollar values. Increased variety of items in pools, reduces risk of involuntary liquidation of old costs. Deflate ending inventory using current index Layer Reinflate layers using appropriate index If layer eroded, do not replace when new layer formed LOCOM What? Using lower of cost or market prices to determine unit costs to use in cost flow assumptions. Why? Conservatism concept requires that probable losses relating to impairment of utility of an asset be recognized when impairment occurs. Loss of utility defined as probability that original cost cannot be recovered through normal selling price.
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