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This document contains questions about accounting for cash, receivables, inventory, and biological assets. It defines key terms like cash, receivables, inventory, and asks about measurement, presentation in financial statements, and accounting treatments. Specific questions address accounting for foreign currency, undelivered checks, allowance method for bad debts, and cost flow assumptions like FIFO, LIFO, and weighted average.
This document contains questions about accounting for cash, receivables, inventory, and biological assets. It defines key terms like cash, receivables, inventory, and asks about measurement, presentation in financial statements, and accounting treatments. Specific questions address accounting for foreign currency, undelivered checks, allowance method for bad debts, and cost flow assumptions like FIFO, LIFO, and weighted average.
This document contains questions about accounting for cash, receivables, inventory, and biological assets. It defines key terms like cash, receivables, inventory, and asks about measurement, presentation in financial statements, and accounting treatments. Specific questions address accounting for foreign currency, undelivered checks, allowance method for bad debts, and cost flow assumptions like FIFO, LIFO, and weighted average.
2.) Define cash Equivalents - assets easily convertible to cash 3.) Explain measurement of cash - face valiie 3.1) is there a difference between initial and subsequent measurement of cash? 4.) Explain the financial statement presentation of cash and cash equivalent - should be shown as the first- line item under current assets 5.) Explain a compensating balance - Balance needed to maintain a bank account 6.) Explain treatment of foreign currency - shall be converted to PHP, measured at current exchange rate 7.) Differentiate undelivered check, post dated check drawn, and stale check POST DATED: bears a date subsequent to the end of reporting period STALE CHECK: Check not encashed by the payee w/in a relatively long period of time UNDELIVERED: merely drawn and recorded but not given to the payee before the end of reporting period 8.) explain cash short and cash overage - To record unknown shortages and overages of cash
Receivables Question for Comprehension
1.) Define receivables - Due from a customer, could be in a form of promissory note (NR) or oral (AR); financial assets that represent a contractual right to receive cash or another financial asset from another entity. 2.) Explain the initial and subsequent measurement of trade accounts receivable INITIAL: at fair value (plus transaction costs) SUBSEQUENT: amortized cost (NRV of AR) 3.) explain two methods of recording accounts receivable - Net and Gross method 4.) explain the allowance method for accounting of bad debts - Direct Write-off and Allowance method 5.) Explain direct write off method of accounting for bad debts - Bad Debts are deducted directly in the AR account 6.) explain presentation of doubtful accounts in the income statement - contra-assset account 7.) what is a negotiable promissory note? Unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand or at a fixed determinable future time a sum certain in money to order or to bearer 8.) explain initial measurement of short-term n/r - at present value, face value 9.) explain initial measurement and subsequent measurement of long term n/r INITIAL: face value if interest-bearing, present value if non-interest (discounted value at future cash flow using effective interest rate) SUBSEQUENT: amortized cost using effective interest method 10.) what is the meaning of zero interest notes - Interest not stated but hence already included in the principal amount 11.) explain compounding of interest in relation to interest bearing notes receivable - Simultaneously gaining interest being added to a new principal amount 12.) what is the meaning of present value of notes receivable - The value today 13.) what are the two types of rcvbl financing? 14.) elaborate the four common forms of receivable financing - Pledging, Assigning, Factoring, Discounting 15.) distinguish pledging and assignment from factoring of notes - Pledging provides a collateral for the NR or Loan Receivable. Assigning is secured borrowing evidenced by a financing agreement and a promissory note 16.) differentiate without guarantee and with guarantee with respect to factoring of Accounts Receivable WITH GUARANTEE: failed sale if customer fails to pay, full responsibility is passed on to the company; WITHOUT GUARANTEE: 17.) give the pro-forma entry for with and without guarantee: WITH GUARANTEE: Recourse Liability account is used. WITHOUT GUARANTEE: Purchaser assumes the risk of collectibility and absorbs any credit losses Inventory Questions for Comprehension 1.) Define inventories - assets held for sale in the ordinary course of business, in the process of production for such sale or in the form of materials or supplies to be consumed in the production process or in the rendering of services 2.) Explain two classes of inventory - Trading concern (merchandise inventory) and Manufacturing concern 3.) what goods are includible in inventory: Goods in Transit, Consigned goods, Special Sales Agreement 4.) try to create a test how to determine inventory if its included (not needed to be true and legitimate) 5.) Who is the owner of goods in transit? - If shipping point, rights are transferred to the buyer. FOB Destination, rights will be transferred upon the receiving of goods in the agreed destination (door to door) 6.) differentiate FOB shipping point and Destination FOB SHIPPING POINT: Ownership transferred upon receiving goods at shipping point FOB DESTINATION: Ownership only transferred when goods arrived at destination. 7.) what is consignment and who is the owner of its goods - goods are still recorded in the inventories of consignor 8.) Explain FIFO, weighted avg, and Moving avg: FIFO - First In, First Out; First good purchased, first good to be sold Weighted Average - in order to compute, TGAS and ending inventory is needed Moving Average - a new average unit cost is computed each time it makes a purchase 9.) Explain specific identification ( try to find a certain example online and answer it) - company includes in COGS the costs of specific items sold. Includes in inventory the costs of the specific items on hand. Only used when handling a relatively small number of costly, easily distinguishable items/ 10.) explain lifo: Last purchased good, first to be sold. 11.) how is relative sales price method of allocating inventory cost possible 12.) when is Net Realizable Value applied to inventory? - if inventory declines in value below its original cost, departure from historical cost occurs. Thus, writing down inventory at NRV 13.) what are purchase commitment: agreements to buy inventory weeks, months, or even years in advanced. Seller retains title to the merchandise or materials covered in the purchase commitment 14.) when is a loss on purchase commitment recognized? If the contract price is greater than the market price and market price is declining, buyer should recognize a loss 15.) when is a gain and until how much can you recognized a gain in purchases commitment? If buyer can fully recover from the loss (purchase commitment liability) 16. ) Define biological asset, agricultural produce and harvest BIOLOGICAL ASSET - non-current asset, usually plant or livestock. Recorded at initial recognition (Carrying Value) and at the end of each period (NRV) AGRICULTURAL PRODUCE - Produced by the biological asset 17.) try to give example of agricultural produce and the boilogical asset it is related to 18.) explain the recognition of biological asset and agricultural produce. - at Net Realizable Value 19.) explain measurement of biological asset - recorded at initial recognition and at the end of each period at fair value less cost (NRV) 20.) explain the measurement of agricultural produce as it grows ans once harvested - NRV (fair value less costs to sell) upon harvesting. Once harvested, NRV of agricultural produce become its cost. 21.) Try to explain recognition of government grant related to biological asset According to PAS 41: Biological assets less costs to sell
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