Bad Debt and Allowances (Note: when figuring our write offs, only look at change in A/R or Allowances,

not delta of both.)

Inventory Beg Invty + Purchase End Invty = COGS LIFO reserve = InvtyFIFO - InvtyLIFO COGSLIFO - COGSFIFO = LIFO reserve COGSLIFO = Big InvLIFO + Purchases EndInvLIFO Net Income (FIFO)= Net Income (LIFO)+Change in LIFO Reserve When comparing LIFO and FIFO companies rebuild I/S and B/S using workflow: InventoryAssetsCOGSNet IncomeRetained Earnings
Drop in LIFO reserve could indicate income is inflated because inventory is not being replenished.

Write off: Reduce A/R & allowance by the same amount -Specific accounts are written off only when they are determined indeed uncollectible -Income is reduced when bad dept expenses are estimates, not when accounts are written off.

Recording Depreciation, and Stock Transactions

If bond %-age > yield Premium Debt retired at maturity results in no gains or losses, but debt retired before : Cash proceeds BV = gain or loss If purchasing back at a loss, debit cash and Gain on Bonds Payable

-Column D shows up on B/S as Lease Obligation -Operating leases make orgs look more efficient by more rev w/ fewer assets

If a firm changes its salvage value or useful life, adjustments are made to future depreciation, not prior periods income.

For DDB rate = 2*(1/useful life) For straight line rate = 1/useful life -Accounting for advertising must be expensed when occurred except Direct Response Advertising -Must write asset down to MV if future undiscounted cashflows < BV of Asset -Software cost is labeled cost but is actually an asset

Shareholders Equity

General shit to remember: -Coupons are semiannual unless otherwise notes -New Revenue is NI(old) + Margin (1-Tax Rate) -Costs are capitalized once they are considered assets

Income Tax -Tax expenses are computed based on GAAP income -Tax payable to IRS computed on taxable income -Deferred income taxes line is accounting for difference btn GAAP & IRS tax liabilities

-A.F.S gains & losses bypass I/S -Should recognize employee stock over vesting period