FAR Typical Items Ch 2 matrix

Question Answer Side 3

Payment made at the beginning of a period is what type of annuity? ANNUITY IN ADVANCE
What type of the annuity is payable at the end of each period. ORIGINAL ANNUITY
What type of the annuity is payable at the BEGINNING of each period. ANNUITY DUE
When an account is written off, BOTH A/R and Allowance for uncollectible accounts
are _________
DECREASED
1. Make a journal entry to recognize periodic uncollectible accounts expense and
provide allowance
2. To write off uncollectible account
1 Bad debt expense Dr
____ Allowance for uncollectible accounts CR
2 Allowance for uncollectible accounts DR
_______ Accounts Receivable CR
Current receivables acquired as a result of Customary trade terms are normally
reported at ____________ value
Long-term receivables are reported at their ______ value.
FACE VALUE
PRESENT VALUE
The effective interest rate is based on the ________ rate. Original CONTRACTUAL RATE
The interest income reflects the EFFECTIVE INTEREST RATE applied to the
___________ received.
NET PROCEEDS
Rent revenue is recognized on a _________ basis, regardless of the payment
schedule
STRAIGHT-LINE
Goods out on Consignment remain the property of the ________and must be
included on the consignor's BS at _________
Consignor
COST
_________ risk occurs when the amount of an accounting loss exceeds the amount
of the associated asset or liability recorded on the BS.
OFF-BALANCE SHEET RISK
The lower of cost or market approach requires comparison of the
"designated market" with cost.
__________ is replacement cost as long as it is lower than the net realizable value
of the inventory and higher than the net realizable value of the inventory reduced by
a normal profit margin.
The designated market
Under the PERIODIC METHOD, the ending inventory is priced at the ___________
prices during the year.
EARLIER
In order for replacement cost to be reported as the lower of cost or market,
REPLACEMENT COST would have to 1 and 2.
1. be lower than original cost
2 to fall below net realizable value minus a normal profit margin
The FIFO Perpetual inventory method will produce _________ ending inventory as
the FIFO Periodic method.
THE SAME
__________inventory system calculates COGS as the difference between cost of
goods available for sale and ending inventory. This system does not maintain
records indication what the amount of __________ inventory SHOULD BE.
PERIODIC INVENTORY SYSTEM
ENDING
The advanced commissions are simply a prepayment of future commissions
expense. It should be charged to prepaid commissions and then to SELLING
expense, NOT to ________ costs
INVENTORY
"Market " upper limit =
"Market " lower limit =

If REPLACEMENT COST is less than market lower limit -
= NET REALIZABLE VALUE = selling price - processing costs
= NET REALIZABLE VALUE - NORMAL PROFIT MARGIN

-> Market= the lower limit; now Inventory is valued at LOWER Market or Cost
In the period of rising prices, changing from FIFO to LIFO will cause
ending inventory to ___________
COGS to ______________
Net Income to ____________
DECREASE
INCREASE
DECREASE
The overstatement of ENDING inventory results in an __________ of COGS =>
___________ of Gross Profit
UNDERSTATEMENT
OVERSTATEMENT
INDEX for Dollar-value LIFO = inventory at current year cost / inventory at base-year cost
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FAR Typical Items Ch 2 matrix
The LOWER of COST OR MARKET rule will not apply if:
1,2
1 The subsequent sales price of an end product is not affected by its market value
OR
2 The company has a firm price contract
Under GAAP, _________ value is the median of an inventory item's replacement
cost, its market ceiling, and its market floor.
MARKET
________ cost is the cost to purchase thee items of inventory as of the valuation
date.
REPLACEMENT
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