F3-Simulations

Question 1

How to account for a voided check dated the following year for a bank reconciliation

Answer 1

You add it back to the book balance

Question 2

How to do a bank reconciliation when given bank statement excerpts and the G/L cash account

Answer 2

Look at the 2 and see if things are missing on both sides, if not they must be included, usually you can look to see towards the end of the month

Question 3

What is a right of setoff for bank reconciliations

Answer 3

It means when you have negative balances in a bank account, the bank can use funds from another account to offset the negative balance so you don’t incur a negative balance

Question 4

Balance sheet method

Answer 4

Multiply gross ending A/R by % to determine ending allowance for doubtful accounts

Question 5

Aging method for allowances

Answer 5

All you do is multiply the A/R amounts by the appropriate amounts and add them up to get ending allowance for doubt full accounts balance

Question 6

Note about capitalizing the cost of land with land improvements

Answer 6

Do not include land improvements in the cost of land or interest from loan to purchase land, that’s only for construction in progress

Question 7

Capitalization of building

Answer 7

Includes interest incurred during construction and cost of labor & materials from when you first incur expenditures from borrowed funds to when shit is ready to use

Question 8

Avoidable Interest to be capitalized with weighted average

Answer 8

1. ) Find Average Accumulated Expenditures(AAE)
2. )Add up all the debt outstanding
3. )Multiply each debt instrument by interest rate and add up
4. )Divide sum of interest by sum of debt outstanding & then multiply by AAE

Question 9

Avoidable Interest to be capitalized with specific method

Answer 9

1. ) Find Average Accumulated Expenditures(AAE)
2. )Add up all the debt outstanding not related to construction
3. )Multiply each debt instrument not related to construction by interest rate and add up
4. )Divide sum of interest by sum of debt outstanding
5. )Multiply construction portion by interest rate
6. )Subtract construction portion from AAE then multiply that number by nonconstruction rate
7. )Add construction and nonconstruction totals

Question 10

Units of production method

Answer 10

1. If there there is salvage value remove it from the depreciable base
2. Divide amount manufactured by amount expected to be manufactured for the year
3. Multiply 1 and 2 to get depreciation expense

Question 11

Nonmonetary transactions that have commercial substance: valuing new asset when you pay cash vs when you receive cash

Answer 11

1. Paying Cash: FV of new asset equals FV of old asset plus cash
2. Receiving Cash: FV of new asset equals FV of old asset minus cash

Question 12

Commercial substance vs no commercial substance meaning

Answer 12

Commercial substance means the things being exchanged are different when no commercial substance means they are the same

Question 13

No Commercial Substance - Cash is paid

Answer 13

You don’t recognize a gain when you pay cash

Question 14

No Commercial Substance - Cash Received (<25%)

Answer 14

1. ) Divide Cash Received by either (cash + FV new machine) or FV of asset given up
2. ) If less than 25%, multiply by gain and record that number as gain
3. ) Plug in FV

Question 15

No Commercial Substance - Cash Received (>25%)

Answer 15

1. ) Divide Cash Received by the FV of the New Asset

2. )If greater then record the full gain

Question 16

Average gross margin for inventory simulations

Answer 16

Remember for inventory sake that if you are given the average gross margin then you need to calculate into inventory for questions

Question 17

What is a receiving report for inventory

Answer 17

Basically for a company it shows you receives inventory

Question 18

Note receivable discounting

Answer 18

1. To calculate maturity value multiply rate by face value and add to face value
2. Calculate bank discount my multiplying discount rate by maturity value and then subtract from maturity value to see amount paid by bank
3. interest income is step 2 minus original face value