acct 3001 test 2 supplemental information

mixed-attribute measurement model
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Terms in this set (102)
notesvaluing noncurrent receivables and payables that carry no stated interest rate or a lower than market interest rateleasesvaluing assets and obligations to be capitalized under long-term leases and measuring the amount of the lease payments and annual leasehold amortizationpensions (and other postretirement benefits)measuring service costs components of employers' postretirement benefits expense and postretirement benefits obligationlong-term assetsevaluating alternative long-term investments by discounting future cash flows; determining the value of assets acquired under deferred payment contracts; measuring impairments of assetsstock-based compensationdetermining the fair value of employee services in compensatory stock-option plansbusiness combinationsdetermining the value of receivables, payables, liabilities, accruals, and commitments acquired or assumed in a "purchase"disclosuresmeasuring the value of future cash flows from oil and gas reserves for disclosure in supplementary informationenvironmental liabilitiesdetermining the fair value of future obligations for asset retirementspresent value-based accounting measurementsnotes leases pensions and other postretirement benefits long-term assets stock-based compensation business combinations disclosures environmental liabilitiesinterestpayment for the use o money; excess cash received or repaid over and above the amount lent or borrowed (principal)principalthe amount borrowed or investedinterest ratea percentage of outstanding principaltimethe number of years or fractional portion of a year that the principal is outstandingvariables in interest computationprincipal interest rate timelargerthe larger the principal amount, the _____ the dollar amount of interesthigherthe _____ the interest rate, the larger the dollar amount of interestlongerthe _____ the time period, the larger the dollar amount of interestsimple interestcomputed on the amount of principal onlycompound interestcomputed on the amount of principal and on any interest earned that has not been paid or withdrawnaccumulatedcompound interest uses the _____ balance (principal+interest to date) at each year-end to compute interest in the succeeding yearcompoundingassumes that unmpaid interest earned becomes part of the principal; the accumulated balance at the end of each year becomes the new principal sum on which interest is earned during the next yearfuture value of 1contains the amounts to which 1 will accumulate if deposited now at a specified rate and left for a specified number of periodspresent value of 1contains the amounts that must be deposited now at a specified rate of interest to equal 1 at the end of a specified number of periodsfuture value of an ordinary annuity of 1contains the amounts to which periodic rents of 1 will accumulate if the payments are invested at the end of each period at a specified rate of interest for a specified number of periodspresent value of an ordinary annuity of 1contains the amounts that must be deposited now at a specified rate of interest to permit withdrawals of 1 at the end of regular periodic intervals for the specified number of periodspresent value of an annuity duecontains the amounts that must be deposited now at a specified rate of interest to permit withdrawals of 1 at the beginning of regular periodic intervals for the specified number of periodsdividesto convert the annual interest rate into the compounding period interest rate, a company ______ the annual rate by the number of compounding periods per yearmultiplyingcompanies determine the number of periods by _____ the number of years involved by the number of compounding periods per yeareffective yieldthe difference between the stated interest rate and the rate of returnexceedwhen the compounding frequency is grater than once a year, the effective interest rate will always _____ the stated ratefundamental variablesrate of interest number of time periods future value present valuerate of interestunless otherwise stated, an annual rate that must be adjusted to reflect the length of the compounding period if less than a yearnumber of time periodsthe number of compounding periods (a period may be equal to or less than a year)future valuethe value at a future date of a given sum or sums invested assuming compound interestpresent valuethe value now of a future sum or sums discounted assuming compound interestfuturecomputing the unknown ______ value of a known single sum of money that is invested now for a certain number of periods at a certain interest ratepresentcomputing the unknown _____ value of a known single sum of money in the future that is discounted for a certain number of periods at a certain interest rateaccumulateif solving for a future value, ______ all cash flows to a future point; in this instance, interest increases the amounts of values over time so that the future value exceeds the present valuediscountif solving for a present value, _____ all cash flows from the future to the present; in this case, it reduces the amounts or values, so that the present value is less than the future amountannuityrequires the following: periodic payments or receipts (rents) of the same amount the same length interval between such rents compounding of interest once each intervalfuture value of an annuitythe sum of all rents plus the accumulated compound interest on themordinaryif rents are due at the end of the period, it is an ______ annuitydueif rents are due at the beginning of the period, it is an annuity _____cashthe standard medium of exchange and the basis for measuring and accounting for all other itemsreceivablescompanies treat postdated checks and IOUs as _____, as well as travel advances if collected from employees or deducted from their salariescurrent assetsbecause petty cash and funds and change funds are used to meet current operating expenses and liquidate current liabilities, companies include these funds in _____ _____ as cashissues of reporting cashcash equivalents restricted cash bank overdraftscash equivalentsshort-term, highly liquid investments that are both readily convertible to known amounts of cash and so near maturity that they present insignificant risk of changes in value because of changes in interest rates; only with maturities of 3 months or lessexamples of cash equivalentstreasury bills commercial paper money market fundscertificates of depositrepresent formal evidence of indebtedness, issued by a bank, subject to withdrawal under the specific terms of the instrumentmoney market fundsa variation of the mutual fund, a mix of treasury bills and commercial paper making up the fund's portfolio determines the yieldtreasury billsUS government obligations generally issued with 4-, 13- and 26-week amturitiescommercial papera short-term note issued by corporations with good credit ratingsrestricted cashcash set aside for a particular purpose; examples include petty cash, payroll, and dividend fundscompensating balancesthat potion of any demand deposit (or any time deposit or certificate of deposit) maintained by a corporation which constitutes support for existing borrowing arrangements of the corporation with a lending institutionbank overdraftsoccur when a company writes a check for more than the amount in its cash accountreceivablesclaims held against customers and other for money, goods, or servicestrade receivablescustomers often owe a company amounts for goods bought or services rendered; a company may subclassify these _____ ______, usually the most significant item it possesses, into accounts receivable and notes receivableaccounts receivableoral promises of the purchaser to pay for goods and services sold; 30-60 daysnotes receivablewritten promise to pay a certain sum of money on a specified future datenontrade receivablesarise from a variety of transactions including advances to officers and employees, advances to subsidiaries, deposits paid to cover potential damages or losses, deposits paid as a guarantee of performance or payment, dividends and interest receivable, and claims against: insurance companies for casualties sustained, defendants under suit, government bodies for tax refunds, common carriers for damaged or lost goods, creditors for returned, damaged, or lost goods, and customers for returnable itemsrecognition, valuations, and dispositionthe basic issues in accounting for accounts and notes receivableindicators that a transaction has occurredseller has a right to payment from the customer seller has passed legal title to the customer seller has transferred physical possession of the goods seller no longer has significant risks and rewards of ownership of the goods customer has accepted the assettransaction pricethe amount of consideration that a company respects to receive from a customer in exchange for transferring goods or services4 items that affect transaction pricetrade discounts cash (sales) discounts sales returns and allowances time value of moneytrade discountscompanies use these to avoid frequent changes in catalogs, to alter prices for different quantities purchased, or to hide the true invoice price from competitors; quoted in percentagescash (sales) discountsused to induce prompt payment; gross or net method is used to record thesesales returns and allowancescontra revenue account to sales revenue and offset sales revenue on the income statementdirect write-off and allowance2 methods to record uncollectible accountsdirect write-off methodwhen a company determines a particular account to be uncollectible, it debits bad debt expense; only shoes actual losses and the company will report accounts receivable at its gross amount; usually fails to record expenses in the same period as associated revenues and does not state receivables at NRV on the balance sheet (not GAAP)allowance methodinvolves estimating uncollectible accounts at the end of each periodnet realizable valuethe net amount the company expects to receive in cash3 essential feature of the allowance methodcompanies estimate uncollectible accounts receivable and compare the new estimate to the current balance in the allowance account companies debit estimated increases in uncollectibles in bad debt expense and credit them to ADA through an adjusting entry at the end of each period when companies write off a specific account, they debit actual uncollectibles to ADA and credit that amount to accounts receivablenodo companies close ADA at the end of the year?percentage-of-receivables approacha company can estimate the percentage of its outstanding receivables that will become uncollectible, without identifying specific accounts; use one composite rateaging schedule of accounts receivableapplies a different percentage based on past experience to the various age categories; prepared as a control device to determine the composition of receivables and to identify delinquent accountsinterest bearing noteshave a stated rate of interestzero interest bearing notesinclude interest as part of their face amountvaluationdiscount on notes receivable is a ______ accountfairan interest rate is presumed to be _____ unless: no interest rate is stated the stated rate in unreasonable the face amount of the note is materially different from the current cash sales price for the same or similar items or from the current fair value of the debt instrumentimputationThe process of interest-rate approximation, which occurs when a company cannot determine the fair value of the property, goods, services, or other rights, and if the note has no ready market3 special issues for accounting and reporting of receivablesfair value option disposition of receivables presentation and disclosurefair value optionreceivables are recorded at fair value, with unrealized holding gains or losses reported as part of net incomeunrealized holding gain or lossthe net change in the fair value of the receivable from one period to another, exclusive of interest revenuefactorsfinance companies or banks that buy receivables from businesses for a fee then collect the remittances directly from the customersfactoring receivablestraditionally associated with the textile, apparel, footwear, furniture, and home furnishing industries; with or without recourserecoursethe right of a transferee of receivables to receive payment from the transferor of those receivables for failure of the debtors to pay when due, the effects of prepayments, or adjustments resulting from defects in the eligibility of the transferred receivablessale without recoursethe seller of the receivable assumes no responsibility for any credit losses associated with the transferred receivablesnonrecourse transactionsthe seller: debits cash for the proceeds and credits accounts receivable for the face value of the receivables recognizes the difference, reduced by any provision for probable adjustments as loss on sale of receivables uses a due from factor account (reported as receivable) to account for the proceeds retained by the factor to cover probable sales discounts, sales returns, and sales allowancessale with recoursethe seller guarantees payment to the purchaser in the event that the debtor fails to pay3 conditions of a salethe transferred asset has been isolated from the transferor the trasferees have obtained the right to pledge or exchange either the transferred assets or beneficial interests in the transferred assets the transferor does not maintain effective control over the transferred assets through an agreement to repurchase or redeem them before their maturityrules for classifying receivablessegregate the different types of receivables that a company possesses, if material appropriately offset the valuation accounts against the proper receivable accounts determine what receivables classified in the current assets section will be converted into cash within the year or operating cycle, whichever is longer disclose any loss contingencies that exist on receivables disclose any receivables designated or pledged as collateral disclose the nature of credit risk inherent in the receivables, how the risk is analyzed and assessed in arriving at the allowance for credit losses