CPA EXAM 2025
Acquisition Cost
- answers-Includes all costs incurred in getting the merchandise to an entity's location and ready
for use
Acquisition cost
- answers-The acquisition cost of PP&E includes both the cash equibalent price and all costs
incurred to get the asset on location and ready for use.
Acquisition Cost - Developed Internally
- answers-Internally developed intangible assets are likely the result of research and development
activities which are expensed in the period incurred. Therefore, the capitalized cost of an
internally developed intangible asset usually is composed of the legal and other related
registration costs.
Assigning Accounts Receivable
- answers-- Assignment of A/R normally is done with recourse
- Assignment usually is done without notification to customers
Available-for-sale Securities
- answers-- Debt or Equity securities not classified as either HTM or Trading
- Debt is classified on BS by maturity date
- Equity securities are classified by mgt's intent
- Carried on BS at aggregate FMV
- Unreal G/L go directly to SH equity (other comprehensive income)
Bad Debts - Allowance Method
- answers-Income Statement Approach
Balance Sheet Approach
, Bad Debts - Direct Write-Off Method
- answers-- No entry for bad debts until customer actually defaults.
- At default, the cutomer's account is written off.
- Theoretically weak, matching issue
- Only allowed if bad debt expense is immaterial
Balance Sheet Approach
- answers-- Estimate of bad debt expense is based on the balance sheet
- Period sales have no bearing on the amount of adjustment
Balance sheet reporting:
- answers-Accounts Receivable
Less: Allowance for bad debts
= Net realizable value of A/R
Capitalized Interest =
- answers-Average Accumulated Expenditures
x Interest Rate
Cash
- answers-Money that is FREE and CLEAR and available to be spend in current operations.
Cash-Flow Hedge
- answers-Protects against potential loss from an asset's or liability's future cash flow
- Record on BS as asset or liability
- Unreal G/L depend on whether hedge is effective
- Effective cash flow hedges counterbalance losses elsewhere
- Ineffective cash flow hedges are reported on the IS
Categories of PPE
- answers-- Plant & Equipment
- Land
- Natural Resources
Ceiling Value
- answers-Net realizable value - reduce the sales price by the estimated cost to complete and sell
the inventory
Acquisition Cost
- answers-Includes all costs incurred in getting the merchandise to an entity's location and ready
for use
Acquisition cost
- answers-The acquisition cost of PP&E includes both the cash equibalent price and all costs
incurred to get the asset on location and ready for use.
Acquisition Cost - Developed Internally
- answers-Internally developed intangible assets are likely the result of research and development
activities which are expensed in the period incurred. Therefore, the capitalized cost of an
internally developed intangible asset usually is composed of the legal and other related
registration costs.
Assigning Accounts Receivable
- answers-- Assignment of A/R normally is done with recourse
- Assignment usually is done without notification to customers
Available-for-sale Securities
- answers-- Debt or Equity securities not classified as either HTM or Trading
- Debt is classified on BS by maturity date
- Equity securities are classified by mgt's intent
- Carried on BS at aggregate FMV
- Unreal G/L go directly to SH equity (other comprehensive income)
Bad Debts - Allowance Method
- answers-Income Statement Approach
Balance Sheet Approach
, Bad Debts - Direct Write-Off Method
- answers-- No entry for bad debts until customer actually defaults.
- At default, the cutomer's account is written off.
- Theoretically weak, matching issue
- Only allowed if bad debt expense is immaterial
Balance Sheet Approach
- answers-- Estimate of bad debt expense is based on the balance sheet
- Period sales have no bearing on the amount of adjustment
Balance sheet reporting:
- answers-Accounts Receivable
Less: Allowance for bad debts
= Net realizable value of A/R
Capitalized Interest =
- answers-Average Accumulated Expenditures
x Interest Rate
Cash
- answers-Money that is FREE and CLEAR and available to be spend in current operations.
Cash-Flow Hedge
- answers-Protects against potential loss from an asset's or liability's future cash flow
- Record on BS as asset or liability
- Unreal G/L depend on whether hedge is effective
- Effective cash flow hedges counterbalance losses elsewhere
- Ineffective cash flow hedges are reported on the IS
Categories of PPE
- answers-- Plant & Equipment
- Land
- Natural Resources
Ceiling Value
- answers-Net realizable value - reduce the sales price by the estimated cost to complete and sell
the inventory
