Capitalizing Interest on Inventory

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					Chapter 1

      What are the significant differences between the FASB and its predecessor, the
       APB?
      What is the process the FASB follows to develop new accounting standards?
      How does politics impact the standard setting process:

Chapter 2

      Why is a conceptual framework useful/necessary?
      What is the primary objective of accounting?
      Identify the primary and secondary qualitative characteristics of accounting.
       What are the components of the primary characteristics?
      Define the basic elements of financial statements (assets, liabilities, owners
       equity, revenues, expenses)
      Define the basic assumptions of accounting.
      Define the basic principles of accounting.
      What are the 4 constraints that affect financial reporting?

Chapter 3
      Identify the steps in the accounting cycle
      Record transactions in the journal and be able to adjust account balance to reflect
       the entries
      Explain the reasons adjusting entries are necessary.
      Prepare adjusting entries and be able to adjust account balances to reflect the
       entries
      Prepare closing entries and be able to adjust account balances to reflect these
       entries
      Be able to adjust inventory accounts at year-end using the periodic inventory
       method.
      Explain the difference between a periodic and a perpetual inventory system
      Be able to calculate the following cash flows:
           o Cash provided by sales
           o Cash paid for expenses
           o Cash paid for prepaid items
           o Cash paid for purchases of inventory
Chapter 4
     Explain the weaknesses of the income statement
     Prepare a single step income statement
     Prepare a multiple step income statement
     Show the presentation of extraordinary items on an income statement, including
      the use of intraperiod tax allocation and per share data
     Show the presentation of discontinued operations on an income statement,
      including the use of intraperiod tax allocation and per share data
     Calculate earnings per share

Chapter 5
     Explain the weaknesses of the Balance Sheet
     Describe the major sections of the balance sheet, including examples of accounts
      that would appear in each section
     Prepare a classified balance sheet
     Describe the purpose of the Statement of Cash Flows
     Know the format of the Statement of Cash Flows
     Identify the three classifications of cash flows presented in the statement and be
      able to give an example of a cash flow that would be classified in each of the
      categories
     Identify the two techniques that may be used to prepare the Statement of Cash
      Flows
     Explain the relationship between the beginning cash balance, the ending cash
      balance, and the Statement of Cash Flows
     Understand that depreciation is NOT a source of cash 
     Be able to calculate the current ratio, the quick, or acid test ratio, and EPS.


Chapter 6:
     Calculate the cash proceeds of a bond issue
     Define interest in terms of cash flows

Chapter 7
     Define cash and cash equivalents
     Define Receivables, and differentiate between notes receivable and accounts
      receivable
     Be able to prepare the adjusting journal entry for accounts receivable using
          o Balance Sheet Method
          o Income Statement Method
     Define Net Realizable Value
     Explain the impact on the balance sheet and the income statement when an
      account is written off using the allowance method
     Identify components of the Allowance for Bad Debts
     Record the entry to recognize a Note Receivable
          Record the adjusting entries to accrue interest
          Calculate present value of a note receivable when the stated interest rate is not a
           ―market’ rate

Chapter 8

         Explain the difference between perpetual and periodic inventory systems
         Understand the components of cost to be included in inventory – freight, returns,
          allowances, discounts
         Calculate EI and COGS under the following assumptions:
              o Perpetual
                       LIFO
                       FIFO
                       Weighted Average
              o Periodic
                       LIFO
                       FIFO
                       Weighted average
         Explain the strengths and weaknesses of LIFO, FIFO, and weighted average,
          including the impact on the income statement and balance sheet associated with the
          different choices
         Explain what is meant by ―dipping into a LIFO layer‖
         Explain the term ―phantom inventory profits‖
         Use DV-LIFO to value inventories
         Explain the effect of an inventory error on the income statement and balance sheet
          both in the y ear the error first occurred and in subsequent years

Chapter 9

         Describe and apply LCM with respect to inventories
         Explain the rationale for writing inventories down for a decline in market value, but
          not writing them up for an increase in value
         Define purchase commitments
         Use the gross profit (gross margin) method to estimate ending inventory
         Use the retail method to estimate ending inventory
              o FIFO
              o Average Cost
              o LIFO
              o FIFO – LCM
              o Average Cost – LCM (conventional retail method)

Chapter 10

         Understand the components of cost to be included in asset valuation (as opposed to
          current period expense)
        Explain the impact on the balance sheet and income statement for the treatment of
         costs with respect to asset valuation and current expense
        Explain the rationale for capitalizing interest on certain constructed assets
             o What is a qualifying asset?
             o Calculate Accumulated Average Expenditure
             o Calculate Avoidable Interest
             o Calculate Actual Interest
             o Prepare the journal entry to record interest
        Prepare journal entries for disposal of an asset
             o Scrap
             o Sale
             o Trade-in of dissimilar assets
             o Trade-in of similar assets


Chapter 11

       What is meant by capital maintenance?
       What is the purpose of depreciation?
       Does depreciation provide cash?
       Be able to apply the major depreciation methods, including straight line, sum of the
        years’ digits, double declining balance, and production methods including units of
        output or hours of use. This includes being able to prepare journal entries to record
        depreciation, as well as an understanding of book value and financial statement
        presentation.
       How do we account for depreciation when there has been a change in estimate, such
        as determining the computer system will have a shorter life than initially estimated?

Chapter 12

       What is the nature of intangible assets?
       Why do intangible assets present a difficult problem for accounting?
       Be able to identify different classes of intangible assets
       Be able to identify costs that would appear on the balance sheet for intangible assets
       Be able to prepare journal entries for amortization of intangible assets
       Patents
       Goodwill
         Recording Goodwill
         Amortization of Goodwill
         Estimating Goodwill
         Impairments of goodwill
         Defining goodwill – from a conceptual perspective, and from a measurement
            perspective
       Research and Development Costs—FAS No. 2
       Software Development Costs—FAS No. 86
Chapter 18
 Define revenue recognition and discuss guidelines for revenue recognition
 What are the special issues with revenue recognition when buyback agreements or
  right of return exist
 What is meant by channel stuffing?
 Accounting for long-term contracts
           o Percentage of Completion
           o Completed contract
           o Installment sales

Chapter 24

      Briefly explain current trends in Financial Disclosure
      Be able to describe Regulation FD
      Be able to describe Regulation G.
      Define Subsequent events. Differentiate between the types of events that require
       journal entries and events that only require disclosure.
      Explain the general content in the Management MD&A
      Comment on strengths and weaknesses of segmental reporting
      Be able to calculate the following ratios:
           o Current ratio
           o Acid-test ratio
           o Profit margin on sales
           o Rate of return on assets
           o Earnings per share

				
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