Wiley CPAexcel Exam Review 2014 Focus Notes: Financial Accounting and Reporting

Focus on: Monetary Assets and Liabilities—Module 12

Bank Reconciliation

Accounts Receivable

Net realizable value = Accounts receivable – Allowance for Uncollectible Accounts

Uncollectible Accounts

Allowance Methods—GAAP

Matching concept—Bad debt expense in period of sale

Measurement concept—Accounts receivable at net realizable value

Direct Write-off Method—Non-GAAP

Violates matching concept—Bad debt expense when account written off

Violates measurement concept—Accounts receivable overstated at gross amount

Notes Received for Cash

Calculating Payment

Principal amount ÷ Present value factor = Payment amount

Present value factor for annuity based on number of payments and interest rate

Allocating Payments

Payment amount – Interest = Principal reduction

Calculating Interest

Notes Received for Goods or Services

Note Balance

Short term: Amount = Face value

Long term: Amount = Fair value of goods or services

Present value of payments if fair value not known

Journal entry:

Note receivable—Face amount (given)	xxx
Revenue—Calculated amount	xxx
Discount on note receivable ...