For **Intermediate Accounting 1**, here’s a comprehensive reviewer covering key topics.

I'll
organize this around major sections, starting with the core concepts you need to understand in
each chapter.

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### 1. **Cash and Cash Equivalents**

**Definition:**

- Cash includes currency, coins, checks, and money orders available for immediate use.

- Cash equivalents are short-term, highly liquid investments that are readily convertible to cash and
have original maturities of three months or less.

**Important Points:**

- **Restricted Cash:** Cash set aside for a specific purpose, such as to cover loans or taxes.

- **Compensating Balance:** A minimum cash balance required by some banks as part of a

- **Bank Overdrafts:** When a bank account has a negative balance, typically reported as a liability
unless offset by cash accounts in the same bank.

- **Petty Cash Fund:** A small amount of cash kept on hand for minor expenses, usually
maintained through an imprest system.

**Accounting Treatment:**

- **Cash in Bank:** Recorded in the balance sheet under current assets.

- **Cash Equivalents:** Include treasury bills, commercial papers, and money market funds.

- **Bank Reconciliation:** Ensures the accuracy of cash balances by comparing the company's
cash ledger with the bank statement.

---

### 2. **Receivables**

**Types of Receivables:**
- **Trade Receivables:** Arising from sales transactions, including accounts receivable and notes
receivable.

- **Non-trade Receivables:** Other claims, such as advances to employees, income tax refunds,
and insurance claims.

**Important Concepts:**

- **Bad Debts Expense:** An estimation of uncollectible accounts; typically recorded using the
allowance method.

- **Allowance for Doubtful Accounts:** A contra-asset account that reduces receivables on the
balance sheet to reflect expected losses.

- **Aging of Receivables:** A method used to estimate bad debts by categorizing receivables based
on how long they’ve been outstanding.

**Key Entries:**

- **Sales on Credit:** Debit Accounts Receivable, Credit Sales.

- **Bad Debts Provision:** Debit Bad Debt Expense, Credit Allowance for Doubtful Accounts.

- **Writing Off an Uncollectible Account:** Debit Allowance for Doubtful Accounts, Credit
Accounts Receivable.

**Factoring and Discounting:**

- **Factoring Receivables:** Selling receivables to a third party for immediate cash, either with or
without recourse.

- **Discounting Notes Receivable:** Selling notes receivable before their due date, typically at a
discount.

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### 3. **Investments in Debt and Other Non-current Financial Assets**

**Debt Investments:**

- Investments in debt securities such as government and corporate bonds.

- Recorded as **held-to-maturity**, **available-for-sale**, or **trading** based on management’s

- **Held-to-maturity:** Measured at amortized cost.

- **Available-for-sale:** Initially recorded at cost but subsequently reported at fair value, with
unrealized gains/losses recognized in other comprehensive income.

- **Trading Securities:** Recorded at fair value, with unrealized gains/losses reported in net
income.

**Key Entries:**

- **Purchase of Debt Securities:** Debit Investment in Debt Securities, Credit Cash.

- **Interest Revenue:** Debit Interest Receivable, Credit Interest Revenue.

- **Fair Value Adjustments:** Adjust investments based on market changes when classified as
available-for-sale or trading securities.

**Impairment of Investments:**

- If a debt security’s value declines and is deemed not recoverable, the investment is written down
to its fair value, and the loss is recognized in net income.

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### 4. **Investments in Equity Securities**

**Types of Investments:**

- **Passive Investments:** Where the investor owns less than 20% of the voting stock, typically
recorded at fair value.

- **Significant Influence (20% - 50% ownership):** Accounted for using the equity method, where
the investor recognizes their share of the investee’s profits and losses.

- **Control (Over 50% ownership):** The investor consolidates the investee’s financial statements.

**Fair Value Method:**

- For passive investments, unrealized gains or losses are recorded through net income or other
comprehensive income, depending on the classification.
**Equity Method:**

- The investor records their share of the investee’s net income or loss by debiting Investment in
Equity Securities and crediting Investment Income.

- Dividends received are treated as a reduction in the investment.

**Consolidation:**

- When an investor controls an investee, their financial statements are combined, eliminating
intercompany transactions and adjusting for minority interest.

---

### 5. **Inventory**

**Types of Inventory:**

- **Raw Materials, Work-in-Process, Finished Goods** for manufacturing companies.

- **Merchandise Inventory** for retail companies.

**Inventory Valuation Methods:**

- **First-In, First-Out (FIFO):** Assumes the oldest inventory is sold first.

- **Last-In, First-Out (LIFO):** Assumes the newest inventory is sold first.

- **Weighted Average:** Averages the cost of all inventory units.

**Lower of Cost or Net Realizable Value (LCNRV):**

- Inventory is reported at the lower of its historical cost or its net realizable value, which is the
estimated selling price minus costs of completion and disposal.

**Inventory Errors:**

- Misstatements in inventory affect both the income statement (cost of goods sold and net income)
and the balance sheet (inventory and equity).
---

### 6. **Property, Plant, and Equipment (PPE)**

**Key Concepts:**

- **Initial Measurement:** PPE is recorded at cost, which includes the purchase price, taxes, and
any directly attributable costs to bring the asset to use.

- **Depreciation:** The systematic allocation of the asset’s cost over its useful life. Methods
include straight-line, units-of-production, and declining balance.

- **Impairment:** If an asset’s carrying amount exceeds its recoverable amount, the asset is
written down to its recoverable amount, and an impairment loss is recognized.

**Key Entries:**

- **Acquisition of PPE:** Debit PPE, Credit Cash or Accounts Payable.

- **Depreciation:** Debit Depreciation Expense, Credit Accumulated Depreciation.

- **Disposal of PPE:** Remove the asset’s cost and accumulated depreciation from the books and
record any gain or loss.

---

### 7. **Intangible Assets**

**Types:**

- **Patents, Trademarks, Goodwill, Copyrights** are common intangible assets.

- **Amortization:** Most intangibles (except goodwill) are amortized over their useful life.

**Goodwill Impairment:**

- Goodwill is not amortized but is tested annually for impairment, and any losses are recognized
when the carrying amount exceeds the fair value.

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### 8. **Liabilities**

**Current Liabilities:**

- **Accounts Payable:** Obligations from the purchase of goods or services.

- **Accrued Liabilities:** Expenses incurred but not yet paid (e.g., wages payable).

- **Unearned Revenue:** Payment received in advance for goods or services to be provided later.

**Long-Term Liabilities:**

- **Bonds Payable:** Long-term debt issued to investors. Bonds may be issued at par, discount, or
premium.

- **Notes Payable:** Written promises to pay a certain amount of money on a specific future date.

- **Leases:** Operating or finance lease obligations.

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### 9. **Shareholders’ Equity**

**Components:**

- **Common Stock and Preferred Stock:** Represent ownership in the company, with common
stockholders having voting rights.

- **Retained Earnings:** Accumulated profits not distributed as dividends.

- **Treasury Stock:** Company’s own shares repurchased but not retired.

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This covers the key areas in **Intermediate Accounting 1**. Focus on practicing problems related to
these topics, especially in financial reporting and analysis!