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24 Cards in this Set
- Front
- Back
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What are 3 examples of assets requiring individual analysis?
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1) Preferred Stk & Converible Bonds ( if the mkt values the security primarily as a bond, it is monetary, if it values the security primarily as a stk, it is nonmonetary
2) Inventories used on contracts 3) Pension, sinking & other fund under an enterprises control |
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What are the 2 ways a recoverable amount is measured?
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Value in use or mkt value
1) Value in use - used if immediate sale of the asset is not intended 2) current mkt value - used only if the asset is about to be sold |
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What's a cost recovery expense?
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Depreciation, depletion & amortization expense on the basis of the AVERAGE current cost of the assets, svc potential or lower recoverable amount during the period of use.
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Does holding nonmonetary items during a period of changing prices give rise to purchasing power G & L's?
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No
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What's the definition of nonmonetary assets?
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1) Goods held primarily for resale or assets held primarily for direct use in providing svcs for the busines
2) Claims to cash in amts dependent on future prices of specific goods or svcs 3) Residual rights such as goodwill or equity interests |
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What is recoverable amount?
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The current worth of the net amt of cash expected to be recoverable from the use or sale of an asset.
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How do you calculate COGS at avg current cost?
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Avg Current Cost Per Unit
x Units Sold During The Year |
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What are 2 examples of purchasing power gains that result from holding?
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1. Holding monetary liabilities during a period of inflation.
2. Holding monetary assets during a period of deflation. |
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When is the cost recovery method of revenue recognition accepted?
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1. Collectibility of proceeds is doubtful
2. An investment is very speculative in nature 3. Where the final sale price is to be determined by future events |
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Are selling & admin expenses used to compute the GP rate?
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No
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What are the 3 conditions that need to be present in order to recognize revenue at the completion of production?
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1. There must be a relatively stable mkt for the product.
2. Marketing costs must be nominal. 3. The units must be homogeneous. |
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What's the formula for income recognition under % of completion method?
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(Actual Cost / Est Tolal cost x Total Est Contract Income) less income previously recognized
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What is basically the installment method?
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Deferring & recognizing revenue in each year in proportion to the receivables collected during that year.
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When an installment receivable extends beyond one yr how should it be recorded?
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At PV of the pymts discounted at the mkt int. rate
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What are 2 characteristics of the cost recovery method?
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1. It's the most conservative revenue recognition method. This method is used when the uncertainty of collection is so great that the use of the installment method is precluded.
2. All amts collected are treated as a recoupment of the cost of the item sold until the entire cost associated with the trans. has been recovered. Only at this point is profit recognized. |
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When can you recognize revenue at the time of sale when right of return exists? 6 conditions must be met!
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1. The sellers price to the buyer is substantially fixed or determinable at the date of sale.
2. The buyer has paid the seller, or the B is obligated to pay the s, & the obligation is not contingent on resale of the product. 3. The B's ob to da S would not change in the event of theft, physical destruction, or damage of the product. 4. B has economic substance apart from S 5. S does not have significant obligation to help B resell it. 6. The amt of future returns can be reasonably estimated. |
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What's the 5 basic entries in construction accting?
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1. Record the costs of construction
2. Record progress billings 3. Record collections 4. Recognize Revenue & GP 5. Record Completion of the contract |
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When should a franchisor deferr income?
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If it's probable continuing franchise fees will not cover the cost of the continuing svcs provided by the franchisor and also allow reasonable profit.
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When are services considered to be substantially performed?
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1. The franchisor has no remaining obligation or intent to refund any cash received or forgive any unpaid notes or receivables.
2. Substantially all initial svcs of the franchisor req'd by the agreement have been performed 3. No other mat'l conditions or obligations related to the determination of substantial performance exist. |
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Do royalties follow the accrual basis of accting?
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Yes
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What kind of account is progress billings?
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Contra Account to Construction in Progress
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When can installment & cost recovery methods be used to account for franchise fee revenue?
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Only when revenue is collectible over an extended period and no reasonable basis exists for estimating collectibility.
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What's the definition of a monetary asset?
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Money or a claim to receive money, the amt of which is fixed or determinable without reference to future prices of specific goods or svcs.
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When is consignment sales revenue recognized?
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At the time of the sale at the sales price.
Commission paid to the consignee is reported as a selling expense NOT netted against sales revenue. |
