Mac 710 - Fr A - Part 2

Front 1

Revenue Recognition:

Sales Discounts (same as Purch. Discounts)
*Under ____ method, _______ is debited when discount taken.
*Under _____ method _______ is credited when discount forfeited.

A/R is recorded at ___ - net amount of cash expected.

Uncollectable A/R:

1. Direct Write of Method:
Time of Sale?
Nonpayment Determined?
Subsequent Collection of Account?

2. Allowance Method:
Time of Sale?
Nonpayment Determined?
Subsequent Collection of Account?

Back 1

Gross, Sales Discounts
Net, Sales Discounts Forfeited

NRV.

1. Direct:

Time of Sale:
No entry

Nonpayment Determined:
Bad Debt Expense
, A/R

Subsequent Collection of Account:
Cash
, Revenue from Uncollectables

2. Allowance Method:

Time of Sale:
Bad Debt Exp (portion)
, Allowance for Uncollectables

Nonpayment Determined:
Allowance
, A/R

Subsequent Collection of Account:
Cash
, Allowance for Bad Debts.

Front 2

Transfer of A/R, 2 types:
1. Factoring?
2. Securitization?

Ex: 800 factored, 3% financing charge, 5% for potential sales returns. J/E?

Back 2

1. A/R's sold to a co. that collects on account
2. A/R's sold to investors, seller collects on account.

Ex:
Cash 736
Due from Factor 40
Loss of Sale of A/R 24
, A/R 800

Front 3

FASB:
Revenue is recognized when it is ______ and _______ or _______.

SEC guidance (______):
1. Persuasive ______________.
- (must be in accordance _________)
2. Delivery ________________
- (Seller _______accomplished part of arrangement)
3. Price is _________________.
- (not subject to ______ or _____)
4. Collectibility is ___________.

Back 3

earned; realized or realizable;

SAB 104
1. Persuasive evidence of an arrangement exists. (with co. normal policies)
2. Delivery has occurred or services rendered. (substantially)
3. Price is fixed or determinable (adjustment or refund)
4. Collectibility is reasonable assured.

Front 4

______ consignments, are not technically consignments, but qualify... Examples:
- no date set for payment.
- date set, but excused until resale.
- obligation excused upon theft or damage
- seller has significant obligations to bring about resale.
- demonstrations
- required repurchases

Back 4

In substance

Front 5

Bill-and-hold sales - when delivery hasnt taken place, revenue only recognized when conditions are met:
1. __________
2. __________
3. __________
4. __________
5. __________
6. __________

Inconsequential Performance Obligations - if substantial performance completed and revenue recognized, all remaining costs ____________.

Unearned revenues: If stage complete not readily determinable, ____________, otherwise ___________.

Back 5

1. risks of ownership passed to buyer
2. customer made a fixed commitment
3. customer requested bill-and-hold and has reason
4. fixed schedule for delivery
5. seller has no other performance requirements (beside shipment).
6. seller completes and physically segregates goods.

should be accrued

Defer until completion; recognize over the contract.

Front 6

Multiple element arrangements - delivery / performance of multple products or services (sometimes at different points of time during the term of arrangement). If parties negotiated different contracts at same time, considered MEA.

Determine whether the elements should be seperated.
Must meet following criteria:
a. delivered item must ________ ______ (could be resold).
b. ______________ (doesn't matter what company states as ____ in the _____). VSOE (_______) should be used or if not available, third party evidence. This evidence should be proportionately applied to the package price. However if unable to obtain, an exception applies: the ______ method. If VSOE can be found for undelivered items, the delivered item can be recognized as the ___________ less the _________. (the _________ is not allowed).

Back 6

have standalone value; evidence of fair value; price; package; vendor specific objective evidence; residual; package price; fair values of undelivered items; 'reverse residual'

Front 7

Percentage of Completion - used for __________ like _______. Recognizes revenue as ______ progresses (use when it is estimable).

Use chart:
1. __________
2. __________
3. ___________
4. __________
5. __________
6. __________
7. __________
8. __________
9. __________
10. __________

When the current estimate of total contract costs indicates a loss on the entire contract, __________________

Back 7

long term contracts; construction jobs; contract;

1. Costs incurred to date
2. Est. Cost to Complete
3. Est. total contract costs
4. Est. percentage complete
5. Contract Price
6. Revenue Recognizable
7. Revenue Recognizable prior year
8. Revenue Recognized currently
9. Costs incurred currently
10. Income recognized currently

The entire loss should be taken in the current period

(Contract price - revenue recognizable - est. costs to completion)

Front 8

IFRS differences - Revenue Recognition

none major...

Ratios:

Accounts Receivable Turnover?
Measures _______________

Days Sales Outstanding?
Measures _______________

Revenue Growth?

Back 8

A/R Turnover:
Net Sale / Avg. Net Receivables.

Measures # of times on average a company collects receivables.

Days Sales Outstanding:
365 / A/R Turnover

Measures average # of days a company takes to collect on receivables.

Revenue Growth:
Current Period Revenues / Prior Period Rev.