Intermediate I Exam 2

recognize revenue when goods/services are transferred to customers in exchange for the amount entitled to receive, recognized when transfer is complete

Identify the contract, identify performance obligations, determine transaction price, allocate transaction price, recognize revenue

Contract existence, performance obligations, transaction price issues, allocating price, special arrangements

commercial substance, collection is probable

Prepayments (not obligation), QA Assurance (part of product obligation), extended warranties/coupons (separate obligations)

Variable consideration, right of return, principal vs agent, seller payments to customers

standalone selling prices, residual approach if uncertain

Licenses [functional IP (point in time), symbolic IP (over time)], Franchises (multiple obligations), Bill/Hold (upon delivery), Consignment (consignor ownership retention), Gift Cards (deferred revenue)

DR Construction in Progress (CIP) --> CR Cost of Construction and Revenue from long - term contracts

CIP > Billings = contract asset (costs + profit > billings), no profit recorded until complete

Billings > CIP = contract liability

readily available to pay debts or for operations

liquid, short term investments with maturity < 3 months

not available for current use (set aside for a specific purpose)

min balance required to stay in a bank acccount (loan agreement, inc EAR)

Current asset, legal right to receive cash from a customer due to credit sales. Usually due in 30-60 days.

percetnage reudction from list price (quantity discounts)

incentive for early paymeny, recorded via gross or net nethod

record full amount; discount recognized if taken. Record as debited Sales Discount

assume discount will be taken; record ner of discount. Credit Sales discount forfeited

merchandise returned or allowances granted (refund liability=est refunds owed; estimated returns= goods expected to be returned, asset)

allowance method and estimation methods

estimate uncollectible accounts in same period as related sales, uses uncollectible allowance contra-asset to reduce receivables

balance sheet approach and income statement approach

secured borrowing or sale of receivables

assigning or pledging

specific receivables pledged as collateral

entire receivable balance used as collateral

with/out recourse

seller retains risk of uncollectibility

buyer assumes risk of bad debts, seller has no further obligation

adjusting bank and book balance to correct mistakes made (bank vs. book balance)

add deposits outstanding, deduct checks outstanding, add bank errors

collections made by bank, deduct service and other charges, NSF, company errors (less) pmt on note

finished goods ready for sale

raw materials, WIP, finished goods

BUYER owns during transit

SELLER owns until delivery

still owned by consignor until sold, consignee holds inv but not legal title

lowest COGS, highest NI when prices are rising

highest COGS, lowest NI when prices are rising

LIFO Reserve = FIFO Inv (or any costing method used for internal record keeping)

units sold exceeds units purchases and causes older costs to be matched against current revenue

NRV < Cost = inventory write-down, can apply to individual items, categories, total

use a floor and ceiling in identfifying lower cost, using replacement cost as benchmark

est end inv = beg inv + purchases - estimated COGS, COGS = net sales * (1- gross profit margin)

compute cost to retail using goods available for sale to determine end inv at cost

adjust affected accounts, revise prior financial statements (unless LIFO), disclosure

overstated = COGS understated NI overstated, end inv understated = COGS overstated NI understated

financial charge

assigning with recourse

assigning without recourse

write offs

at a point in time upon completion NO --> over time according to percentage of completion YES

the seller is enhancing an asset that the buyer controls as the service is performed

is based on relative standalone selling prices

... is true

extended warranty

cash equivalent

sales discount is debited for the amount of discounts taken by the customers.

added to the bank balance

subtracted from the book balance

not true about accounting for merchandise returns

debit to inventory