aFar_JE

Question 1

Contract Asset & Receivable
Sales of 2 excavators; delivery 1st on 2/1; delivery 2nd on 6/1; pay all on 6/1.
Payment of 1st is conditional on the delivery of 2nd.

Answer 1

2/1
”Contract Asset”   35
       Revenue             35
6/1
Receivable         70
       Contract Asset.  35
       Revenue.             35

Question 2

7/1 pay $; 8/1 delivery JE

Answer 2

7/1
Cash  215
    “Unearned revenue” 215
8/1
Unearned 215
     Sales.         215
COGS       175
      Inventory.  175

Question 3

Forward or Call Option

Round trip? Repo $ > Original$ ~> Fin

Round trip? Repo $ < Original$ ~>Lease

Answer 3

Financing arrangement:
1/1:
Cash. $350
”Financial Liability” $350

Interest Exp. $35 (different between repo$-cash received)
Financial Liability $35

12/31
Financial Liability $385
Revenue. $385

Question 4

Exchange: Commercial Substance JE

Answer 4

New FV + Cash given 
Cash Received, if any
AD
Loss, if any
     Old BV
     Cash given, if any
     Gain, if any

Question 5

Asset Retirement Obligation

Answer 5

Asset Retirement Cost
ARO

Calculate CV of ARO + interest
(similar to Bond Amortization); 
accretion rate (Interest) + Depreciation (=PV of ARO)

Question 6

Dividend
Declaration:
Record date:
Payment date:

Answer 6

Declaration:
RE
Dividend payable

Record: none

Payment date:
Dividend payable
Cash

Question 7

LT construction contract

% completion method JE

Answer 7

Contraction in progress
AP

AR
Progress Billings

Contraction in progress
Current gross profit

Profit = GP x % completion

Question 8

Operating Loss JE

Answer 8

Deferred Tax Asset
Benefit due to loss carry
forward (income tax expenses)

Carried forward only
80% taxable income

Question 9

Take inventory off book

Answer 9

COGS

Inventory