ch 5 terms

Question 1

rev recognition for merch company

Answer 1

when merch sold and delivered

Question 2

rev recognition for service company

Answer 2

recognized when service performed

Question 3

merch company income measurement

Answer 3

sales
- COGS
= gross profit
-op expenses
= income pre income tax
-income tax exp
= net income

Question 4

two types of inventory systems

Answer 4

perpetual and periodic

Question 5

perpetual inventory system

Answer 5

continuous updates
more expensive

Question 6

periodic inventory system

Answer 6

count and measurement only at end of period
less accurate

Question 7

define asset cost

Answer 7

all costs incurred to bring asset to intended use

Question 8

PRADS acronym

Answer 8

=purchases
-returns
-allowances
-discounts
+ shipping (freight costs)

Question 9

FOB shipping point

Answer 9

title transfer @ shipping point
buyer pays shipping
increases cogs for inventory

Question 10

FOB destination

Answer 10

title transfer @destination
seller pays shipping

Question 11

S-RADS

Answer 11

= sales and cogs
-returns
-allowances
-discounts
+ shipping costs (if FOB destination)

Question 12

what are allowances

Answer 12

price reduction for inconvenience (damaged packaging, delay)

Question 13

sales returns ASPE

Answer 13

1. sales returns (contra to sales)
   AR
2. inventory
   cogs

Question 14

what is sales returns account

Answer 14

contra to sales

Question 15

parts of single step income statement

Answer 15

expenses, rev

Question 16

parts of multi step income statement

Answer 16

gross profit, operating expenses and income, income before tax, net income

Question 17

statement of comprehensive income

Answer 17

some items not related to net income
foreign currency exchange, unrealized investments