Chapter 2 Flashcards
when is a current asset recorded for % of completion contract?
when sum of cumulative costs incurred plus cumulative gross profit recognized exceeds cumulative billings, the excess is reported as a current asset.
when is a current liability recorded for % of completion contract?
when cumulative billings exceed the sum of cumulative costs incurred plus cumulative GP recognized, the difference is reported as a current liability.
install sale:
GP =
sale - cogs
install sale:
GP % =
GP/Sales price
install sale:
earned GP =
cash collections x gp %
install sale:
deferred GP =
installment rece x GP %
for installment sales, gross profit is recognized in income…
…in proportion to cash collection
when the amount ultimately collectible cannot be estimated, what method of recognizing revenue should be used?
installment method
when it is doubtful that the amount due will be collected, what method of recognizing revenue should be used?
cost recovery
financial stmts prepared under what method include adjustments for both specific price changes and general price level changes?
current cost/constant dollar
BEFORE technological feasibility is established, how are planning/development costs treated?
expensed as R&D
If a transaction lacks commercial substance, when is a gain/loss recognized?
When boot received is >10% of total consideration
are balance sheet accounts generally included at 1. historical exchange rates or 2. current exchange rates?
current! EXCEPT:
- a self-contained subsidiary with a 3 year inflation rate of 100% or more.
- a foreign entity which does not maintain its accounts in a foreign functional currency.
When the translation method is used, what currency are assets/liabilities translated into? Common stock? APIC?
assets and liabilities are translated to the reporting currency using the current (YEAR-END) exchange rate.
common stock, APIC are translated using historical exchange rates.
Should R&D costs related to patent be amortized/capitalized or expensed?
expensed.
