construction contracts/ bank recon / interest capitalization/depreciation Flashcards
if CIP> progress billings
if progress billings>CIP
current asset
current liability
what does the CIP account hold?
costs to date
profit recognized to date
in a construction contract, what are the journal entries for:
- incurring costs
- billing the customer
- collecting from the customer
construction in progress
(cash)
AR
(progress billings)
cash
AR
book to bank reconciliation items:
+ deposits in transit
- outstanding checks
bank to book reconciliation items:
+bank collections
+ interest income
- service charges
- non-sufficient funds
application for changes in:
- estimate
- accounting principles
- accounting entity
error correction
prospective
retrospective
restatement
restatement
where do these belong:
freight in
freight out
cogs
selling expenses
a gain that is both unusual and infrequent should be reported in
income from continuing operations, as a separate component
how do you amortize software costs?
greater of:
percentage of revenue
straight line
in a cloud computing service contract, how are implementation costs handed?
capitalize as a prepaid expense
how do you record a fixed asset purchased for a single R&D project?
expensed
what are the only costs capitalized for internally developed patents?
registration and legal costs
how to account for R&D performed for others (they will get reimbursed)?
expense as cogs
how are fixed asset additions, betterments, and replacements applied?
capitalize! even if it does not extend the life
what happens if the carrying value is unknown:
- replacement (extend life)
- improvement (higher quality)
reduce AD
capitalize
how to treat:
- ordinary repairs
- extraordinary that extends life
- extraordinary that improves quality
expense
reduce AD
capitalize
what kind of interest can be capitalized?
money borrowed DURING construction
to construct a BUILDING
for OWN USE
how are the following costs treated for a patent:
- internally develop a patent
- register an internally developed patent
- legal costs to defend a patent (successful)
expense
capitalize
capitalize
how many steps are involved when testing for the impairment of:
- goodwill
- fixed assets
- intangibles with definite life
- intangibles with an indefinite life
2
2
2
1
composite rate:
sum of SL depreciation expense / total asset cost
how are restoration costs integrated in a depletion rate?
added to depletion base
what is the journal entry for recording profit using the percentage of completion method?
construction expense (costs incurred)
CIP (profit)
(revenue)
