construction contracts/ bank recon / interest capitalization/depreciation

Question 1

if CIP> progress billings
if progress billings>CIP

Answer 1

current asset
current liability

Question 2

what does the CIP account hold?

Answer 2

costs to date
profit recognized to date

Question 3

in a construction contract, what are the journal entries for:
- incurring costs
- billing the customer
- collecting from the customer

Answer 3

construction in progress
(cash)

AR
(progress billings)

cash
AR

Question 4

book to bank reconciliation items:

Answer 4

+ deposits in transit
- outstanding checks

Question 5

bank to book reconciliation items:

Answer 5

+bank collections
+ interest income
- service charges
- non-sufficient funds

Question 6

application for changes in:
- estimate
- accounting principles
- accounting entity
error correction

Answer 6

prospective
retrospective
restatement
restatement

Question 7

where do these belong:
freight in
freight out

Answer 7

cogs
selling expenses

Question 8

a gain that is both unusual and infrequent should be reported in

Answer 8

income from continuing operations, as a separate component

Question 9

how do you amortize software costs?

Answer 9

greater of:
percentage of revenue
straight line

Question 10

in a cloud computing service contract, how are implementation costs handed?

Answer 10

capitalize as a prepaid expense

Question 11

how do you record a fixed asset purchased for a single R&D project?

Answer 11

expensed

Question 12

what are the only costs capitalized for internally developed patents?

Answer 12

registration and legal costs

Question 13

how to account for R&D performed for others (they will get reimbursed)?

Answer 13

expense as cogs

Question 14

how are fixed asset additions, betterments, and replacements applied?

Answer 14

capitalize! even if it does not extend the life

Question 15

what happens if the carrying value is unknown:
- replacement (extend life)
- improvement (higher quality)

Answer 15

reduce AD
capitalize

Question 16

how to treat:
- ordinary repairs
- extraordinary that extends life
- extraordinary that improves quality

Answer 16

expense
reduce AD
capitalize

Question 17

what kind of interest can be capitalized?

Answer 17

money borrowed DURING construction
to construct a BUILDING
for OWN USE

Question 18

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)

Answer 18

expense
capitalize
capitalize

Question 19

how many steps are involved when testing for the impairment of:
- goodwill
- fixed assets
- intangibles with definite life
- intangibles with an indefinite life

Answer 19

2
2
2
1

Question 20

composite rate:

Answer 20

sum of SL depreciation expense / total asset cost

Question 21

how are restoration costs integrated in a depletion rate?

Answer 21

added to depletion base

Question 22

what is the journal entry for recording profit using the percentage of completion method?

Answer 22

construction expense (costs incurred)
CIP (profit)
(revenue)