Deck #2 (F1)

Question 1

5 components of FS

Answer 1

balance sheet, income statement, comprehensive income, cash flows, owners equity

Question 2

recognition criteria

Answer 2

measurable, relevant, reliable

Question 3

rev rec principle

Answer 3

revenue recognized when (1) performance obligation satisfied (2) transfer of good or service occurred

Question 4

expense rec principle

Answer 4

expenses are incurred to generate revenue. “matching principle”

Question 5

Whats on the balance sheet?

Answer 5

Assets, Liabilities, Equity

Question 6

Whats on the Income Statement?

Answer 6

Revenue, Expense, Gain, Loss

Question 7

Whats on the non operating portion of the IS?

Answer 7

Gains and Losses

Question 8

Format of Multiple Step IS

Answer 8

Net Sales
-COGS
= Gross Margin
-Selling
-General, Admin
-Depreciation
=Income from Operations
\+/- (other) revenue/gains
=Income before unusual
\+/- unusual items
=Income before tax
-Tax expense
NET INCOME

Question 9

Format of Single Step IS

Answer 9

Revenue and Gain
-Expense and Loss
= NET INCOME

Question 10

Name Current Assets

Answer 10

cash, trading securities, AR, Notes receivable, Inventory, prepaid expenses

Question 11

Name Current Liabilities

Answer 11

AP, NP, Int Payable, Salaries Payable, Unearned Rev, Current Portion of LT Debt

Question 12

5 step approach to rev rec

Answer 12

ISTAR

1. Identify contract
2. Separate performance obligations
3. Transaction price
4. Allocation transaction price
5. Recognize Revenue

Question 13

Example of separate performance obligations

Answer 13

Designing a warehouse, building a warehouse. Recognize Revenue separately

Question 14

How do you deal with discounts in a contract?

Answer 14

allocate proportionally to each obligation

Question 15

JE to record unearned sales revenue (product not transferred yet)

Answer 15

Dr. Cash

Cr. Unearned Sales Rev

Question 16

JE to reverse unearned sales revenue (product now transferred)

Answer 16

Dr. Unearned Sales Rev
Cr. Sales Rev
Dr. COGS
Cr. Inventory

Question 17

What is an incremental cost to a contract?

Answer 17

costs that would have not been incurred if contract had not been obtained. (such as commissions on the sale or legal fees for creating a contract)

Question 18

Bill-and-Hold only exists if these 4 criteria are met (all must be met):

Answer 18

1. substantive reason for the arrangement
2. product belongs to the customer now
3. product is ready to transfer to customer
4. entity cannot use the product or give to another customer

Question 19

Consignment exists if these 3 criteria are met :

Answer 19

1. entity controls the product
2. dealer does not have obligation to pay
3. entity can require the return of the product

Question 20

what is a repurchase agreement?

Answer 20

entity sells an asset and also promises to or has the option to repurchase the asset