Deck 9 Flashcards
Difference between freight in and freight out:
Freight in: inventory cost (capitalize); freight out: selling expense (expense)
“Maintains a safety stock of 50% of the current year purchases”:
Only half of the current years purchases is sold (the other half carries over to next year and is sold first)
Gross profit for percentage of completion =
Contract price - estimated total cost
Net construction in progress =
Construction in progress - progress billings (shown at year end on balance sheet)
Initial francise fees are not revenue until:
All conditions have been “substantially performed”
Unrealized profit to be eliminated on inventory =
Intracompany profit on inventory * % of inventory purchased still on hand
When a parent issues bonds, does this effect NCI?
No effect on NCI, only effects retained earnings (NCI is effected when the sub issues bonds)
Journal entry for the sale of goods (2 entries):
Dr. A/R Cr. Sales; Dr. COGS Cr. Inventory
Elimination entry for intracompany sales:
Dr. Intercompany sales - parent, Cr. Intracompany COGS, Cr COGS - sub, Cr. Inventory
What accounts are not eliminated in combined financial statements?
Equity accounts because there is not parent company
Types of combined financial statements (3 types):
1) Companies under common control; 2) companies under common control; 3) Unconsolidated subsidiaries
When is the installment method appropriate?
If the ultimate collectible is indeterminate
Refundable deposits is what kind of account?
Monetary asset
Holding net monetary assets during inflation will result in:
Loss of purchasing power
Holding net monetary liabilities during inflation will result in:
A gain
Adjusted cash balance =
Unadjusted cash balance +/- bank errors + credit memos = service charges (debit memo)
Definition of factoring receivables:
Process by which a company converts A/R to cash by assigning them to a factor, either with or without recourse
Cash equivalent maturity date:
Must be within 3 months to be considered cash equivalent
Definition of pledging receivables:
The pledging company will retain title to the receivables and will use the proceeds collected from the receivables to repay the loan (“collateral”, only need a footnote)
Odd examples of current assets:
Trading securities, cash surrender value of life insurance
