F2-rest Flashcards
Under the completed contract method, revenue is recognized
when the contract is complete, however expected losses are recognized immediately
U.S. GAAP “completed contract” method to account for a long-term construction contract
=Contract price-cost incurred-estimated cost to complete
When the “percentage of completion” method of recording revenue is used
Contract price
-Total estimated cost
=Profit
Cost incurred to date/ Total estimated cost=%
Profit *%=Gross Profit
accumulated cost incurred + cumulative gross profit recognized > cumulative billing
current asset
cost incurred + profit recognized > billing
accumulated cost incurred + cumulative gross profit recognized < Cumulative billing
current liability
cost ncurred +profit recognized < billing
Installment sale method
Delays revenue recognition by recognizing revenue as cash is collected rather than accelerating revenue recogniton
Cost recovery method
Delays revenue recognition until all costs have been collected rather than accelerating revenue recognition.
Cost method
when installment sale are material, there is no reasonable basis for estimating collectibility
Installment sale method should be used only if
the amount ultimately collectible can not be estimated, impossible to established a reasonable bad debt percentage. it is possible some amount will be collected, but cannot be projected.
Cost recovery method used when
collection is in doubt
Under current cost accounting
specific price index used
Current cost/constant dollar
both specific and general price level change
INFLATION AND APPRECIATION
Historical cost/ nominal dollar
no price level change
NEITHER
Current cost/nominal dollar
specific price level change(specific price index)
APPRECIATION
Historical cost/constant dollar
general price level change
INFLATION
Lack of commercial substance gain/loss
Book value approach no boot=no gain boot paid=no gain 25%= full gain loss=full loss
With commercial substance
Fair Value approach
future cashflow
commercial substance
either (1) the risk, timing, and amount of the expected future cash flows from the asset transferred differs significantly from the risk, timing, and amount of the expected future cash flows from the asset received, or (2) the entity-specific value of the asset received differs significantly from the asset transferred.
proper accounting for nonmonetary exchanges that have commercial substance
recognizes gains and losses immediately.
Installment method
no reasonable basis for estimating the DEGREE of collectibility
The functional currency of a company may be:
A foreign entity’s local currency, which is typically the one in which the entity keeps its books;
The currency in which the financial statements will be presented, which is the currency of the parent company; or
A foreign currency other than the one in which the foreign entity maintains its books.
Functional currency cannot be the local currency if
the foreign entity operates in a highly inflationary environment (i.e., approximately 100% over three years)
Nonmonetary Exchange JE
New Loss Cash Received Accum Deprciation Old Gain Cash Recieved
Installment Method JE
Record Sale:
Installment A/R
Inventory (COGS)
Deferred Gross Profit (contra-rec)
Record cash collection:
Cash
Installment A/R
Record Profit on collection:
Deferred Gross Profit
Realized gross profit
Cost Recovery Method JE
Record sale:
Cost recovery A/R
Inventory
Deferred Gross Profit
Collection year 1:
Cash
Cost recovery A/R
Collection year 2: Cash Cost recovery A/R Deferred gross profit Realized gross profit
Funtctional
Translation
PU(F)ER-OCI
Dysfunctional
Remeasurement
(I)DEA-I/S