FAR 1.1 Flashcards
JE entry for accounts written off that are later recovered
dr. A/R
cr. allowance for doubtful accts
next, collection of cash
dr. Cash
cr. A/R
The line item “Income (loss) from Operations is shown on the IS…
Before taxes
Revenue recog.
Received payment Nov & Dec year 1 for a three year subscription that starts Jan yr. 2.
When do you recog rev?
Revenue begins to be earned Jan yr 2
Rev Recog. - Initial Franchise Fee of $150k
Received 60k at signing, and balance by note over three years
PV of note is 72k & note collectibility is reasonable certain
What is the unearned franchise fee?
Full JE
Cash 60k Note rec 90k Rev 60k Disc on note 18k Unearn Fran. fee 72k
Percentage of completion formula
costs incurred to date / Estimated total costs
Percentage of completion
How to calculate a current liability?
JE to record revenue/cost during the construction period?
Accumulated costs (2,000,000) plus Gross profit earned to date (250k) (2,250 aka “Construction in Progress”) compared to related billings (1.8m)
The liability in this example is zero since billings do not exceed costs plus GP earned.
Construction in progress 250
Construction expense 2,250
Revenue 2,500
(note this entry would be zero’s for completed contract method)
Assets held for sale are presented on the BS as?
How are they valued?
Current assets if expected to be sold within 12 months, and are held at the lower of book value or net realizable value.
Assets held for sale are presented on the BS as?
How are they valued?
Current assets if expected to be sold within 12 months, and are held at the lower of book value or net realizable value.
OCI items are presented…
Net of tax
What are Unearned (deferred) revenues
cash received before revenue is earned (liability)
magazine subscription revenue collected before earned
What are Prepaid (deferred) expenses
cash paid before the expense is incurred (asset)
prepaying rent today for the upcoming year
What are Accrued Revenues?
(Receivables). cash received AFTER the revenue has been EARNED (asset)
made a sale on credit, and the customer pays you later
What are Accrued Expenses?
(accrued liabilities, accts payable, or other payables)
cash is paid AFTER the expense has been INCURRED
incur utilities expense but don’t pay the bill until next month
JE to record Unearned Revenue
AJE to record Unearned Revenue that has been Earned
Dr. Cash ( A up = L down + Eq NC)
Cr. Unearned Rev
Dr. Unearned Rev (A NC + L down + Eq up)
Cr. Revenue
JE to record Prepaid Expense
AJE to reverse Prepaid Expense and record incurred expense
Dr. Prepaid Exp (asset) (A up & down = L NC + Eq NC)
Cr. Cash
Dr. Expense (A down = L NC + Eq down)
Cr. Prepaid Expense
