FAR 34 Flashcards
What is CIP
Construction in Progress - this is a Current Asset. These are the costs that you incur while performing the Long term contract. This is debited as you incur costs on your long term project
dr. CIP
cr. CASH
If at the end of the Year you net the Billings with the CIP and CIP is in excess of Billings?
This means that you have spent and earned more than you billed CIP > Billings = Current Asset on the year end balance sheet
If at the end of the year you net the billings with the CIP and the billings are in excessive CIP?
This means that you have billed more than you have earned Billings > CIP this is a current liability on your balance sheet
How do you calculate profit in % of completion
Total CIP = costs incurred to date + Profit
so profit= Total CIP - costs incurred to date
Total CIP = 364,000
Costs incurrent to date = 297,000
365-297 = 67,000 - this is total profit recognized on the project
subtract what was recognized last year (17,000) to get this years profit
67,000 - 17,000 = 50,000
When using completed contract method - when do you use billings to record revenue( profit)
never - progress billings are never considered - neither are collections
On what date does depreciation expense begin
It starts on the date the asset is placed in service
What are the essential characteristics of an asset
An asset is a probable future economic benefit that is within the control of the entity and results from a past event or transaction.
Assets may be tangible or intangible.
They may be obtained at a cost, in an exchange, or in a nonreciprocal transfer.
Claims related to an asset may or may not be legally enforceable, which is not a requirement as long as they represent a probable future economic benefit that is within the control of the entity.
How do you calculate royalties earned
Recognize those earned to the terms of the deal So if the terms are 10% of net sales - take sales subtract 1% return and then take 10% of net sales = this is the amount of royalties income for the year
What do you record if you get both a notes receivable (non interest bearing) and a contract to purchase a fixed amount of merchandise in the future at a discount
You would record a discount on the note AND a Deferred charge
because the notes receivable is recorded at present value - you would record a discount
dr Notes receivable
dr discount
cr. cash
also a deferred charge for the future purchase of the fixed amount of merchandise
This is considered a prepaid expense
dr prepaid expense
cr cash
Do you need to disclose if 10% of your total revenues is derived from a single customer and / or export sales
YES - to both
10% or more from foreign operations
10% or more from a single customer
10Q Dates - filers - large accelerated, accelerated, small
10K
8K
10Q - quarterly reports - due 40 days after the end of the fiscal quarter for large and accelerated
40 days for small
10K - LA - 60, A - 75, small -90
8K - 4 business days
What do you do when you lease a building and land and there is no TT or BPO
- you evaluate the land to see if it is significant
Land fair value: 50,000
Land and building FV: 300,000
50 / 300 = less than 25% so land is ignored
The lease is accounted for as a building lease
What is a sales leaseback
This is when the property owner sells the property and then leases all or part of it back after it was sold
- If the present value of the rental is greater than 90% of the property - this is a capital lease
- Then you will defer all gains
When sell property:
dr. cash 1000
cr Equipment 950
cr deferred gains 50
the 50 deferred gain is amortized over the term of the lease
When the seller transfers most all of the risks of ownership to new guy - and then rents back - how do you record this lease
- They are considered two separate transactions
The seller will then recognize any gain or loss
Dr cash 1000
cr Equipment 950
cr Gain 50 - I/S
What is a non refundable lease bonus paid by lessee and when is it recognized
It is treated as part of the minimum lease payment sand is recognized over the term of the lease
