Far 5 Flashcards
What is the formula for completed contract method?
Contract price - (Cost incurred +Estimated cost to complete) = Gross profit
When would a current liability arise using the percentage of completion method?
Only occurs when progress billings is greater than costs and the estimated earnings.
What makes up Faithful representation?
Neutrality, freedom from error, and completeness
what makes up Relevance?
Predictive value, confirming value and materiality
What is the market approach?
uses matrix model and looks at the fair value of market transactions that use identical or comparable assets or liabilities to measure fair value
What is the cost approach?
Uses current replacement costs to measure Fair Value of assets
What is the income approach?
Converts future amounts that includes cash flows or earnings, to one single discounted amount to measure Fair Value.
How do you find the end balance of an escrow liability account?
Beg Balance
Add Deposits ( X * # of months)
Sub total
minus: Payments ((year pmts/4 quarters) * pmts made)
=Ending Balance
How do you calculate reporting sufficient for reporting segments?
After applying the 10% to total combined sales if the aggregated segments do not add up to 75% of total external sales only
Then take a reporting segment that was not added initially and take the segment with the highest income for external sales and do that until the reporting segments are at least at or greater than 75%
What is needed to reconcile bank statement only?
Beg balance + deposits in transit - Outstanding Checks
How do you reconcile bank account to book and or General Ledger?
Must be given book or G/L balance and service charges, NSF checks, credit memos (customer collections via wire transfer), interest income, and errors made by the company is what is included
For the Direct method what is the formula to solve for “Cash payments for Purchases”?
Cost of Goods Sold
- Decrease in Inventory/ +Increase in Inventory
- Increase In A/P / + Decrease in A/P
=Cash payments for purchases
What are the two entries needed when collecting on an account previously written of using the Allowance method?
Dr A/R
Cr AFDA
Dr Cash
Cr A/R
ADFA increases
A/R is not effected
What is the % of receivables method and what is the J/E used to adjust the account at year end?
You take a given % and multiply it against total A/R for the year and then add or subtract it against the related allowance account balance
Dr Bad Debt Expense
Cr Allowance for uncollectible accounts
what happens to the allowance account when writing off an account under the allowance method?
The allowance would decrease when a specific uncollectible account is written off