FARE Accounting Fund/Revenue Recognition Flashcards
What is the formula to determine periodic revenue under percentage of completion method?
Cost incurred to date divided by total estimated cost X contract price = cumulative revenue - prior period Revenue = revenue for this period.
What are the two criteria for using the percentage of completion method for construction contracts?
- Cost, profit, and percentage of completion can be established with a reasonable degree of assurance
- Collection of billing is reasonably assured
Under the installment sales method what is the formula for deferred gross profit?
Year end accounts receivable X gross profit percentage
Under the installment sales method, what is the formula for realized gross profit?
Cash collected X gross profit percentage
If purchases are understated, what is the effect on net income?
Net income is overstated
When are losses recorded under the completed contract method?
when they are apparent
True or false?
Assets and liabilities resulting from different long-term construction contracts should be netted on the balance sheet
False
They should be presented separately
When is the installment sales method and cost recover method appropriate?
When there is reason to doubt collection
What is the result when discount on receivables is amortized
Additional interest income
What is the formula for amortizing discount or premium on receivables?
Imputed ( ie., effective) interest rate X carrying value of receivables ( at the beginning of period) Less cash interest paid (face amount X stated rate)
