Financial Statements and Rev Rec

Question 1

Balance Sheet

Answer 1

Reports the effect of transactions at one point in time.

Consists of Assets, Liabilities, and Stockholder’s Equity. Items are broken down between current and non-current.

Question 2

Current Assets

Answer 2

assets that will be used or converted to cash within one year or the operating cycle, whichever is longer.

Question 3

Current Liabilities

Answer 3

liabilities that will be settled within one year or the operating cycle, whichever is longer.

Question 4

Cash

Answer 4

most liquid asset of a business, presented first on the balance sheet

Question 5

Cash Equivalent

Answer 5

security that is easily converted into cash

must have an original maturity of 90 days or less

An asset that has longer than 90 days until maturity will not be reclassified once it hits 90 days or less

Question 6

Post Dated Check/NSF

Answer 6

this is a receivable

Question 7

Overdraft protection

Answer 7

If it’s in the same bank net them and show as either cash or a liability

In different banks do not net them, show as an asset or liability

Question 8

Bank to Checkbook Reconciliation

Answer 8

Add DIT and subtract OS Checks +/- bank errors

Question 9

Checkbook to bank Reconciliation

Answer 9

Add amounts collected by the bank subtract unrecorded bank charges +/- errors

Question 10

ON-TIDe-N-OC

Answer 10

O-Operating Income
N-Non-Operating (other income and expense)
T-Provision for Income Taxes
I-Income from Continuing Operations
De-Discontinued Component Unit
N-Net Incomr
O-OCI-DENT
C-Comprehensive Income

Question 11

Rev Rec Overview

Answer 11

Rev is to be recognized upon the transfer of promised goods/services

The amount of revenue recognized represents the consideration the entity expects to receive in exchange for the goods/services

Question 12

Revenue Recognition 5 Steps

Answer 12

1. Identify Contracts with Customers
2. Identify all Performance Obligations
3. Determine the total consideration of the contract
4. Allocate consideration to each Performance Obligation
5. Recognize Revenue WHEN or AS it happens

Question 13

Identify Contracts with Customers

Answer 13

A contract is an arrangement between two or more parties that creates legally enforceable rights and obligations. If it can be terminated without penalty it is not a contract.

Question 14

4 Terms of a Contract

Answer 14

1. Both parties must approve the provisions
2. Terms don’t need to be explicit but both parties must know what they are agreeing to
3. Has Commercial Substance
4. Collection is probable

Question 15

Contract Modification

Answer 15

Treated as the cancellation of the original contract accompanied by a new contract

Question 16

Performance Obligation

Answer 16

An enforceable promise to transfer goods or services to a customer identified at the inception of the contact

Combine small obligations until a distinct performance obligation is created

Question 17

Distinct Performance Obligation Criteria

Answer 17

1. Customer must be able to benefit from the good/service on its own
2. The promise to provide goods/services is separate from other promises in the contract

Question 18

Assurance Type Warranty

Answer 18

protects the customer from obtaining a product that is not acceptable or working. These are a contingent liability to the seller. These are probable and estimable and therefore can be accrued in the period incurred which is generally the period of sale.

Question 19

Service Type Warrnaty

Answer 19

Provides customer with parts and labor repairs.

It is a separate Distinct performance obligation.

Question 20

3. Determine the Transaction Price

Answer 20

the amount of consideration the seller expects to be entitled to for providing the goods and services less amounts collected on the behalf of others (sales tax)

Question 21

Transaction Price when seller is a Principal

Answer 21

Entire amount is recognized and any amounts collected for others are expenses or costs of sales

Question 22

Transaction price when seller is an Agent

Answer 22

only the net amount (revenue after paying the principal) is retained and recognized

Question 23

Principal

Answer 23

Someone who controls goods or services before the transfer and may satisfy the performance obligation directly or have someone else do it

Question 24

Variable Consideration

Answer 24

an expectation that the seller will accept less than the contract amount (discount rebate refund credit etc)

Question 25

Non-cash consideration

Answer 25

measured at FV

Question 26

4. Allocate transaction price to performance obligations

Answer 26

price is allocated to performance obligations in proportion to their stand alone selling price

Question 27

5. Allocate Revenue as Performance Obligations are satisfied

Answer 27

while or as
when the customer has control of the goods
control= ability to use them,prevent others from benefiting, obtain benefits in the form of cash flows

Question 28

Input Method

Answer 28

how much materials and time the customer has given

Question 29

Output Method

Answer 29

time elapses (10 out of 10000) how much of the goods and services have been transferred to the customer