general accounting Flashcards
should plan investments be reported in a defined benefits plan’s financial statements at face value?
yes, plan assets are reported at face value.
how to calculate accretion expense for an asset retirement obligation
ARO * credit adjusted risk free rate.
what kind of form is this? more current than quarterly or annually
reports current events, allowing investors to a company’s performance.
1. a change in a certifying accountant.
2. notification about entering into material agreements(merger and sales of securities)
3. entering to debt or other direct financial obligations
form 8-k
temporary market declines expected to reverse are not recognized in interim financial statement, the decline should not be recognized until?
year end.
holding gains
difference in the cost. replacement cost - purchase price.
is Redesign of a product prerelease consider a RnD expense?
yes
ACCRETION EXPENSE
INCREASE IN AN ASSET RETIREMENT OBLIGATION THAT ACCRUE AS AN OPERATING EXPENSE
how should the acquirer recognize a bargain purchase in a business acquisition?
a s a gain in earning sat the acquisition date.
only UNREALIZED gains and losses on AFS securities are recorded in OCI, true or false?
true
When should you recognize revenue when there is a right to return.
When the right of return exists, revenue from the sales transaction shall be recognized at time of sale only if all of the following conditions are met: the seller’s price is substantially fixed or determinable at the date of the sale; the buyer has paid the seller, or the buyer is obligated to pay the seller, and this obligation is not contingent on the resale of the products; the buyer’s obligation is not changed in the event of theft or destruction of the products; the buyer has economic substance apart from the seller; the seller does not have significant obligations for future performance to directly bring about resale of the products; or the amount of future returns can be estimated.
Sales revenue and cost of sales that are not recognized at time of sale because the foregoing conditions are not met are recognized either when the return privilege has substantially expired or when the conditions subsequently are met, whichever occurs first. Therefore, Clothes should recognize revenue 12 months after the date of the sale.
when the cost recovery method is used on installment contracts, what is the reasonable basis for estimating collectibilty
there is no reasonable basis for estimates of the degree of collectibility —-either the installment method or the cost recovery method of accounting may be used.
when should you use installment sales method of revenue recognition.
when installment sales are material, and there is no reasonable basis for estimating collectibility.
Under the installment sale method of recognizing revenue, recognition is deferred beyond the point of sale and is associated with the subsequent collection of payments. The rationale underlying the method is that the length of the installment contract and the nature of the contract itself impose uncertainty concerning collection such that dependable estimates of uncollectibles are not possible.
are executory costs such as real estate taxes included in the capitalization of the present value of leased liability?
no, and you should use the round factor.
amortization of loan
A company finances the purchase of equipment with a $500,000 5-year note payable. The note has an interest rate of 12% and a monthly payment of $11,122. After two payments have been made, what amount should the company report as the note payable balance in its December 31 balance sheet?
note payable * interest rate, figure out the interest portion.
principle amortized would be monthly payment-interest
the new principle value minus the amortized amount* interest rate
Beginning principal of $500,000 × 0.12 (Interest rate) × 1/12 (because they are monthly payments) for only one month’s interest = $5,000.
The principal amortized from the first payment is thus the payment amount less the $5,000 interest, or $11,122 – $5,000 = $6,122.
The interest on the second payment is $500,000 less $6,122 for the principal of $493,878, × 0.12 × 1/12 (as before, covering one month) for a total interest charge of $4,939.
the funded status of a defined benefit pension plan for a company should be reported in the ?
statement of financial positions, other words for balance sheet, it is the difference between plant assets and projected benefit obligations.
accrual to net income
Accrual-basis net income is computed as follows:
Beginning Effect on
of Year End of Year Accrual Net Income
--------- ----------- ------------------ Cash-basis net income $70,000 Accounts payable $ 3,000 $ 1,000 2,000 Unearned revenue 300 500 -200 Wages payable 300 400 -100 Prepaid rent 1,200 1,500 300 Accounts receivable 1,400 600 -800
------- Accrual net income $71,200
prepaid expense is an asset on an accrual basis
In converting expenses from a cash basis to an accrual basis, a prepaid expense increase of $5,000 must be deducted because it is an expense on a cash basis and an asset on an accrual basis. An increase of $20,000 in accrued liabilities must be added because it is an expense incurred but not paid.
$150,000 - $5,000 + $20,000 = $165,000
how to report contingent liabilities when the loss is probable but not reasonably estimated?
disclosed in the notes to the financial statements.
Which of the following should be disclosed for each reportable operating segment of an enterprise?
Both profit or loss and total assets
Cash collection is a critical event for income recognition in:
both the cost recovery method and the installment method.
Interest cost included in the net pension cost recognized by an employer sponsoring a defined benefit pension plan represents the:
increase in the projected benefit obligation due to the passage of time.
According to the FASB conceptual framework, certain assets are reported in financial statements at the amount of cash or its equivalent that would have to be paid if the same or equivalent assets were acquired currently. What is the name of the reporting concept?
Current cost
does the correction of an error in prior year financial statement requires restatement?
yes, changes in estimates and changes in depreciation methods are accounted for prospectively.
acquire recognize a bargain purchase in a business acquisition
as a gain in earnings at the acquisition date, acquired less than FMV, thus recognizing a gain
According to the installment method of accounting, gross profit on an installment sale is recognized in income:
in proportion to the cash collection.
