New Study Plan Flashcard Deck 2
Two methods that help variable consideration must be estimated by applying consistently throughout the contract period?
Expected value
most likely amount
When there is an error net that has error for the prior period how is that corrected?
it needs to be adjusted for the prior period adjustments
When there is a change in accounting principle for comparative financial statements how is that corrected?
The beginning of the inventory and retained earnings must be adjusted bc it needs the change from LIFO to FIFO
How to calc the accumulated depreciation for a purchase machine?
Step 1 - Calc the depreciation expense by finding the original amount of the machine and divide it by the useful life of the machine
Machine is 528,000 / 8 years useful life = 66,000 depreciation expense
Step 2 - Next step is to calc the accumulated depreciation so first we need use the depreciation expense for the prior step which was depreciation expense multiply by the estimated useful life of 3 years
Depreciation expense of 66,000 x 3 years = 198,000
Step 3 - Next step we need to calc the purchase amount of the machine and subtract the accumulated depreciation
Carrying amount - Purchase amount - accumulated depreciation
Purchase amount - 528,000 - accumulated depreciation of 198,000 from the prior step
528,000 - 198,000 = carrying amount 330,000
Step 4 - Carrying amount - the salvage value which is given and divide it by the estimated useful life 3 years because we calc it for 4 years total
carrying amount of 330,000 - 48,000 / 3 years = 94,000 deprecaition
Step 4 - subtract the carrying amount of 330,000 - 94,000 = 198,000 accumulated depreciation for year 4
In order to adjust beginning retained earnings what is the process of doing that?
To adjust retained earnings we need to adjust prior period adjustments. If there is a prepayment we would need to allocate that to three years period
When a adjustment needed beginning of retained earnings and there is an decrease in sales what adjustment is required?
The adjustment would be nothing bc since there was an decrease in sales that would make the adjustment a future or change in estimate usually any change made for retained earnings are retroactively
When there is a change from cash basis of accounting to accrual basis of accounting how is that corrected?
As a prior period adjustment by adjusting the beginning balance of retained earnings
how to adjust the expense for the machine which is adjusted prior period adjustments?
Step 1 - To adjust the machine for prior period we need to adjust the machine using the straight line method which is mentioned on the problem
Step 2 - and next we need to adjust the results after tax understatement of net income
Step 3 - We use the annual depreciation and divide it by 3 which would be the estimated life and multiply it by the tax rate
Step 4 - Understated of net income subtracting the after tax overstatement of net income
When there are any changes any depreciation problem from the method being used or changes to sales how is the retained earnings adjusted per year?
They are not adjusted since there were changes made so that would be a change in prospective not retrospective
A change in standard assurance type warranty is what kind of change in adjustment?
change in estimate for prospectively
When a change in accounting principle that is inseparable from the effect of a change in accounting estimate it would
it can only be accounted on the change in estimate only
Calc, the revenue and interest income from contract?
To calc the interest income
Start off with the cash selling price 250,000 x implicit interest rate 10% = 25,000
Next we need to subtract annual payment 144,049 - 25,000 1st installment payment
= 119,049
250,000 - 119,049 = 130,951
Final step is 130,951 x 10% = 13,095 interest income
In order to measure the progress toward complete satisfaction of a performance obligation must be measured
it’s the input method
What are some conditions where there are no financial statement adjustments required?
Subsequent events such as fire client suffers a fire after balance sheet
advise management to disclose the event to the financial statements so the events don’t seem misleading on the notes
Any sales of division require what kind of adjustments for the financial statement?
No adjustment of the statement however pro forma financial statements are the best method to adjust when an entity makes sales
When events that occurred before the issuance the statements and after the balance sheet date?
require disclosure but NOT recognition on the financial statements
Any event that is fire, natural disaster or explotion are they required to disclose and recognize the losses?
Only disclose the event
What determines the Fair value of an asset?
Which ever market has the higher sales proceeds costs
Calc, the entity sale for performance obligation?
Standalone selling price - 40,000
120,000
Standing selling price of product Z 160,000
40,000 + 120,000 + 160,000 = 320,000
40,000 selling price / 320,000 standalone selling price = 0.125
exchange for 250,000 x 0.125 = 31,250
How is transaction price calc?
By allocating performance obligations
Which would be by adding the standalone price by the standing alone selling price
Calc, the gross profit for the completion for project using the input method?
Step 1 -
First add the incurred cost and the estimated cost to complete
cost incurred 1,800,000
estimated cost 600,000
Incurred cost - 2,400,000
Contact - 3,000,000
Total anticipate gross profit - 600,000
Step 2 - Next we need to calc percentage to calc
Cost incurred - 1,800,000
2,400,000
= 75%
Step 3 - Total anticipate 600,000 x 75% = 450,000 - 300,000 = 150,000 gross profit
Are deposit and transit included in in the bank statement balance?
NO they are not included. They’re never added to the bank balance
Outstanding checks that are not cleared by the bank are included in the cash per book or per bank statement?
Cash per book
For problems that ask for net cash balance do we need to included the Bank service charge and NSF check?
No we don’t include it for cash balance
For cash in bank balance do we need to include deposit in transit and outstanding checks
Yes we do include then for the calc for cash bank bal
Where is the foreign gain and losses reported?
On other comprehensive Income
Calc the net income attributable to the investment?
Investment 410,000
purchase of investment 400,000
Fair Value investment - purchase an investment = investors recognizes an unrealized gain
Paid dividends x percent = dividend income
A transaction that is unusal in nature or infrequent in occurrence should be reported as a
must be reported in separate income from continuing operations and those items must not be reported on the face of the income statement net of income taxes
Gains or loss from trans that is unusual in nature or infrequent in ocurrence should be reported separately as component of income
before results of discontinued operations
For foreign currency if there is a change in gains and loss where is that reported?
It’s reported on the component of income
When there is a stock dividend, stock split, or reserve split does there need to be a restatement of BEPS & DEPS?
YES
When neither party has no significant influence over the investment do they have any right to use the equity method?
No neither is apart of it
Calc the goodwill for the investing using the equity merthod?
First you need to know the amount of investment which is mentioned in the problem of 500,000
Next you need to add and subtract the necessary item for the net assets
50,000 + 250,000 FV of building 900,000+ 100,000 land - liability 100,000 = 1,200,000 x 30% = 360,000
500,000 - 360,000 = 140,000
A transaction is unusual in nature or infrequent in occurrence should be reported as a
Component of income from continuing and not net of application income taxes
these items are NOT reported for INCOME TAXES
Subsequent events affecting the realization of assets ordinary will require recognition in the financial statement because such events typically represent the
Culmination of conditions that existed at the balance sheet date
Realization of assets typically represent the culmination of conditions that existed at year end
