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ACC-320: Intermediate Accounting II > Test 2 > Flashcards

Test 2 Flashcards

1
Q

PROBLEM II: List the Five-Step Process for Revenue Recognition (ISTAR)

A
  1. IDENTIFY the contract with customers
  2. Identify the SEPARATE performance obligations in the contract
  3. Determine the TRANSACTION price
  4. ALLOCATE the transaction price to the separate performance obligations
  5. RECOGNIZE revenue when each performance obligation is satisfied
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2
Q

What method is used for both Debt and Equity (Convertible Preferred Stock)

A

Book Value Method

(they use the same method)

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3
Q

COMPUTATIONAL: $100,000 Compensation Expense had funding for 2 years. What is the compensation expense per year

A

$50,0000 per year

($100,000 / 2 years)

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4
Q

M/C COMPUTATIONAL:
What is the formula for Basic EPS?

A

Net Income - Preferred Dividends / Weighted-Average Number of Shares Outstanding

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5
Q

What is the formula for Diluted EPS?

A

(Net Income - Preferred Dividends / Weighted-Average Number of Shares Outstanding) - Impact of Convertibles - Impact of Options, Warrants, and Other Dilutive Securities

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6
Q

When are additional shares outstanding for Stock Dividends or Stock Splits?

A

At the beginning of the year

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7
Q

What is “Held-to-Maturity” and what are they recorded at?

A

debt securities

recorded at net amortized cost (discount or premium) usually under effective-interest method (or straight-line)

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8
Q

What is “Trading Securities” and what are they recorded at?

A

can be sold anytime, held less than one year (common stock)

sell within 0-12 months

Recorded at FV

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9
Q

What type of account is Fair Value Adjustment Account?

A

contra asset account

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10
Q

How are changes in FV (at end of each year) recorded for net income?

A

FV < CV = Loss
FV > CV = Gain

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11
Q

What method is an investment valued at if the ownership percentage is <20%?

A

Fair Value Method

no significant influence exists (like ordinary people buying stocks)

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12
Q

What method is an investment valued at if the ownership percentage is 20% - 50%?

A

Equity Method

significant influence usually exists

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13
Q

If the ownership percentage is <20%, what should happen for recording dividend income, and what must happen at year-end?

A

FAIR VALUE
-Records ONLY DIVIDEND INCOME when investee declares a dividend
-Adjust to FV (AFS) at year-end, unrealized gain/loss goes to NET INCOME (not SE)

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14
Q

If the ownership percentage is 20%, - 50% what should happen regarding investee’s income and dividends declared?

A

Record % of investee’s income as an INCREASE to Investment Account

Record % of dividends declared as a REDUCTION to Investment Account

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15
Q

Under the new FASB/IASB Standard, which approach has been adopted?

A

asset-liability approach

-recognizes and measures revenue based on changes in assets and liabilites

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16
Q

What is the new FASB/IASB Standard centered around?

A

a Contract

-creates enforceable rights and obligations
-written, oral, implied

17
Q

When is revenue recognized under this new Revenue Recognition Principle?

A

when performance obligation is satisfied

18
Q

If there is more than one performance obligation, but they are interdependent, how many are recorded?

A

One

19
Q

When are revenues and gross profits recognized in the Percentage of Completion Contract?

A

recognize revenues and gross profits EACH PERIOD based upon the progress of construction

20
Q

What is the formula to find “Percent Complete?”

(Percentage of Completion Contract 1)

A

Costs incurred to date / most recent estimate of total costs

21
Q

What is the formula to find “Revenue (or gross profit) to be Recognized to Date?”

(Percentage of Completion Contract 2)

A

Percent complete x Estimated total revenue (or gross profit)

22
Q

What is the formula to find “Current-period Revenue (or gross profit)

(Percentage of Completion Contract 3)

A

Revenue (or gross profit) to be recognized to date - Revenue (or gross profit) recognized in prior periods

23
Q

If CIP (asset) > Progress Billings (contra asset), how is this presented?

CIP = construction in process

A

Has NET DEBIT Balance

Shown as a Current Asset

24
Q

If CIP (asset) < Progress Billings (contra asset), how is this presented?

CIP = construction in process

A

Has NET CREDIT Balance

Shown as a Current Liability

ACC-320: Intermediate Accounting II (7 decks)

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