Flashcards in Deck 3 Deck (20):
Deferred gross profit (contra asset) =
gross profit rate x installment receivables
Installment receivables =
Sales - cash collections
How do you account for gains/losses in an exchange that has commercial substance?
Recognize gains/losses immediately
Gain (has commercial substance) =
FV asset given up - BV of asset given up
What does "commercial substance" mean?
Exchange results in a change in cash flows
Basis of acquired asset (has commercial substance) =
FV of asset given up + cash paid
What causes an exchange to lack commercial substance:
1) no change in cash flows or 2) FV can not be determined
Recognized gain (lacks commercial substance) =
Realized gain x (boot received/FV received)
What method of measuring prices is used for GAAP?
Historical cost/nominal dollar
Examples of nonmonetary assets
Inventory, PPE, intangibles
Examples of monetary assets
Cash, AR, AP
When is the historical rate used for foreign currency?
Used for equity
Reporting currency is
Foreign Currency Translation
Functional currency to the Reporting currency (US$)
Foreign Currency Remeasurement
Foreign currency to entity's functional currency
Temporal method; monetary (fixed items) - use current rate; nonmonetary - historical cost
When is the weighted average rate used for foreign currency?
For all income statement items under both methods
Current rate method; use current rate for assets and liabilities; use historical rate for C/S and APIC
Personal financial statements are recorded at
Estimated Fair Value