Deck 5 Flashcards
(20 cards)
Unearned revenue under franchisor accounting includes:
Initial franchise fee and prepaid continuing franchise fee
How are organizational expenses (start-up costs) treated?
Expense immediately
Technological feasibility for computer software costs:
Expense costs until technological feasibility has been achieved; capitalize costs after technological feasibility has been achieved up to the point of sale
Two-step impairment test (When/how is it used)
Intangible assets with finite lives; step 1: use discounted future net cash flows to determine the impairment; step 2: use FV for the amount of impairment
One-step impairment test (when/how is it used)
Intangible assets with indefinite lives (Amount of impairment - use FV)
Where is goodwill impairment loss recorded?
Dr. loss due to impairment; Cr. goodwill (record in income from containing operations)
Goodwill for private companies -
Amortize the goodwill over 10 years or less
Calculate impairment loss under IFRS:
Use the greater of: Fv - costs to sell; or Value in use
Exit and disposal activities include:
Benefits related to involuntary employee termination
Permanent inventory losses are recognized in:
The interim period incurrred
Losses from discontinued operations must be shown:
Net of tax
Percentage of completion calculation =
Total costs to date/total estimated cost of contract
What method of long-term construction contracts is allowed for GAAP and IFRS?
Percentage-of-completion method
Current liability for long-term construction contracts =
Progress billings exceed costs and estimated earnings
Deferred gross profit =
Gross profit rate x accounts receivable
Installment method:
Gross profit is deferred until cash payments are received
Installment receivable =
Sales - collections - accounts written off
Cost recovery method:
Revenue is recognized after cash equaling the cost of the item is received
Gross profit percentage =
deferred gross profit/accounts receivable
Earned gross profit =
Cash collections x Gross profit percentage
